If you’re thinking about buying a home, there are several things to consider. Affordability, location, size, proximity to work and transportation are just some of the factors that come to mind. You may be contemplating the value in renting versus buying. Financially, you are afforded a number of tax benefits with home ownership including a mortgage interest deduction, a real estate tax deduction, a mortgage insurance premium deduction, and in some cases, a loan point deduction. Of course, there are other benefits to owning a home as well: personal achievement, a place to call your own, the ability to customize and decorate without landlord permission, a personal space to create and share memories, the opportunity to put your hands on skills to work, and the list goes on. Statistically, the average person moves every 7 years and nationally, home prices appreciate 4 to 7% annually. That being said, Real Estate can also be a nice asset to incorporate into your portfolio.
When educating my clients on the home buying, I compartmentalize the process into 7 basic steps:
1) Pre-approval or Securing your financing
2) Selecting a Real Estate Agent
3) Determining your wants and your needs ( and distinguishing between the 2)
4) Selecting and previewing inventory
5) Making an offer and ratifying a contract
6) Loan Processing
Pre-Approval- Unless you are paying cash, the majority of prospective homeowners will be financing their purchase. Securing a pre-approval from the beginning will give you a guideline as to what you can afford and what you are comfortable paying on a monthly basis. Remember that Real Estate taxes, homeowner’s insurance, mortgage insurance, if applicable, and any HOA or condo fee will all be factors in determining that final figure. Secondly, interest rates are very important and will vary according to your credit history and the type of financing you elect. A change in interest rate can significantly improve or hinder your buying leverage so it is vital to know where you stand from the beginning.
Selecting a Real Estate Agent- You didn’t think I could write this page without incorporating this important criteria into the mix, did you? Having a knowledgeable and experienced Real Estate agent by your side with make all the difference in the journey you have. That’s where I come in. 🙂 While a click of a button can provide you will all sorts of data via the internet, nothing replaces experience. This process can be a very emotional one, your agent’s job is to remain clear and objective. Your agent has a responsibility to you and your best interests. They will negotiate on your behalf, perhaps secure discounts you may not otherwise have been privy to, prepare all required paperwork, and guide you through the entire transaction. When you contact a listing agent or a new community about a home for sale, remember that agent represents the seller or the builder and negotiates in their best interests. You want someone negotiating for you.
Determining Your Wants & Needs- Now that you are pre-approved and committed to buying, it’s time to zero in on a location and determine what you are looking for. Does a stand alone home with a big yard appeal to you? Do you prefer the privacy of your own home but the close proximity to neighbors that a town house or condo community provides? Do you like to get your hands dirty in the garden or do you want to leave the exterior maintenance to someone else? What about the area? Do you want something close to public transportation and shopping, on the local school bus run, near your favorite grocery or park? Does the home have to be new or would older construction that with a renovated interior suffice? These are all things to consider. As an experience agent, I always advise my clients to separate their wants versus their needs. Perhaps you want a new home with a gourmet kitchen, a walk-out basement, a large square yard, cathedral ceilings, a jacuzzi tub, and a guest suite but find a home that is 25 years old, structurally sound, with a new roof that has only half your list. Would you consider it? Defining those distinctions upfront will help you find the best home for your money and help your agent in electing inventory that best suits your needs.
Selecting and Previewing Inventory- Once you’ve discussed your criteria for a home with your agent, you should begin to receive options via email. It’s always best to preview online. In the age of virtual tours and photos, you should be able to discern between what may and may not be a viable option for you. The house hunt should be interactive on both sides. Take advantage of online resources and email options to your agent that perhaps they didn’t elect for you. Remember to let your agent do the inquiring. You never want to undermine your negotiating position by volunteering unnecessary information to another agent or seller. Once you’ve elected a list, the fun begins! Remember to take notes as your tour. Keep in mind the interior as well as the age of the windows, heating unit, roof and other big ticket items. Your agent will be taking notes as well, mentally.
Making an Offer and Ratifying a Contract- Now that you’ve fell in love with the perfect home, it’s time to make an offer. Your agent will run recent sales and comparables within the community, and incorporate the condition of the home. Collectively, you will arrive at an offer price. You will also need to consider how soon you want to close and any conditions on your offer. Perhaps your offer will be contingent upon a home inspection or satisfactory appraisal. This is the time to discuss all options with your agent and ask questions. If your offer is accepted, it becomes a legally binding contract. Make sure you clearly understand your responsibilities. The seller may also make an counter offer; you should be prepared to negotiate. Make sure your agent knows your position. Your will need to elect a title company or attorney to facilitate the closing. Both Maryland and Virginia law give the buyer the exclusive right to elect.
Contract & Loan Processing- Once you have agreed on terms and your offer has been signed by all parties, you now have a contract. You must receive a copy of the contract, either electronically or a hard copy, in order for it to be legally enforceable. At that point, your agent will forward the contract to your lender for processing. Expect lender review and underwriting conditions you must fulfill in order to complete financing. At this time, the title company or attorney will also be given a copy of the contract. They will begin to pull title or ownership history and prepare the necessary documents on their end in order to facilitate closing. Any scheduled inspections will now take place within the specified time frames. You will also be preparing for a move. Remember to file a change of address, elect homeowner’s insurance, transfer utilities etc. The turnaround from contract to closing is 30 days on average but can be as little as 7 days on a cash purchase and 14-21 days on a conventional loan.
Closing- Your big day has arrived! Prior to meeting at the title company, you should be conducting a final walk-through at the property with your agent. This is to ensure that the property is in the same condition as when you made the offer. If you’ve negotiated any repairs as part of your contract or home inspection, they should now be complete. If any damage has occurred to the property, you will need to reconcile repair or a credit at closing. At the title company, you will sign a number of documents as part of your loan package. If you have elected the property as your primary residence or are receiving a state credit as first time home buyer, you will sign an affidavit to affirm. The seller will be signing the deed transferring ownership of the property to you and you should be receiving clear title to the property. The title provides you ownership rights to the property. You should receive a hard copies or electronic access to everything you signed at closing. You exchange keys and the home is yours! Congratulations!
**The above is a brief synopsis of what to expect when buying a home. There are several other details that go into and affect the transaction.**
Call me at 301-633-8556 to schedule a free home buying consultation!