Deciding to Buy

Purchasing a house is one of the largest milestones you will experience in life. Whether you’re purchasing your first home, upsizing, or downsizing  the path to owning your new home can be very exciting. Click through this interactive guide to learn more about how to prepare for your home purchase!

So, you’re ready to buy a home! As you work toward your home purchase and move, it’s essential to ensure that you know your financial ability before you make the leap. Consider the following factors:

Why Buy?

Why are you looking to buy a home? Getting married? Is your family growing and you need more space or have they already grown and you now have too much space? Are you tired of renting or leasing when you would rather build your own wealth? Do you need to relocate for a new job? Are you looking for a different neighborhood? Do you want to diversify your investment portfolio with rental properties?

There are plenty of reasons to buy a new home, and the motivation for moving varies from person to person. While there’s no “right” answer to the “Why buy?” question, it’s important for you to have a clear understanding on why you want to move so you can make a good decision when buying.

What Does Your Income Look Like?

Often, individuals turn to real estate purchases as their incomes grow, since property is an excellent investment option as a personal asset or portfolio component. Real estate is a fairly low-risk investment and is an ideal way to grow personal equity or as a source of extra income.

PREPARING YOUR PAPERWORK

Once you’ve decided to buy, you need to gather the paperwork necessary to determine your purchasing power. It’s important to be prepared - and with this handy checklist - you will be set:

• Financial records

• Bank statements

• Credit card statements

• Auto loan information

• Income information, including:

  • Your past two (2) tax returns

  • Recent pay stubs

• Investments, including:

  • 401(k)s and other retirement accounts

  • Life insurance

  • Stocks

  • Bonds

  • Annuities

  • Corporate investment portfolios (ex. mutual funds)

  • Investment property loans

Examine Your Credit Rating

As you might have guessed, your credit rating plays a big role in determining the financing options you’ll have when you go to purchase your new home. Consult with a reliable lending institution to pull your credit score.

Be Mindful of Your Financial Actions

The time leading up to your new home search and purchase is not the time for making big moves financially. Resist the urge to make a career change or purchase a big ticket item, like a new car, as you work toward your goal of a new home purchase.

FINDING A REAL ESTATE AGENT

Now that you have your proverbial ducks in a row, it’s time to build a home searching team. Your real estate agent is an integral player in your home search and purchasing, so you want to find someone who can help you navigate the process while keeping your best interests in mind. Do your homework now to find the best agent for your purchase:

• Interview local agents to learn about their past clients and sales. Have they placed people in homes similar to those you’re considering?

• Consider agent availability. Will they be available on evenings and weekends?

• Look at potential agents’ credentials and education. You ideally want an agent who’s committed to their field and is always looking for ways to stay up-to-date in the real estate business.

• Does a potential realtor respond to your calls and emails promptly? Communication is key - lost time could result in missing out on your ideal property.

• Ask for references and a list of past properties sold.

• Gauge your comfort with any potential realtor. You want someone you can trust and who you believe has your best interest in mind.

STARTING YOUR HOME SEARCH

Here comes the fun part: searching for your next home!

Visit Your New Locale

Take a trip to your new town or drive around the one you live in, if you’re looking to relocate locally. Look at different subdivisions and make note of landmarks that might be of interest to your family, like attractions, libraries, or parks. Think about what it would be like to live and own property there.

Narrow Your Prospects

Hone your search list to consider only a few properties that meet your qualifications and let your agent know you’re ready to start your search. Make sure to ask your agent about resale potential, as well, to ensure that your ideal properties translate to good investments.

Make an Offer

When you’ve found the right house, you’ll work with your agent to place an offer for the seller to accept. A good agent will be able to help you navigate expenses associated with the sale and will also help you to prepare an offer that will give you an advantage over other buyers.

COMPLETING THE SALES PROCESS

When your offer has been accepted, you’ll work through the sales process. While there are a lot of components to this part of the process, remember, you’ll have your real estate agent by your side to walk you through each one.

Your Initial Agreement

This agreement, also known as the Contract, is a legal agreement between you and the seller upon acceptance of your offer on the home they’re selling.

There are two important points to remember here:

1. Keep meticulous records. You want to submit everything in writing, including your initial offer, counter offers, and any addendum's. Even verbal agreements should be committed to writing. Your agent can help you keep track of these details.

2. Mind your schedule. When you submit your offer, you and the seller will be provided a schedule for acceptance and next steps. It’s essential that both parties adhere to the schedule to avoid violating any legal agreements.

Your Closing Agent

Your closing agent is either an attorney or a title company that will hold your initial deposit while checking to ensure that the property you’re trying to buy is free and clear of any liens and title issues. When they determine that the property is clear, you will continue to move on pace toward your closing date. There may be some restrictions to your property, like building restrictions, that you must be aware of and adhere to. These will be spelled out in your title paperwork.

Holding Title

Consult an attorney or tax advisor to learn the best way to hold title. There are multiple methods, but some may not be applicable in your situation. It’s invaluable to work with a professional who can understand the nuances of your situation specifically.

Inspection

At this point, you will need to have your prospective new home inspected by an accredited agency. This inspection will include evaluation of the home’s structure, systems, roof, and so forth. You may even wish to have multiple inspectors look at the property to get the best picture of the house’s status.

After the inspection, one of two things will happen:

1. You are pleased with the results and you move forward with the purchase as scheduled.

2. The buyer asks the seller to make repairs by a professional or for a renegotiation to accommodate for inspection findings (usually price).

Remember no home is perfect though.

Lending and Appraisal

Your agent will keep you up to speed as you work through the various parts of the sales process. An essential step at this point in the process is filling out your lending paperwork. You will need to provide financial statements and be prepared to present these documents when requested.

If your purchase is contingent on lending, you will also require a home appraisal. The appraisal will be conducted by a licensed appraiser and will determine the property’s value, based on factors like home and property size, age, and location.

Association Application and Acceptance (If Applicable)

In some situations, you’ll need to apply to and be accepted by associations related to the property that you’re looking to purchase. These include co-ops and homeowners’ associations.

To navigate the process as smoothly as possible, request a copy of the rules and regulations and fill out your application, along with any application fees, as soon as you are able. This will allow the review committee to evaluate your application and schedule any followup interviews in plenty of time.

Insuring Your Property

If you’re financing your property, your lending institution will require that you insure your home and property as part of your financing agreement. While your financial institution may provide insurance options, you may also look to other institutions for a property insurance policy that matches your needs. Here are some things to consider when shopping for property insurance:

• Rethink your deductible. Many insurance companies offer lower premiums in exchange for higher deductibles. Even adding a few hundred dollars to your deductible could lower your monthly premium.

• Look for discounts. If your home has certain safety features, like a security system or fire sprinklers, you may be able to get a discount from your insurance company. Additionally, if you fit certain demographics, such as being over age 55, you may be able to secure further discounts.

• Insure only your home. Often, your insurance proposal is based on the appraised value of your home and the property it sits on. However, you need only spend money to insure the home itself, NOT the land - which can add a significant amount to your coverage. Ask your agent to help you find insurance policies that factor this into account to save money on your policy.

MOVING INTO YOUR NEW HOME

Once you’ve successfully navigated the ups and downs of the sales process, it’s closing day. Congratulations, you’re almost home!

Here are some last minute items to check off the list before you take the keys.

The Final Inspection

On the day of your closing (or, in some cases, the day before), you’ll go for a final inspection walk-through of your new property. This is more of a formality than anything, and your agent will accompany you to ensure that the property is as you expect it to be, per the paperwork you and the seller have agreed to. You’ll want to double check on details to verify that things are still in working order, that no personal items have been left behind by the seller, and that additional items to be left with the property (if any) are in place.

Setting Up Utilities

Prior to taking residence in your new home, you will need to set up utilities in your name at that address. Your agent can provide company names and contact information for the utility companies that service your new address.

Last Minute Snafus

As you approach the finish line, you may run into some unexpected glitches in the process. At this point, generally any problems are fairly minor and easily solved. However, in the excitement and stress of closing on a new home, you may not have the presence of mind to work through these on your own. Not to worry! Your agent will be on hand to help you handle these details as they arise.

Closing on Your New Home

And now, the moment you’ve been waiting for: your closing meeting. A closing agent will preside over the closing process, where you officially acquire your new property. You will be asked to sign your loan paperwork, as well as other paperwork associated with the - transaction.

If, for any reason, you are unable to physically make your closing date, your agent may be able to take your place during this meeting, but you must provide pertinent paperwork and funds, if necessary. The seller will present the keys and any other information, as requested, to make the transfer process go as smoothly as possible.

Once all the paperwork is signed by all parties and the money has been received by the title company you are officially a new home owner. Congratulations!