Defining your needs
This is the most basic, but the most important step. It begins with you putting down on paper your most important needs and priorities when buying a new home. If the decision to buy a home is shared with others, each person should create his/her own list and then compare all to identify the most important needs. Keep the list of priorities between three and five.
Here is an example of needs/priorities.
1. (top priority) – Two bedrooms and two full bathrooms;
2. Near an elementary school (no more than ten minutes by car);
3. No more than $XXXXX.00 dollars, including closing costs;
4. Ranch style home; and
5. No more than 15 minutes from the nearest shopping mall.
Once you’ve defined what your real needs are, an effective search will result in the best homes in the neighborhoods that will work best for you. It is very important to get a loan commitment before you begin your search.
The following saying in real estate is very true: In any market, the best homes are always competed for. When you find a home you like, you will want to be ready for it.
When do you look to finance your next home?
The answer is before you start your search. The moment that you find your new home, your financing should be in place and already documented. It is preferable to have a mortgage lender pre-approve you rather than simply being pre-qualified. When you are pre-qualified it says you can get a loan. When you are pre-approved it means that a lender has already said “yes” to your loan. The key here is time. Once you sign a sales contract you won’t have time to shop for the best loan.
Get to Know “What’s Out There”
The best “buy” depends on how much you know about the product. It’s no different when buying a home. You can get information from friends and family, but the best information is on the Internet. School ratings, the price of homes in a specific neighborhood, flood zone information, etc. Sometimes you only have one day to decide to buy when you find the “right” home, so you’ll want to be market-wise and ready to make a decision.
Offer and Negotiation
You are ready to make an offer on the home you found, but you want to buy with reduced risk and at a price that makes sense to you. The seller, on the other hand, is ready to move and get the best price he/she can get. The goal in making an offer and in the negotiation that follows is to offer the “right” price (you do not want to lose the home to another informed bidder), win the issues that are crucial to you and concede on the issues that are not. Also, the seller will be more apt to “come to terms” and have more confidence in you if you offer:
1. A comfortable closing date (transfer of home from seller to you);
2. A substantial deposit; and
3. Pre-approval from a lender.
Inspection and Search
Once the offer is accepted by the seller, the home should immediately be inspected. A general home inspection can reveal potential problems that need to be repaired prior to the closing date. Other inspections are required by the lender and vary according to the area of the home. All of these have to be arranged by you and any faults brought to the attention of the seller for repair before the closing date. Note: A seller has no obligation to fix or repair any faulty items found during the inspections. Typically a reasonable seller will take responsibility so they don’t lose you as a buyer. Note: A contract for sale would have stipulated a closing contingent on all repairs being made by the seller before the transfer of the house occurs.
Similarly, the title of the home you are purchasing must be researched. If the house has a ”clouded” title, which means there is a lien filed against it or the buyers, it will not be accepted by the financial institution which has pre-approved you for the loan. The title must then be cleared before closing.
You are ready to “close” the deal
With the inspection-related issues resolved, the title cleared and the final commitment from the lender in place, you are ready to go to closing. But before closing, it is important to do a “walk through” of the home to ensure that everything is as agreed-upon and expected.