Home Buying 101
Home Buying 101
Here are the basic steps involved in buying a home. These apply whether you are a first time home buyer or an experienced buyer. This information is for people purchasing homes in Arizona. Some of the information may vary for purchases in other states.
1. Get Pre-approved for a Home Loan- Unless you will be paying cash, your first step should be to speak with a banker, a mortgage broker, a credit union regarding getting pre-approved for a home loan. In Arizona we have a form called a Loan Status Report, LSR, that your lender completes to show that you have been pre-approved for a loan. Your real estate agent can provide the form to you or to your lender for completion. Your agent can also provide you with names of lenders for consideration.
2. Define Your Wants and Needs- Make a list of features that you want in a home. Determine which features are must have items and which are things that you would like but aren’t required. This is information you will need to give your REALTOR® and will be a handy reference for you as you browse homes on the Internet and view homes with your agent. Here are some basic features to consider:
- What is your price range?
- What type of dwelling do you want? Single Family? Townhome? Patio Home? Condo? Loft?
- How many bedrooms and bathrooms do you want? (A bathroom with a sink, toilet, and shower is considered a three-quarter bath. A bathroom that has those items plus a bathtub is full bath. So you might Need a home with 1.75 bathrooms but would like one with 2.0 bathrooms.)
- Do you need a single level home or are multiple stories okay?
- What type of parking needs to do you have? Garage? Carport? Assigned Parking? RV Gate?
- Do you want a swimming pool or spa in the back yard?
- Are you willing to pay an HOA fee? If so, what is the maximum HOA fee you will consider? Remember the services provided by HOA’s vary by community. Some HOA fees just cover landscaping of common areas. In other cases such as townhomes, many times roof and exterior maintenance of the unit is included, sometimes also water, sewer, and garage service is included.
3. Find Your REALTOR® - Not all real estate agents are REALTORS®. REALTORS® are members of the National Association of REALTORS®. They are professionals who are bound by a strict code of ethics. As friends, co-workers, and family members for recommendations of agents that they have worked with in the past. Ask any potential REALTOR® to tell you how many years of experience he has and ask if he has any designations. A GRI designation means that the agent is a Graduate of the REALTOR® Institute. A GRI has completed 90 hours of intensive course work to educate themselves about national and local real estate issues that will affect him and his clients. We both have the GRI designation.
4. Select Homes to View – Once you have given your REALTOR® your list of wants and needs, he can do an MLS search for you an email you information about properties that might be of interest to you. You can also use the buttons on the left side of this page to search area homes for sale. Once you have narrowed your list down to four to eight homes, schedule a time with your agent to go and view the properties.
5. View the Homes – Go with your agent to view the properties you have selected. It can sometimes take several viewing trips to find the right property. When you are seeing homes, be sure to let your agent know about any specific features you’ve seen that you would really like in a home or would prefer not to have. He will be able to refine your search criteria with this information.
6. Make an Offer – Once you have found a property you like, ask your REALTOR® to do a Comparative Market Analysis for you. This will provide you with information about what similar homes have sold for recently. Determine the price you would like to offer and work with your agent to write up a contract offer. Don’t forget to request that the agent list in the contract any appliances or other items you would like left with the property. This is also the time to include items such as requesting that the seller pay for closing costs.
7. Negotiation- Once you submit an offer to a seller you will need to wait for a response. For a traditional seller you will typically get a response in 1 to 2 days. For a foreclosure property, it will take 2 to 5 business days. For a short sale it will take 4 to 8 weeks and sometimes longer. The seller may accept your offer as it is written, he may reject it, or he may counter offer. This is when having an experienced agent can really pay off for you. An agent should clearly explain to your the negotiation envirnoment you are in and advise you appropriately. For example, there could be multiple offers or you may be the only offer for a property that has been on the market for a long time. Each calls for a different strategy.
8. Escrow- Once you have an accepted contract, your REALTOR® will open escrow with a title company. He will deposit your earnest money with the title company. The title company will check to see that the property has a clear chain of title. They will also contact any HOAs to get required information from them. The title company will process all of the paper work and prepare final documents for signature at closing. They will also process all funds from you and your lender. The escrow process typical takes about 30 days but can be longer or shorter.
9. Inspections- We recommend that you get a professional home inspection and a termite inspection. Many lenders will require that you get a termite inspection. Typically you have 10 days from the date of the accepted contract to get your inspection. You will need to check your contract espcially if you are purchasing a foreclosure or short sale property because this time may vary. Unless written otherwise, you can cancel the contract during the inspection period if you decide the property will need more repairs than you expected or will not meet your needs and get a return of your earnest money from the title company.
10. Loan Processing- Your lender will be processing your loan during the escrow period. You will need to provide whatever documentation your lender requires in a timely manner in order to ensure that the loan process is completed within the time frame specificed by the contract. One of the things your lender will do is order an appraisal of the property.
11. Closing – Once the title company has all the paperwork that it needs including loan documents from your lender, they will prepare closing documentation. They will tell you how much money if any you will need to bring to closing. (This will vary depending upon your down payment amount, type of loan, and closing costs.) They will also schedule a time for you to come in and sign documents. Some banks require 24 hours to fund a loan once they have received signed documents from the title company.
12. Recording – This is the final step in the process. Once the title company has all of the paper work signed by the seller and the buyer and has all funds from the lender and buyer, it will submit the sale to record with the county. Once the title company notifies your REALTOR® that the sale has recorded, he can give you the keys to the property!
Please realize that these are the basic home buying steps. There are many details involved in the home buying process and this is meant to provide a brief outline. Also, in some cases specific contract language may change the order in which these steps occur or change some of the provisions. This has become more common with banks selling foreclosure homes having anywhere from 1 to 20 pages or more of addendums to add to the contract. Again, having an agent who has experience in helping buyers purchase foreclosure properties can be very important.