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Whatever the reason you are
thinking about purchasing a home, there are 12 steps you will inevitably
take. If you do them in the right order, you will save
yourself time, frustration, and money. For example,
if you start shopping for homes on the Internet without
knowing how much you can spend, you will not only waste
time looking at the wrong homes, but you may ultimately
be disappointed at what you can actually afford.
FIND OUT HOW MUCH YOU CAN SPEND
The first thing you need to do is figure out what
kind of home you want to buy and how much you can
afford to pay in monthly installments.
Keep in mind that the results of your calculations
will only be an estimate. Until you have chosen a
home and the type of loan you want, and communicated
with a lender, you can only use the calculated amount
to help you determine a price range of homes you want
to preview.
GET PRE-APPROVED FOR A LOAN
Either go to a mortgage broker or a direct lender
and find out for certain the size of mortgage for
which you can qualify. The pre-approval letter the
lender issues you will help you be taken more seriously
by agents and sellers because they will recognize
you as someone who is prepared to buy. If you want
a larger mortgage or better rate, investigate the
government sites such as HUD.
HIRE AN AGENT, PARTICULARLY A BUYER'S AGENT
Using an agent can help you in numerous ways, especially
because you are already paying for those services
in the purchase price of the home. Both the seller's
agent and the buyer's agent are paid out of the transaction
proceeds that are included in the marketing price
of the home. If you don't take advantage of an agent,
you are paying for services you aren't getting. If
you are planning to buy a home available through foreclosure
or a for-sale-by-owner (FSBO), you can still use the
services of an agent. Agents will negotiate with you
on their fees and the amount of service you will receive
for those fees, and you can arrange for them to be
paid out of the transaction, not out of your pocket.
Start by narrowing the field. If you are interested
in a certain neighborhood in your town, find out who
the experts are in that area of town. They will be
better informed and more attuned to the "grapevine,"
and are better positioned to network with other agents
in the same area. Contrary to popular belief only
20 percent of homes are actually sold through newspaper
ads. The other 80 percent are sold through networking
among agents. If you are relocating to a new city,
ask agents in your own town to refer you to agents
in your new area. They will be happy to do so, because
if you buy a home from their referral, they will receive
a referral fee, so they are motivated to make certain
you find the right agent to assist you in buying a
home.
SIGN A BUYER'S AGREEMENT
Again, if you find an agent you like, go all the way
and sign a buyer's representation agreement. This
agreement means that you will have one agent representing
you as a buyer. The agreement empowers the agent to
not only search out the latest Multiple Listing Service
list, but to seek alternative means of finding you
a home, including searching foreclosures and homes
for sale by owner. With a signed agreement, the agent
becomes a fiduciary and must act, by law, in your
best interests.
BE AWARE OF YOUR LIKES AND DISLIKES
As you shop for homes, keep in mind what you like
and don't like and pass along your feelings to the
agent. You should feel comfortable looking at numerous
homes, but neither you nor your agent is interested
in wasting time on homes that aren't appropriate.
Like any relationship, your home will not be perfect.
If you are finding that most of your criteria is met,
it shouldn't be long before you find the right home.
Think in terms of possibilities as well as what you
see is what you get. Perhaps a home isn't move-in
perfect, but with a little work it could be the home
for you. Don't let cosmetic or minor remodeling problems
discourage you. Many remodeling jobs add tremendous
value to a home. If you remodel a kitchen, for example,
you may receive as much as a 128 percent return on
your investment. Talk with your agent, friends, relatives,
and contractors and find out what it will cost to
remodel the home the way you want it.
WRITE A CONTRACT
When you find the home you want, you will write a
contract, either through your agent or your attorney,
or on your own. Your offer should spell out what you
are willing to pay for and what you are not, when
you want to close, and when you want to take possession
of the home. Your contract should be contingent upon
getting an inspection and evaluating the results.
If the inspection reveals a big problem, you and the
seller can renegotiate the purchase price if you are
still interested in buying.
GET THE LOAN UNDERWAY
As soon as the seller agrees to the contract, you
must start following through on your loan. Take the
contract to the lender and let it start the loan process
in earnest. If you have been preapproved, much of
the legwork has already been done and your loan will
process more quickly.
THE HOME WILL BE APPRAISED
The lender will arrange to have the home appraised,
which may affect whether the loan is granted. But
the likelihood of a homeselling for more than a lender
is willing to lend is slim. The real estate industry
not only keeps up with how quickly homes sell, but
how much they sell for in an area. Most lenders will
have a ceiling on the amount of square feet per home
they will lend in a certain neighborhood. If a home
is overpriced, it will quickly be obvious. You can
then go back to the seller and renegotiate.
THE HOME IS INSPECTED
In many markets, you will have the inspection after
the contract is signed, rather than before. This is
a better protection for the buyer. The inspection
can reveal some nasty shocks, though. Your inspector
may find a major problem with the furnace or the foundation.
These are problems that must be fixed or the home
cannot be conveyed. The seller then has to arrange
to pay for the repairs, or have the repairs paid for
out of the contract proceeds via a mechanic's lien.
Before you can truly set the closing date, the repairs
have to be made and approved by the buyer.
NEGOTIATIONS CONTINUE AS YOU GET READY TO MOVE
As you find a mover, pack your things, and arrange
days off a work around the closing date, you will
find that things can still change. It is the most
intense, nerve-wracking time of the transaction --
waiting for the other shoe to drop. You think you
may have addressed all the issues and closing will
proceed without any other hitches, but negotiations
still continue as you reevaluate the inspection report,
or find out the chandelier you thought was included
is actually excluded from the contract. As you revisit
the home to show your relatives, your hopes raise,
even through your doubts that the home will ever be
yours increase.
CLOSING -- BE PREPARED FOR ANYTHING TO HAPPEN
Until closing, and even during closing, anything can
happen. You find out that your closing costs are higher
than you thought they would be because some additional
service fees have been added by the lender. A glitch
could come out in your credit report that delays the
sale; a problem the owner was supposed to fix wasn't
repaired in time; the homeowner can decide that she
or he doesn't want to pay for the home warranty after
all; the appraisal may come in the day before closing
and be short of the asking price of the home. If so,
the buyer, seller, and their agents have to figure
out how to make up the shortfall. Do they lower the
price of the home? Do the agents pay for the difference
out of their commissions? How will last-minute problems
be handled? The negotiating table is an emotionally
explosive place. That is why closings are generally
held in private rooms with the buyers and sellers
separated.
YOU GET THE KEYS
It's all over. The home is yours. Congratulations.
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