10 Steps to Buying a Home
Buying a home is a major undertaking. As such, the process can seem a bit confusing and requires multiple steps in specific sequence. To help you through it, our team has put together the key steps you’ll need to cover in your pursuit of securing the home of your dreams.
1. Find the Right Real Estate Professional
Perhaps the most important part of the home buying experience is finding the right real estate professional to assist you. A buyer’s agent will help you through the entire home buying process, making sure you find the perfect home and make your best deal, too. You’ll need to link up with a professional you can trust and feels right for you. We suggest getting a referral from a trusted source and also doing your research, including interviewing to find someone that best fits your requirements for professionalism, market knowledge, track-record and personality fit.
2. Get Pre-Approved for Financing
The next step, if utilizing mortgage financing to make the purchase, is to get pre-approved with a mortgage lender. Just like finding the right real estate professional, working with the right lender is essential. We recommend asking your real estate professional for a referral if you don’t already have a trusted relationship in place. A mortgage professional will review your credit scores, income, and assets to help you determine what you can and want to afford in terms of home purchase price, monthly housing expense and required cash to close. Ask your lender for a copy of your credit report after you apply and check it carefully for errors. If there are discrepancies, contact the reporting agency directly to resolve them. Additionally, if there are any past credit problems, be prepared to explain them and work with your mortgage professional to resolve them as needed.
3. Determine your Purchase Budget
Your mortgage lender and real estate professional with help you figure out what kind of price range you can and want to afford. This will be expressed in three ways, with the home’s purchase price/market value being the first. Second is the monthly housing expense (MHE), which is the combination of mortgage principal and interest payments, escrowed real estate taxes and insurance payments, homeowner or condo association dues, and mortgage insurance (if financing with less than a 20 percent downpayment). Finally, is your cash to close (CTC) which is the combination of your down-payment, closing costs and pre-paid items. For an accurate idea of what you can afford, have a lender examine your income, debt, assets, and credit to get pre-approved for a loan that’s right for you.
4. Identify your Home Buying Criteria: Budget, Location and Must-Haves
Once you’ve determine your budget and finances, next is deciding on location and criteria. When it comes to location, your real estate professional will help you figure out in what area of South Florida you want to live. Do you like the hustle and bustle of Delray Beach or other downtown, busy pedestrian areas? Or is the leisurely lifestyle of Lighthouse Point or other coastal areas more your style? Is it the gated family neighborhoods or country clubs of Boca Raton or the active adult communities of communities of Boynton Beach? No matter what you are looking for, there’s something for everyone in South Florida! When identifying criteria, you’ll need to understand that unless you have an unlimited purchasing budget, which is rarely the case, there will be some criteria tradeoffs in order to make the purchase within the desired budget and location. Start with the “must-haves” — those elements that are absolutely essential requirements for the home purchase and deal breakers if not present. Next are the “nice-to-haves,” which if present would be ideal but not a total deal breaker if not included. This will help guide the process to most effectively identify the right home in a competitive marketplace.
5. Go Shopping
Your real estate professional will start sending you properties via the Multiple Listing System based on your desired criteria. You can also shop online at steinposner.com. Once some good options have been identified, plan to spend time searching throughout different areas and neighborhoods to visually tour properties in order to select the right home. By far the best way to identify the right home is to tour until you have found the right one.
6. Make an Offer
Once you find your dream house (which we know you will), it’s best to make an offer quickly. After reviewing the comparables with your real estate professional and confirming the financial picture with your lender, its best is to make an offer that’s on par with the value and condition of other houses in the neighborhood that have sold recently. If you really love the house but make a lower offer, you risk losing it. A higher offer will be stronger and may be the right approach to get the house. Your experienced professional will be able to advise you on the best approach to take to get your offer accepted and make sure you are paying a fair price.
7. Enter Contract
Review the contract with your professional to ensure the deal is contingent on obtaining a mortgage (if buying with financing), a successful home inspection, obtaining clear title and a guaranteed walk-through the day before closing. You’ll also need to make a good-faith deposit into an escrow account, which can range from 1 percent to 10 percent of the purchase price. After the deal closes, the seller will receive this money as part of your purchase price. If the deal does not close for some reason, you may be entitled to a refund, depending on the reason.
8. Conduct a Home Inspection
Essential to the process is knowing the condition of the home you are buying and not just what’s on the surface but underneath. A thorough home inspection will indicate the age and condition of the roof, mechanical, electrical and plumbing systems. Also included could be some structural, window, flooring, termite and even a mold inspection if necessary. Finally, in Florida specifically, there will be an inspection for any mitigating factors for wind coverage in the event of a storm to reduce your insurance costs. The inspector will provide a full report, including all identified deficiencies, to understand what you are buying and to negotiate any repairs or credits with the seller, as may be appropriate. Your real estate professional can recommend potential inspectors to provide these services.
9. Finalize Your Financing
There will be a lot of paperwork that needs to be provided to your loan officer, including: submitting a full application, providing proof of income, verification of employment (as applicable), assets, credit scores, tax returns, and other related documentation. Your loan officer will also order an appraisal of the home to validate the value for the lender and other property related items. This may take 30-45 days to go through underwriting so you’ll want to respond to your loan officer’s requirements in a timely manner with all requested items so as not to delay the closing. Also, as this will likely be one your largest single purchases and the place you live with your family, you’ll want to protect your home, family and belongings. Work with an insurance professional to obtain the best insurance for you. Your lender will require this as well. Included will be liability coverage (should an accident happen or if you have a pet) as well as coverage for loss, fire or other damage to the structure, your belongings or any other physical property elements. You’ll also want to obtain flood insurance, depending on your location, to insure against loss or damage due to rising water from the outside of your home. Once the financing is approved, you will be cleared to close.
10. Close the Deal
The final and most exciting step of the home-buying process is the closing. As mentioned, your lender will go over all of the closing costs, pre-paid items and down payment requirements so you are prepared at the closing table. Your real estate professional will conduct a pre-closing walkthrough to ensure the home is ready and accompany you to the closing to make sure everything goes smoothly. After you close, and all funding has occurred, the home is all yours. Congratulations, now it’s time to unpack and enjoy!
If you are looking to buy a home in South Florida, our South Florida Real Estate Agency will make sure your buying process goes as smoothly as possible. To learn more, call us today.