What Do I Need to Buy a House?
Despite the myth and fear of the process… Buying a house can be relatively simple. In order to start, you need a minimum of a 620 credit score, 2 years of consistent employment, and a down payment. FHA loans offer to cover 97% of the value of the home which means you only have to come up with 3% of the price of the house at closing. For an $100K home, you’d need about $3,000 to close. For a $200k property, that’s about $6000 to close, etc. There are grants and sellers assistance available to help you out with the closing costs. Once you have those things mentioned above, you’ll be able to get a preapproval from the bank or mortgage company of your choice. Next, you’ll need a good Realtor!
Why Do I Need a Realtor?
Buying a home is the LARGEST purchase most people will make in their entire lives. It is filled with various intricate steps that you may not be aware of. You need a realtor to look for the things that you are NOT looking for. You need the guidance and assistance of an experienced real estate professional. A good realtor will be knowledgeable, ease the process for you, and actually educate you along the way. They can also save you tons of money from expensive wrong decisions.
The Realtor facilitates the transaction between the seller and the buyer by gaining access to properties, writing up agreements, obtaining disclosures, and monitoring information which could be foreign to you. An aggressive realtor will negotiate on your behalf, and even with your lender. More importantly, in most cases a buyer agent (Realtor for buyer) costs the actual buyer little to nothing. The Buyer’s Agent is paid from the Seller’s Proceeds!
Let the House Hunting Begin!
The buying process officially begins once you start touring with a realtor! While touring, it is important to know what you are looking for. Make your wish-list and note all of your must-haves in a property. Searching for the perfect property could take anywhere from 4 to 6 weeks. Touring is the most important process in my opinion because that’s when you (the buyer) are educated the most. You’ll see first-hand what you absolutely want or DON’T want in a property.
To your surprise, through the touring process… you’ll find your wish list has changed. This is because many times, first time home owners adapt to what’s available on the market… vs. what they made up in their head. For example, everyone in Philadelphia wants a single home. However, in a city that’s made up of 8% Single homes, 12% Twins, and 60% Row homes… expecting a GOOD single detached property may not be realistic to the market. . Use factual reasoning to make strong decisions and have your “bottom-lines” as far as what you really need. For an example, If you have kids, the neighborhood, number of bedrooms, and schools are priority.
Making a Decision To Purchase.
Once you’ve found the property you like, the realtor takes your preapproval letter and makes an offer to the seller on a proposed “Agreement of Sale”. The agreement of sale lists the terms and conditions of the sale such as dates: inspection period, when you will settle, your earnest deposit, and specific details like: Do you get the Washer and Dryer with the property? Your good faith earnest deposit gives the seller collateral to know you are serious about your offer. You will be credited your deposit back at settlement towards your closing costs. If the seller likes the offer, the seller signs the agreement of sale. Congratulations You Are Officially on your way to homeownership!
It’s Time to Inspect the Property
Now, you’ll need a full inspection of the property by a licensed inspector. A good inspector will evaluate the house from the basement to the roof. Literally… the inspector is going up on the roof. They’re looking for plumbing issues, Structural issues, electrical, termites, failing appliances: like Central A/C, furnaces, hot water tanks, construction permits etc. They’re going to report it all. You can then negotiate with the seller according to your findings. A good inspector may cost $500-750. It is important to know that this cost is coming out of your pocket upfront… pass or fail. $500 could save you $50,000+ in damages in the future… it’s worth it.
Banking: Paperwork, Paperwork… More Paperwork
At this point, your realtor’s job is pretty much hands off. Once signed by the buyer and seller, the “Agreement of sale” is turned over to your lending institution. Remember, you were “ PRE” approved based on general information that you provided them. Now it’s time to prove it! You have to prove to them that you make $60k a year with paystubs, Prove that you have $10k saved in the bank for closing, Prove the amount of your student loan payment, Prove that your family member will be giving you a gift of $5k or grant, etc. It’s important to know that the bank has hundreds of changing regulated laws to abide by. Many homeowners become furious with the amount of info they require. Be cool, it happens to everyone. Once you provide these things to your loan officer and underwriter, you will be conditionally approved.
All Clear, You are Ready for Settlement!
You will now have to choose a Title Company. A title company makes sure that the Title comes to you from the Seller free and clear of liens. You don’t want to buy a home without title insurance. The seller could have utility liens from 1998 for $14k. If you do not know of this, years later when you go to sell your property… You will be responsible to pay that $14k from your proceeds. A title company guarantees that the title is clean and if not… Their insurance will cover it! They also administrate the funding transaction from the bank to the seller. They provide all closing details such as location, time, and conditions. One condition that is required to settle is to purchase homeowners insurance prior to closing. Homeowner insurance covers the structure of the property and its’ contents. Your first year’s premium is paid upfront and then collected through your mortgage payment the following years. All funds will be submitted to and through the title company on the closing date.
Closing
Closing on a property usually takes place about 45 days (or sooner) after the agreement of sale is signed. You may ask…”What am I doing at closing?”. You’re signing the finalized docs from the bank, accepting your mortgage, and bringing your check to pay for the remaining closing costs… After that, Get Your Keys! You are now a Successful First Time Homeowner! Please Read “The 5 Things You Need to Know Before Buying a Home!” I am a licensed Real Estate agent in the State of Pennsylvania. For detailed inquiries, please text “Homes” to 267-600-7670.
