It pays to work with a REALTOR®
A REALTOR® provides critical assistance with the home buying process. REALTORS® have many resources to assist you in your home search, and can provide objective information about each property. Not every real estate licensee is a REALTOR®. A REALTOR® is a member of the National Association of REALTORS® and has pledged to conduct their business in conformity to the REALTORS® Code of Ethics.
How to Select a REALTOR®
You will want to be comfortable with the person you select to assist you with what may be your biggest investment. It is not always to your advantage to just call the agent who has advertised a home, or has a sign out front. Referrals are aways a good way to go. REALTORS® depend on referral business from their clients and business associates. Check with friends and relatives who have recently purchased a home, that can tell you of their satisfaction with a professional they have used. In addition, it is important to interview the professional you are considering. Ask to see a copy of their real estate license and/or their membership card in the REALTOR® association. Understand what services they will provide for you, how you can reach them and when they will be available to you.
The Importance of Agency Disclosure
A real estate licensee is required to provide you with a "Disclosure Regarding Real Estate Agency Relationships." This disclosure form lets you know to whom the agent owes their utmost care; to the buyer, to the seller, or if they are acting as a dual agent with responsibility to both buyer and seller.
Once You Select a REALTOR®
Don't look for property without letting your REALTOR® know. When you have arrived at a good working relationship with your real estate professional, you will want to keep them in a central position in your home search. They understand your needs and desires and are working to assist you. This is true when you are visiting open houses and new housing tracts. If you want to visit open houses, upon entering the house, tell the person representing the seller that you already have a real estate agent who will represent you in any home purchase. Additionally, you will want your REALTOR® to negotiate for you prior to signing any agreements.
Make a Plan
Have a clear understanding of what you want in a home. Don't be an impulse buyer. Know what your needs are such as the size of home, neighborhoods that you like, schools your children wish to attend. driving distance to work, etc. Focus on looking at property that truly meets your needs and wishes, and what you can afford. If you are a first-time homebuyer, keep in mind that a home comes with other regular expenses including property taxes, insurance, upkeep, etc.
Get Yourself Financially Ready
Create a budget - a spending plan and a savings plan. This would include a reserve for home repair, maintenance and emergencies. Get a copy of your credit report to correct any errors and outdated information. For a small fee, you can order a copy of your credit report online from Experian, Transunion, and Equifax. Be prepared to explain your past and current credit history, if necessary. In addition, you may be required to cover issues such as length of employment, income, debt, and how much you have for a down payment.
Shop for the best financing
Closing costs tend to vary from lender to lender. That's why it is best to shop around and consider the different financial options open to you. There are hundreds of loan programs available in today's lending market, and every one of them has a different set of guidelines, fees and rates. Use a knowledgeable, friendly, and experienced lender that can explain all of your options. Request copies of estimates in writing from each lender to compare fees, rates and costs of different mortgage plans.
Before you shop for a home, it is important to get prequalified with the lender of your choice. Prequalification is the process of determining how much money a prospective homebuyer will be eligible to borrow before applying for a loan. If you have credit or other issues, it is best to seek preapproval. This is a formal offer or loan commitment from an underwriter. Once you are prequalified, your lender will give you a prequalification letter. The next step would be to meet with your lender to fill out the loan application. Be prepared to bring all of your income information such as tax returns and W-2's, pay stubs, bank statements, etc. Remember, prequalification is different from preapproval.
What Should a Loan Cost?
Today, closing costs range between 2 and 7 percent of the home's purchase price and include three basic categories: Out-of-pocket expenses, prepaid expenses and mortgage points. Request estimates of these costs in writing and compare.
What Are Points?
A mortgage point is equal to 1 percent of the mortgage loan amount and actually helps reduce the loan's interest rate. For example, depending on prevailing rates, a $100,000 mortgage might be obtained at 6.0% with two points, or at 6.375% with no points. Obtaining the lower interest rate would cut the mortgage payment by $24 per month, but would require $2,000 (2 points) up front at closing.
Get a Home Inspection!
Even if the house looks in great shape, it is important to have the home inspected by a professional. The reassurance you will have is well worth the money it costs for an inspection and may save you thousands of dollars in the future.
REALTORS® are required to disclose to you what they know about a property, and what they see on a reasonably competent visual inspection of the accessible areas of the property. They are not responsible, nor qualified, to conduct a home inspection that would be appropriate before you buy.
A home inspection is different than an appraisal inspection. The appraisal inspection is to provide assurance to the lender that the home is valued to the extent of the loan. This protects the lender, not you, should there be a default on the loan.
You need an inspector that can check the home from roof to foundation for your protection. The inspection is only as reliable as the person who does the inspection. Be sure you use a professional inspector. Get the home inspection report and make sure you read it before your home closes escrow.
The time to start shopping for your best value in homeowners' insurance is when you make the offer to purchase. You may also want to purchase a home warranty as a defense against costly repairs of vital household systems and appliances that break down from normal wear and tear.
Understanding What You Sign
In a real estate transaction, there are many forms and agreements that you will be asked to sign. Having your agreement in writing in clear and understandable language, is one way REALTORS® serve their clients. Take the time to read and understand the contract. Make sure everything is down in writing, especially any contingencies to your agreement to purchase. As part of the services offered, REALTORS® will explain to you the forms and agreements that you will be asked to sign. A copy of each item you sign is to be provided to you for your personal record.
Earnest Money Deposit
When you sign a purchase agreement, you will be asked to make a deposit of a certain amount of money. This money shows to the property owner that you are making a "good faith" offer. If the owner does not accept your offer, the money is refunded to you.
What is Escrow
When you and the seller have reached an agreement, an escrow is opened with a company that is a third-party to collect and handle all the various aspects of the transaction, including insurance, preliminary title report, inspection reports and loan information. When the escrow closes, the title is recorded and you take ownership. It is very important that you and your REALTOR® keep in close communication with your escrow officer and your lender to make sure there are no problems to delay the closing.
We hope this publication has given you some ideas in your quest to purchase a home. A real estate purchase is very complex, and the information included in this pamphlet is just a thumbnail sketch. You should ask the REALTOR® you select to serve you to answer any questions you have, and to keep you updated on the progress of your home purchase
Search. Find. Move.