10 Step Buyers Guide

1. What Is My Credit Score?

You should know your own credit score before applying for a mortgage.  Although you can be approved by a lender with less than favorable credit (580+ for FHA loans), the higher your score (720+ for conventional loans) is the better your outcome will be.  A higher credit score can save your thousands in interest payments and points paid to the lender.  

You can receive free credit reports from Equifax, Experian and TransUnion annually!  There are also free apps you can use like Credit Karma to help you keep track of what's going on with your credit.  Payment history, total debt, length of credit history, new credit and type of credit are the factors that impact your score. 

Your credit score affects many aspects of your life so if its low start working on it today!  Review your credit reports and dispute all errors.  Make all of your payments on time and try to keep your balances low.  Don't apply for new credit when you are in the homebuying process because this can negatively affect your debt-to-income ratio which determines how much you can borrow.  Keep your utilization the same or lower than at the time you are pre-approved by a lender as your credit will be checked again during the process until the closing takes place.

2. How Much House Can I Afford?

A lender will consider your credit score, annual income, monthly debts, estimated down payment and other factors to determine the maximum amount you may borrow.  Getting pre-approved by a lender should be your first step so that you know exactly how much house you can afford.  Sellers may require this upon submission of a contract to purchase.  Also, a real estate agent may require this before they consider showing you a single property.  

A pre-approval letter shows a seller that you are a ready, willing and able buyer!  Chances are your offer will not be the only one so being pre-approved will help your contract stand out in front of buyers who are only pre-qualified or have no approval at all.  As your agent, I can refer you to a lender if you don't have a particular one, you'd prefer to work with.  Be aware that qualifying for a primary residence vs. an investment property have different criteria which your lender will discuss with you.  

3. Hire A Real Estate Agent

Although you are not required to use a real estate agent during the home buying process, having this professional guide you through the process is your best choice.  Real estate agents are licensed and knowledgeable about the market and negotiation tactics.  We are required to take continuing education throughout our career and can provide you with expert advice and recommendations.  Since the seller usually pays the buyer's agent commission, using an agent to represent you is free!  Click here if you would like to discuss how I can help you achieve your real estate goals.

4. Start Your Property Search

Now that you know how much you qualify for you should begin prioritizing your must-haves based on what you can afford.  Start with your non negotiables first and continue on to features that you would like to have but aren't deal breakers if they are not found in a property you want to make an offer on.  HOA fees, property taxes, bedrooms, bathrooms, home and lot size, location, home type, layout, amenities, school districts and commute times are a good place to start when compiling your list.  

As your agent I would ask you exactly what you are looking for and send you listings that best match your wants/needs.  You can also use the very many online resources to perform your own searches and stay abreast of market conditions.  Depending on your budget you may have to sacrifice the yard space you want to get the house square footage you need.  It is important to stay flexible and be realistic about where you stand!  Good communication is key and should be kept between yourself and your agent at all times.  

You will want to start schedule showings as soon as possible.  What's listed for sale today can go under contract today and you don't want to miss out on the opportunity to put in an offer on a home you could see yourself living in!  The pictures that draw you to a listing may not reveal the home's true health.  Pay attention to structural defects, water pressure, HVAC issues, electrical issues, doors, windows, roof quality, exterior defects, neighborhood noise and other factors that you would have to deal with later on.

5. Present An Offer

Now that you've found a property that has piqued your interest it is time to present an offer!  Depending on market conditions - seller's market or a buyer's market, multiple offers, property condition and how long the listing has been on the market you may be able to make a lower offer than asking or have to go in higher to remain competitive with other buyers.  As your agent, I would do a comparative market analysis (CMA) which is a properties market value based on recent comparable sales in the same area.  You'll be ready to submit a purchase contract with a fair offer price.  

A seller must disclose all known defects to the property which will help you in negotiating the right price.  Consider the proposed closing date depending on your flexibility as the terms may not meet your timeframe and do not make the listing a viable option.  Your offer may be based on contingencies depending on the type of loan and/or down payment assistance you qualify for.  The lender will require an appraisal contingency to assure that your offer is not more than the property is actually worth.  As a buyer the choice to include an inspection contigency is totally up to you.  As a licensed professional I would recommend that you always have a property inspected to avoid any major costly issues once you've already closed.  You'll need to include an earnest money deposit as part of an offer which shows good faith to the seller that you are serious about making a purchase.  These funds will be used as part of your down payment at closing.  Be aware that you will forfeit your deposit if you choose to back out of the deal outside of a contigency.

A seller has the choice to accept, counteroffer, or reject your offer.  As a buyer you have the choice to accept, counteroffer, or reject the seller's counteroffer.  You may both have to compromise in order to get the deal closed.  As your realtor I will negotiate on your behalf in getting you the best deal possible.  Your best interest is always my first priority! 

6. Schedule A Home Inspection

A home inspection contingency protects your earnest money deposit in the case any major issues are found.  A home inspection protects you against these underlying issues that can be very costly in the future.  As your agent, I can recommend a reliable licensed home inspector after you are officially under contract.  You should make every attempt to attend the inspection so that you can ask questions and be made aware of any issues on the spot.  We'll review the official inspection report together and discuss how you should respond to the seller.  A contract re-negotiation may be necessary asking the seller to fix the issues or provide you with a credit to make the repairs post-closing.   You will incur upfront costs for the home inspection, appraisal and land survey.  

7. Secure Lender Financing

Although you've been pre-approved you still need to submit a formal mortgage application in order to secure the necessary financing for your purchase.  You have the choice of submitting an official application to the lender that pre-approved you or to a different one.  Changing lenders may or may not hinder the process so be sure when making this choice.  The lender will request the necessary documents which should be submitted A.S.A.P. to avoid any delays in closing.  

Your lender will hire a licensed appraiser who will provide you with copies of their official report - appraised fair market value and the comparable that were used.  You will want the appraisal to match or be higher than your offer price in order to recieve a "clear to close" from the lender.  A higher appraisal is the best outcome because this means the purchase price is below market value therefore giving you immediate equity!  The lender will not approve the full loan amount if the appraisal comes in too low.  You can either pay the difference in cash or try negotiating the offer price with the seller.  You can also request a new appraisal if you believe the one your received is incorrect.  

8. Purchase Your Homeowners Insurance Policy

Proof of a homeowners insurance policy is mandatory before closing!  Shop around for the best rate or inquire with your lender to set up a policy that can be inlduded in your monthly escrow account payments.  Be aware that older homes can be harder to insure and may require you to pay a higher rate.  

9. Closing Day

A final walkthrough is recommended the day before or the day of closing to ensure that the property looks the same as when your offer was made and if applicable that the seller has made the agreed upon repairs.  An official land survey should have been completed by this time.  You will want to make sure that the property line matches the description of the property that was provided in the listing.  

You've finally made it to the closing table where you will sign legal documents that will transfer ownership of the property from the seller to you.  You may be all signing during the same appointment, or you may do so separately.  Your lender will let you know what your closing costs are, and these funds are due at the time of closing.  Your costs can range between 3-5% of the sale price and can be paid via wire transfer or cashier's check.  You will receive the keys at this time, depending on the terms of your contract - immediate possession or at a later date.  

10. Celebrate!

You can know breathe a sigh of relief that the process of purchasing the property is now complete!  You've received your keys and its now time to move and get settled in.  Set up your utilities, plan your housewarming and start creating great memories.