If you are considering purchasing a home or refinancing—you can go to quickenloans.com or lendingtree.com along with local mortgage lenders in your area—to determine what loan will best suit you—and your family. You can compare closing costs, APR's and Par rates to determine what loan will best serve your—and your family's long-term interests.
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Many first-time home buyers have posed the above question—and it is a valid one—and one that they should pose to their real estate agent prior to entering into a written buyer brokerage agreement.
By posing this question on the front end—you can better gauge the agents level of professionalism—and their ability to serve your interests in a manner that will truly benefit you—and your family!
The Complete Home Buying Process:
It starts with preliminary homebuyer prequalification to post-closing—in my opinion and based on the way our company operates.
A professional real estate agent should be concerned with more than just your ability to purchase a home—they should also be concerned with your ability to maintain and keep your new home.
Therefore, “preliminary pre-qualification” is a vital step. Don’t skip this step, many homeowners have skipped this step in the past to their own peril (loss of house, financial difficulty etc.).
The home buying process begins well before you decide to place an offer on a home!
The preparation that you put into buying a home on the front end will pay great dividends on the back end if you do it the proper way.
I often have the potential home buyer pull their credit from the three major credit bureaus and have them obtain their credit scores as well.
This gives the consumer confidence that they are in control of their own financial destiny.
Although they may not see it now—this will help them start to take control of there financial affairs if they aren’t doing so already.
Assuming their credit and credit scores are satisfactory we move on to the next step. A quick front end and back end ratio analysis is then performed.
If their credit and credit score situation is unsatisfactory they correct them (usually within 12 months) and we then move to the next step.
Assuming you have no bankruptcies, judgments or
other public record data on your report it can normally be cleaned up within 12
months if you have the right cash flow and you are disciplined in paying off—or paying down your outstanding debt—and paying your revolving and installment accounts in a timely
While working with buyer’s I try to implement a comprehensive strategy in their home buying pursuit.
It is important to begin at the cash flow (budget) analysis point and move forward from there. I look at their total financial situation so I can be of the most benefit to them (assuming they agree to the complimentary service).
From there we can see if there is discretionary income available after all variable and fixed expenses have been paid.
I then perform personal balance sheet, income statement and net worth analysis to get an even better look at their financial situation so I can be of the most benefit to them (again assuming they agree to the complimentary service).
Front and back end ratio analysis would then be performed again.
I then analyze all of this based on family size, future goals (retirement, college, etc.) financial needs and wants and other factors that may be present in their situation.
I then decide if they qualify based on their down payment saved, emergency fund, cash flow situation and their ability to reach their goals based on what they stated above.
I also look at other factors (compensating) and non-compensating as well—such as a future financial windfall, other household income that will not be included on the loan application, expected increase in family size, child going to college and any other factor that could potentially have a negative or positive effect on their home purchase.
Assuming all of the above turns out to be positive I inform them of the home buying process in greater detail.
I then inform them of the advantages of getting pre-approved as opposed to pre-qualified (more negotiating power).
Once they are pre-approved we begin the home search and once a home is found to their liking we put an offer contract on that property (along with earnest money deposit).
After negotiation and a final sales price and terms are agreed to the buyer performs an inspection (usually a professional inspector is hired) based on the time limits specified in the offer.
If there are problems of concern to the purchaser we counter the offer and negotiate until a final sales price is agreed to. Once all contingencies are met the contract moves forward and the closing occurs.
Be aware that not all real estate agents will be concerned with your “preliminary pre-qualification” but you should be—you have to live with the choice and decision that you make well into the future, so it is important that you get this step right.
Once the contract is accepted you make formal application for the loan (unless buying with cash) and once you receive the loan commitment letter (a contract between you and the lender—make sure you understand what you are signing) and the process moves forward.
Once the inspection is complete and repairs are negotiated the contract continues to move forward. If no agreement is reached the contract may become null and void.
Assuming the contract moves forward and closing approaches after you receive your mortgage commitment, the attorney will submit a title insurance binder along with other legal paperwork required by your lender.
Once everybody has signed off approval—a closing date can be set.
It is highly recommended that you do a final walk through of your soon to be new home prior to closing.
The final walk through allows you to reconfirm the condition of the house prior to closing. This normally happens a day or two before closing.
Don’t skip this step because this is usually your last chance to verify that there has been no change or damage to the property, all agreed on repairs have been made, appliances you expect to be there are still there and that the seller’s personal belongings have been removed.
Don't Assume Anything!
A lot can happen between having your offer accepted and getting to the closing table. If possible it is not a bad idea to do another walk through several hours before closing—just as an added security—and peace of mind effort.
Make sure that you bring photo identification to the closing. This is required since 9/11!
Real estate closings can often be exciting and stressful at the same time. There are many legal papers being shuffled back and forth, as well as checks for large sums of money being exchanged among parties.
At closing, the seller gives the title to the buyer in exchange for the purchase price that is stated in the contract. The seller also delivers a deed, title evidence and a property survey if required.
The buyer brings insurance, termite letter, cashier’s check etcetera.
You will be required to sign final mortgage papers, IRS Form 1099, a form known as the HUD-1 statement or Uniform Settlement Statement and other closing documents.
The attorney will explain the purpose of each of these.
In addition, what the seller or buyer brings to closing—will vary depending on your locale, so be aware that state laws vary on buyer and seller responsibilities.
In addition, who brings what will vary based on how closing costs were negotiated.
In most cases, there are no warranties after closing. The only defects that you can make notice of or complain about are defects that you can prove were known and/or hidden defects that were not disclosed or could not have been found out about through a reasonable investigation.
Post Closing is critical. Utilize a cash flow budget. Stay in touch with your agent.
Your deed and mortgage will be registered and filed at the county recorders office.
On a day when you have time it may be wise to go to the recorder’s office a month or more after closing to ensure that the deed and mortgage was properly recorded.
Be sure to save all of your closing paperwork in a safe place.
You will need some of it for your taxes as interest, points, and now MIP or PMI is now deductible on your tax return.
The deed and abstract should be placed in either a fireproof box and/or safe deposit box. The documents are very important and due care should be utilized to safeguard them.
They are an inconvenience to replace and will cost you valuable time and money.
Also file your homestead exemption by April 1st of the year after closing in the County in which the property is purchased.
In Georgia you will save on your property taxes (must be owner occupied residence) and it is worth the effort if you are an owner/occupant.
NOTE: The above home buying process assumes 1st time buyer with no house to sell!
Also remember that all home buying situations are different and may require a more detailed offer and closing than that listed above.
Use the above home buying process as a guide only—as each home buying situation will be unique.
Learn how to apply — “the Keys to Success”—in your life