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THE HOME BUYING PROCESS - BOSTON and SUBURB TOWNS |
Do You Know what You want? What would you like/want in terms of real estate? Do you have a time frame to buy your home?
If you know your answers, you can effectively define your goals. Feel free to discuss any concerns/questions with me.
What do you have in terms of Money?
Homes and financing are closely interlinked (financing is debt or mortgage). The mortgage industry over the years has evolved with innovative loan programs with requirements of 5 percent down payment or even less.
Of course, You will have to pay PMI (Purchase Mortgage Insurance) which can be a hole in your pocket every month.
Buyers will also need cash for closing costs (the final costs associated with closing the loan).
Again, less money down means higher monthly mortgage payments. Here, a good mortgage officer will guide and help you in finding the right mortgage plan suitable to your unique needs.
Is Your Financial House in Order?
The loans with little or zero down are virtually not available to people even with good credit now. If you have not built good credit, then at least one year prior to purchasing a home, you should pay rent check, car payment, every credit card bill and other debt in full and on time.
The real issue with mortgage is to get the loan that's right for you with the lowest cost and best possible terms.
Getting a Pre-approval letter!
I recommend pre-approval as Purchase form/contract to purchase (when you are ready to make an offer) require Buyers to apply for financing within a given time period, which in most case is between 7 - 10 days. By meeting with loan officers in advance and understanding and identifying mortgage programs, it is easy to make an offer when you have liked a house. Also, rushing into a financing decision at that point may not be the best option.
I can often get clients pre-approved in a couple of hours with a phone call.
What is Pre-approval?
"Pre-approval" means you have met with or talked on the phone with a loan officer, your credit files have been reviewed and the loan officer believes with the information you have provided, you can readily qualify for a given loan amount with one or more specific mortgage programs. The lender will provide a pre-approval letter, which shows your borrowing power. You can visit as many lenders as you like and get several pre-approvals, but keep in mind that each one carries with it a new credit check, which will show up on future credit reports.
Although not a final loan commitment, the pre-approval letter is shown to listing broker when bidding on a house with the offer. It demonstrates your financial strength and shows that you have the ability to go through with a purchase. This information is important to Sellers since they do not want to accept an offer that is likely to fail because financing cannot be obtained.
Define Your Search!
Each of us is different and so it's important to list the features and benefits you want in a home. Consider such things as pricing, location, size, amenities, design, layout, needs etc.
Next, consider your priorities. What will you get within your price range with the features you want. What is more important to you? For example, A longer commute for a newer/bigger house or a great location with small living area, etc.
Lastly, consider your needs in several years. If you'll need a larger home, maybe now is the time to buy a bigger house rather than moving or expanding in the future. If you expect your income to increase, perhaps you could consider a more expensive home financed with a loan program where monthly payments increase in the future.
How do you find a house - Search for Homes.
The first step is to become a member of my Website which is free and easy to use. In just a few minutes, you will have access to the Multiple Listing Service (MLS) that contains property for sale in Massachusetts. The membership will allow you to define and change your search criteria and print out the listing sheets of the properties that you are interested in. Then, I will schedule the showings for these houses to tour them when it is convenient for you.
Choose a home!
There's no doubt that choosing a home is a big decision and you want to do it right. A home is where you will live, work, relax, entertain, raise family and spend your life.
For a Buyer, this is what happens. A house has been put on the market for which the Seller has an asking price. At this point, you have various choices: a) accept the Seller's asking price and create a contract; b) reject it and not make an offer; c) suggest different price and terms. Generally, Buyers choose this last option which the Seller may accept, reject or make a counter-offer.
In the home buying process, the bargaining between the Buyer and Seller is the most complex. This is one point where you will value my experience and competence as I have spent years negotiating real estate transactions.I will also give you list of the houses that got sold and are under agreement in the town in the recent past within the price range and similar features to understand the current market situation.
While attention is spent on offer price, a proposal to buy includes both price and terms. In some cases, terms can mean thousands of dollars in additional value for buyer or additional costs. Terms are important and should be carefully reviewed.
In practice, the offer depends on the basic laws of supply and demand. If many Buyers are competing for homes, then Sellers will more likely get the asking price offers and even more. If there is less demand, then offers below the asking price may be in order.
How do you make an offer?
The process of making offers varies around the country. In a general situation, you will complete an offer to purchase form that I will present to the Seller's Realtor who will present it to the Seller. The Seller, may accept the offer, reject the offer or make a counter-offer.
Counter-offers are common (any change in an offer can be considered a "counter-offer"), and the negotiation takes place between the Buyer's and Seller's Realtor in consultation with their clients.
Accepted offer!
Once an offer has been accepted you will schedule a home inspection and call an attorney. Unless I am working as a Buyers broker I cannot by law recommend a home inspector although I will give you a list of names of companies for you to choose from. Your attorney will be very important in the weeks to come to review the purchase and sale agreement and generally protect your interest throughout the remainder of the process.
Home inspections!
Inspections include surveys to determine boundaries, appraisals to determine value for lenders, title reviews, structural inspections, checks for termites,radon etc.
During structural inspection, an inspector comes to the property to determine if there are material/physical defects and whether expensive repairs and replacements are likely to be required in the next few years. Such inspections for a single-family home often require two or three hours, which the Buyers should attend. This is an opportunity to examine the property's structure and interior functions of the house,and learn far more about the house than is possible with an informal walk-through.
Get insurance.
The essential idea behind various forms of real estate insurance is to protect owners in the event of catastrophe. If something goes wrong, insurance can be the bargain of a lifetime.
Title insurance - Purchased with a one-time fee at closing, title insurance protects owners in the event that title to the property is found to be invalid. Coverage includes "lenders" policies, which protects Buyer up to the mortgage value of the property, and "owners" coverage, which protects owners up to the purchase price. In other words, "owners" coverage protects both the mortgage amount and the value of the down payment.
Homeowners insurance provides fire, theft and liability coverage. Homeowners policies are required by lenders and often cover a number of items, such property as furniture, home office equipment, etc.
Flood insurance is required in high-risk flood-prone areas, this insurance is issued by the federal government and provides as much as $250,000 in coverage for a single-family home plus $100,000 for contents.
How do you get insurance?
The time to obtain insurance and warranty coverage is at closing. You should talk to an insurance broker shortly after you sign the purchase and sale agreement. Be sure to ask about limitations, costs, deductibles and "endorsements" (additional forms of coverage that may be available).
Home warranties.
With new homes, Buyer wants assurance that if something goes wrong after completion the builder will be there to make repairs. But what if the builder refuses to do the work or goes out of business.
Home warranties bought from third parties by home builders are generally designed to provide several forms of protection. Workmanship for the first year, mechanical problems such as plumbing and wiring for the first two years, and structural defects for up to 10 years.
Home warranties for existing homes are typically one-year service agreements purchased by Sellers. In the event of a covered defect or breakdown, the warranty firm will step in and make the repair or cover its cost.
Insurance policies and warranties have limitations and individual programs have different levels of coverage, deductibles and costs. For details, speak with insurance brokers and home builders in case of new homes.
Closing on your home!
Go to any local courthouse and you can find property records detailing real estate ownership in the community. Records that even date back hundreds of years.
These records are important because they provide Sellers with proof that they have good, marketable and insurable title to the property they are selling. Equally important, such records give Buyers the proof of ownership and will enable them when they sell.
The closing process, which in different parts of the country is also known as "settlement" or "escrow," is computerized and automated. In many cases, Buyers and Sellers don't need to attend a specific event. The signed paperwork can be sent to the closing agent via overnight delivery.
In practice, closing brings together a number of parties who are part of the "transaction" process. For example, while the history of property ownership has been checked, it's possible that the records contain errors, unrecorded claims or flaws in the review itself, thus title insurance is necessary. At closing, transfer taxes must be paid and other claims must also be settled (including closing costs, legal fees and adjustments). In most transactions, the closing agent also completes the paperwork needed to record the loan.
Closing is a process where all of the necessary paperwork needed to complete the transaction is signed. It is held in an office setting, sometimes with both Buyer and Seller at the same table, with each party completing their papers separately.
Also at closing, determine the status of the utilities required by the home, items such as water, sewage, gas, electric and oil service. You want utility bills to be paid in full by Sellers as of closing and you also want services transferred to your name for billing. Usually such transfers can be done without turning off utilities.
Whatever the case, the result is that title to the property is transferred from Seller to Buyer. The Buyer receives the keys and the Seller receives payment for the home. From the amount credited to the Seller, the closing agent subtracts money to pay off the existing mortgage and other transaction costs. Deeds, loan papers, and other documents are prepared, signed and filed with local property record offices.
Before closing, Buyers have a final opportunity to walk through the property to assure that its condition has not materially changed since the sale agreement was signed. At closing itself, all papers have been prepared by closing agents, title companies, lenders and lawyers. This paperwork reflects the sale agreement and allows all parties to the transaction to verify their interests. Buyers get the title to the property, lenders have their loans recorded in the public records and state governments collect their transfer taxes.
Whether you're a first-time buyer or a repeat buyer, there are several more steps you'll want to take.
Those papers you receive at settlement are extremely valuable, so hold on to them. In the short-term they will help establish tax deductions for the year in which the property was purchased. In the future, these papers will be important for tax purposes when the property is sold, and in some cases, for calculating estate taxes.
Moving in
For most Buyers, a home is the largest single asset they hold, so it makes sense to protect that asset.
Make a photo or video record of the home and possessions for insurance purposes and then keep the records in a safety deposit box. Your insurance provider can recommend what to photograph and how to secure it.
You want to maintain fire, theft and liability insurance. As the value of your property increases such coverage should also rise. Again, speak with your insurance professional for details.
About two weeks after closing, contact your local property records office and confirm that your deed has been officially recorded. Such records are public notices that show your interest in the property.
Its yours!! You've done it. You've looked at properties, made an offer, obtained financing and gone to closing. The home is yours. Enjoy your home.
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