First Time Home Buyers
What are home buying keys to success? As soon as you can, start reading pages like this one. In fact, find one page that seems to be straightforward and ask questions. Look at some listings and get to know the terms and language of real estate. One thing we want to say… there is a difference between real estate agents and Realtors. Read on. So, let's look at the home-buying process and understand the keys to success.
Talk to a Lender and Determine How Much House You Can Afford
Lenders will recommend people look for homes that fit their annual household income. If a home buyer, for example, plans to make a 20% down payment and has a moderate amount of other debt, this will be evaluated by the lender. We tend to favor local lenders, someone you can meet face to face. Lenders have a wide range of competitively priced loan programs and a reputation for exceptional customer service. You will have many questions when you are purchasing a home, and having an experienced, responsive mortgage lender can make the process much easier. Every home buyer has their own priorities when choosing a mortgage. Some are interested in keeping their monthly payments as low as possible. Others are interested in making sure that their monthly payments never increase. And still, others pick a loan based on the knowledge they will be moving again in just a few years. Make sure you talk to your lender about closing costs and earnest money (more about earnest money in a minute).
Work with your chosen lender to get prequalified or preapproved for a loan. Before you start looking for a home, you will need to know how much you can actually spend. The best way to do that is to get prequalified for a mortgage. To get prequalified, you just need to provide some financial information to your lender, such as your income and the amount of savings and investments you have. Your lender will review this information and tell you how much you can borrow. This will tell you the price range of the homes you should be looking at.
Be sure to consider your earnest money. Earnest money is "good faith" money you offer at the time you make an offer on a home. This is credited back to you at closing (we'll talk more about this when we address contingencies). Two important things…ask your lender for a breakdown of their fees and expenses. And connect your lender with your realtor. They should work together.
Find a Realtor That Fits
Now, getting back to what we said earlier, real estate agents and realtors are different. They're both important partners when you're buying or selling a home. Realtors are members of the National Association of Realtors and are held to a higher standard of ethics and professionalism. Here's a good article that explains the difference. The Difference Between Realtors and Real Estate Agents
Either one can provide you with helpful information on homes and neighborhoods that aren't easily accessible to the public. Their knowledge of the home buying process, negotiating skills, and familiarity with the area you want to live in can be extremely valuable. Best of all, it doesn't cost you anything to use an agent – they're compensated by the commission paid by the seller of the house. Your agent should be energetic, responsive, committed to your satisfaction, and have integrity. If you can find a husband/wife team…well, we think they're the best! Who doesn't want two agents working on their behalf? We also recommend realtors who are members of the National Association of Realtors.
Shop for Your Home and Make an Offer
Sounds easy, huh? Along with your Realtor, start looking at homes in your price range. Ask your realtor to set up an automatic search in the MLS, so you're notified immediately of new listings and changes to existing listings. The realtor, we see those same results, so you're on the same page. Some listings require a 24-hour notice to view them. Stay away from third-party pages like Zillow. Ask your realtor for a website they recommend that's accurate and up to date. It might be helpful to take notes on all the homes you visit. You will see a lot of houses! It can be hard to remember everything about them, so you might want to take pictures or videos to help you remember each home. Ask the realtor for a copy of the Seller's Disclosure. This can be a useful source of information. Your realtor should point out the good and the bad about the home…not just today…but later on when the time comes to sell. Your realtor should provide tax records, copies of deeds, and other information critical to the property.
When looking at a home, do a thorough investigation of the interior, including bathrooms, closets, the kitchen, and flooring, and really check out the basement and mechanical systems like the furnace and water supply.
Make sure to check out the little details of each house. For example:
1. Test the plumbing by running the shower to see how strong the water pressure is and how long it takes to get hot water
2. Try the electrical system by turning switches on and off
3. Open and close the windows and doors to see if they work properly
It's also important to evaluate the neighborhood and make a note of things such as:
1. Are the other homes on the block well maintained?
2. How much traffic does the street get?
3. Is there enough street parking for your family and visitors?
4. Is it conveniently located near places of interest to you: schools, shopping centers, restaurants, parks, and public transportation?
Take as much time as you need to find the right home. Then, work with your realtor to negotiate a fair offer based on the value of comparable homes in the same neighborhood. Once you and the seller have reached an agreement on a price, the house will go into escrow, which is the period of time it takes to complete all of the remaining steps in the home-buying process.
To summarize, here is a short video of the Home Buying Process:
What's a Contingency?
Typically, there are three primary contingencies. They are financing, inspection, and appraisal. If your application for a loan is denied at some point during the purchase process, you will get your earnest money back. Go fix the issue with your credit and get back to the home search. If the inspection reveals defects that you can't live with or that you and the seller can't agree on, you can cancel the deal and get your earnest money back. And finally, what if the appraisal comes in, and it's not satisfactory to the lender? For example, let's say you're buying a home for $270,000, and the appraisal comes in at $260,000. What happens? In this case, your lender isn't going to lend you $270,000 on a home worth $260,000. There are 3 options:
1. The seller can sell the home for the lesser amount (ideally, the best and most common scenario).
2. You can bring the difference to closing. We never advise this, as you're paying more than the home is worth.
3. You can walk away from the deal. On occasions, there are other contingencies, such as a seller who sells their home "contingent upon finding suitable housing." This means the seller has to find and purchase a home before you can move. This gets complicated.
The Home Inspection / Home Buying – The Keys to Success
Typically, purchase offers are contingent on a home inspection of the property to check for signs of structural damage or things that may need fixing. Your realtor will help you arrange to have this inspection conducted within a few days of your offer being accepted by the seller. This contingency protects you by giving you a chance to renegotiate your offer or withdraw it without penalty if the inspection reveals significant material damage.
You will receive a report from the home inspector outlining their findings. Rarely should you provide the report to the seller, but make sure your realtor gets a copy. You can then decide if you want to ask the seller to fix anything on the property before closing the sale. If you request repairs, your realtor will write the repair addendum, which becomes part of the Purchase and Sales Agreement (routinely referred to as a P&S). Be sure your realtor asks the seller for copies of paid receipts of the work done and that all work must be done by a licensed professional where appropriate. (Some states require licenses for electricians and plumbers, but contractors may not need a license.) Before the sale closes, you will have a walk-through of the house, which gives you the chance to confirm that any agreed-upon repairs have been made.
Time for an Appraisal
Lenders will arrange for an appraiser to provide an independent estimate of the value of the house you are buying. The appraiser is a member of a third-party company and is not directly associated with the lender. The appraisal will let all the parties involved know that you are paying a fair price for the home.
The Lender, The Paperwork, and Arrangements to Move
As you can imagine, there is a lot of paperwork involved in buying a house. Get used to it, and after all, you're buying a house. Home buying has many keys to success, and another one is the lender. Your lender will arrange for a title company to handle all of the paperwork and make sure that the seller is the rightful owner of the house you are buying. Your realtor may also suggest a reliable title company they work with. Be sure to arrange for the utilities to be transferred into your name. Don't forget to coordinate your homeowner's insurance prior to closing. We promise we won't bug you, but we're not going to allow a key success point to slip by. The keys to success require a team effort.
Close the Sale!
Three days before closing, you'll receive a statement outlining all the fees, expenses, taxes, etc., itemized in total. Be sure to review this carefully. Your realtor should also review it. We always ask for a copy, and we do find errors! At closing, you will sign all of the paperwork required to complete the purchase, including your loan documents. Be sure to bring your ID, such as a driver's license or military ID card. You'll also, if you owe money at closing, be sure to bring a bank check to closing. You should verify the amount you need… and you should do this twice. Sometimes, there are last-minute changes to your closing numbers.
Make sure you have utilities transferred into your name. Your realtor should also check with the sellers to make sure they have arranged their service termination. This is a list by town of utility services provided by the NH state: https://www.puc.nh.gov/Consumer/communitiesserved.pdf.
You should have a good start to understanding the home-buying process and the keys to success. If you're planning to buy a home, please ask us to help you. Our job is to serve our clients and give them the advice they need to navigate through the process. Contact us at (603) 361-7295 or (843) 224-1258, or email us at [email protected]