-Anna McClusky / Legacy Group Realty
1. Get Familiar with Terms and What You Will Need
This primarily applies to first-time home owners. Purchasing a new home is not always cut and dry. There are many factors that come into play and much to be considered.
Financial items you WILL need:
Earnest Money- Earnest money is a check or money order you give to Escrow to hold. It tells the seller you have intention to buy their house.
It can be refunded under certain criteria written in the offer should you not be able to complete the sale. All monies will be applied then at closing to buyer expenses, such as down payments or closing costs. Should you not need the full balance the remainder will be refunded to you.
It can be refunded under certain criteria written in the offer should you not be able to complete the sale. All monies will be applied then at closing to buyer expenses, such as down payments or closing costs. Should you not need the full balance the remainder will be refunded to you.
The minimum earnest money is around $1000, but varies greatly depending on the price of the home, and other factors such as new construction.
Inspection Fees-You will most likely want an inspection on your home. This will tell you all of the in's/out's and help ensure you know this is not a lemon! Fees range from about $400-$550.
Inspection Fees-You will most likely want an inspection on your home. This will tell you all of the in's/out's and help ensure you know this is not a lemon! Fees range from about $400-$550.
Financial Obligations You May Need:
Down Payment
This can vary largely do to the type of loan you have and what you want to put down. A general overview looks like this:
VA loans (for Veterans) start at 0%
FHA loans 3.5%
Conventional 5%.
There are certain state grants that can get first time home buyers 0% Down by offering a second loan that covers you for 30 years, no interest. You pay this back by 30 years, or when you sell or refinance. These terms and loan options can change as the market changes, and there are many other factors, loan types (USDA,FHA 203k) and conditions that your loan officer/lender can explain to you based on your needs and criterias.
Closing Costs- Closing costs are usually split by the seller and the buyer. For a buyer this usually averages around 3% of the cost of the home. In some situations, a Realtor can negotiate closing costs be paid by the buyer; either based on negotiated price, or by increasing offer to accomodate these costs. Depending on the market conditions, and if there are multiple offers on a home, a Seller may not even consider paying those costs as it decreases their net.
It's best to be prepared to have those costs, especially if there is home you really love and don't want to lose to a weak offer.
It's best to be prepared to have those costs, especially if there is home you really love and don't want to lose to a weak offer.
Repairs in Escrow- Some, if not most loans, at this point that will require funds to be in escrow should there be major structural damage or unlivable conditions in the home. For instance- major roof repairs or life of roof not over 5 years. Should you buy a HUD home, Bank Owned or Shortsale these sellers will do no repairs, and a buyer will have to provide funds to be dispersed to repair companies at closing.
Search Terms
Active Listings – This includes all the homes in your area that are similar to yours that are currently on the market.
Pending Listings – These are formerly active homes that are pending(in contract) a sale but the sale is not yet closed. They are presumably no longer available unless the sale fails.
Sold Listings – These homes have recently sold and are not longer available. The amount for which they sold is listed.
Pending Listings – These are formerly active homes that are pending(in contract) a sale but the sale is not yet closed. They are presumably no longer available unless the sale fails.
Sold Listings – These homes have recently sold and are not longer available. The amount for which they sold is listed.
Short Sale- Homes that are being sold short of the loan amount. The seller will have to agree to the price, but then the bank will have to agree to the loss as well. Do not assume the bank is willing to take a major loss. They know what the market is bearing and should they sell it after foreclosure they may get more. This can be a sales process of up to 3-4 months minimum. Homes are generally sold As-Is, no repairs. Some agents require the use of a Law Office and charge the fee back to buyer. This is usually a minumum of $2500.00.
HUD- HUD Homes are sold by the Goverment(Dept. of Housing and Urban Development) and can be bid on by your agent through a special site. Ask your agent if they have ever done one because there are special criterias that make it difficult, but can be done successfully.
REO- Bank owned homes have already been foreclosed. Since they are trying to stabalize the market some have been vacant for years and may have serious or minor damage. Banks will do no repairs and are sold as is. You may need Escrow Repair costs in this type of purchase. If the damage is extensive it may be cash only.
Auction- These homes have recently been added in the MLS and can often be viewed. However buyer beware they usually are cash or short term high interest loans only. No repairs will be made.
Bankruptcy Homes- Another one that comes up in the low cost home or discounted homes search. These homes are in the process of a bankruptcy. They usually require cash payment of $20,000 to the bankruptcy court as well as fees on top of the price. They are much harder to close as the court doesnt always approve of low cost offers and will most likely only accept offers close to list price. Need to know more? Here's Steps to Buying a Home
2. Buyer's Financing 10 Commandments
All of these are crucial in obtaining financing. Buying a home can get so exciting you are tempted to find the new couch, Apply for a loan to cover closing costs, obtain money from relatives. At all costs do not open a loan or buy anything out of the norm. And should you need to get a gift from relatives ask your mortgage lender for a gift letter to file with them. Your account will be under scrutiny the entire process, and it's worth it but all deposits and money must be accounted for.
3. Get Pre-approved
Most seller require that a buyer is pre-approved. Before you start actually viewing homes you will want to make sure you have this, and deliver it to your Realtor. The pre-approval process is a more thorough qualification than the pre-qualification. A pre-qualification simply tells a Realtor that you are serious about purchasing a new home. It’s not a very detailed process. A pre-approval tells all parties involved that you are financially ready to purchase a new home.
This process will also inform you as to what financing options are available to you in today’s market.
Because choosing a mortgage lender can be so daunting I would love to refer you to our teams preferred lenders, for their ability to get you into the perfect home loan and follow through all the way to closing.
Tom O'Hearn and Melissa Engle- Guild Mortgage
APPLY HERE or call (253) 329-2400.
Justin deCeault- Prime Lending
APPLY HERE or call (253) 736-5066
4. Location, location, location
Know where you want to be. Think about your lifestyle – how it is now and how it might be in 5 – 10 years. Will you need to commute to a nearby large city? Do you or will you have school aged children? Do you want to live in a neighborhood or in town? Would you prefer to have a smaller home in a more expensive town or a larger home a bit further away?
These are all important factors that must be taken into consideration. If you are new to an area you may want to think about renting first for 6 months to a year in order to familiarize yourself with your new location and all that it has to offer. You wouldn’t want to end up with buyers remorse after having purchased a home that was not quite right for you. Take the time to really get to know your surroundings. You won’t regret it.
5. What You Want in Your Home.
Once you’ve narrowed down where you want to live, you then need to figure out what it is that you have to have in your home. Do you want a newer home with all the amenities or an older historical one that you can work on and renovate over the years? Do you want a large yard for children and pets, or would you prefer something requiring less maintenance so you won’t have to go out and spend your summer weekends mowing?
Do you want a porch or a fireplace? How many bathrooms must you have? Do you have young children? Is the house child-friendly? Do you like to entertain? Does the house have a good flow and a guest room? Make a list of all your Must Haves. Most likely you won’t find all of them in one home, but as you look at your potential homes you can start to prioritize which of these "Must Haves" are truly necessary and which ones you can do without. Be open to suggestions from your Realtor.
5. Take a Drive
Once you’ve searched the internet and found some homes that meet your criteria it’s time to get off the internet and see them in person. Photos can often be deceiving. Many listing agents hire talented photographers who can create images that can make rooms in a home appear larger than in real life. Often stagers and stylists are brought in to make a home look more inviting. On the flip side, an agent may have taken photos of the home that just don’t do it justice. The only way to know if a house is right for you is to go out and see it for yourself.
Enlist your agent to show you homes that meet your criteria as well as those that may be similar. Often agents will have suggestions that you might not ordinarily have chosen but now might be worth considering. Public open houses are another wonderful resource to be taken advantage of. If you attend an open house, it’s important to let the host know that you are already working with an agent.
6. Don’t judge a house by its cover
Try to look past the pink shutters! Most agents will recommend their sellers to do some staging to a home before putting it on the market, but this does not always happen. While staging a home can make a home look fantastic, it is important to look beyond the decor. Look at the structure and the flow of the home. Does she have nice bones? Look past the chintz curtains and try to imagine how your belongings will fit. Will there be enough room? Are the rooms large enough? Are the ceilings tall enough?
Don’t let the green shag rug from 1976 scare you away. Imagine the possibilities… beneath it there could be some lovely hardwood floors to uncover. The neon walls can be repainted, and the hideous light fixture over the dining room table can be replaced. Don’t sweat the small stuff, focus on the possibility and the potential that lies within the home. When everything is out of the home and it is yours, you have the opportunity to do whatever it is you want to do to the walls, floors, fixtures and property. Once the house becomes your own, you can add your own personal touches.
7. Have a Back-up Plan
It’s important to have a back up home. There are a number of things that can happen. You may have found the home of your dreams, but the seller may not agree to your price and terms, or issues may come up during a home inspection that are unable to be resolved. It is a good idea to be emotionally leveraged so that if your dream home does not work out, you have a plan B to fall back on.
8. Get to Know the Property
If you plan on working on the home it might be worthwhile to visit town hall to find out more about the property. Take some time to talk with the building and zoning departments to see what work has been done to the house, and that permits were pulled and a certificate of occupancy was granted. Building and zoning may also have a survey on file for you. If a survey has not been created you may want to consider getting your own done. There are other matters you should know as well, especially in light of recent weather-related events.
You should find out if the home is in a flood zone and insurable by contacting your insurance agent and giving them the address.
9. Keep your cool during the building inspection
Be prepared. Inspectors need to find everything wrong with the house – that is their job. Many of these issues are small, insignificant things. Others may not be quite so small or insignificant and yet others could potentially be quite grave. After the inspection, make a list of your priorities so that you can decide for yourself what’s a non-issue and what could potentially be a large problem. You can always discuss these matters with professionals to give you more information, as well as an estimate of the work needed to resolve the problem.
10. Know Your Agent and Understand Their Job.
All of these are crucial in obtaining financing. Buying a home can get so exciting you are tempted to find the new couch, Apply for a loan to cover closing costs, obtain money from relatives. At all costs do not open a loan or buy anything out of the norm. And should you need to get a gift from relatives ask your mortgage lender for a gift letter to file with them. Your account will be under scrutiny the entire process, and it's worth it but all deposits and money must be accounted for.
3. Get Pre-approved
Most seller require that a buyer is pre-approved. Before you start actually viewing homes you will want to make sure you have this, and deliver it to your Realtor. The pre-approval process is a more thorough qualification than the pre-qualification. A pre-qualification simply tells a Realtor that you are serious about purchasing a new home. It’s not a very detailed process. A pre-approval tells all parties involved that you are financially ready to purchase a new home.
This process will also inform you as to what financing options are available to you in today’s market.
Because choosing a mortgage lender can be so daunting I would love to refer you to our teams preferred lenders, for their ability to get you into the perfect home loan and follow through all the way to closing.
Tom O'Hearn and Melissa Engle- Guild Mortgage
APPLY HERE or call (253) 329-2400.
Justin deCeault- Prime Lending
APPLY HERE or call (253) 736-5066
4. Location, location, location
Know where you want to be. Think about your lifestyle – how it is now and how it might be in 5 – 10 years. Will you need to commute to a nearby large city? Do you or will you have school aged children? Do you want to live in a neighborhood or in town? Would you prefer to have a smaller home in a more expensive town or a larger home a bit further away?
These are all important factors that must be taken into consideration. If you are new to an area you may want to think about renting first for 6 months to a year in order to familiarize yourself with your new location and all that it has to offer. You wouldn’t want to end up with buyers remorse after having purchased a home that was not quite right for you. Take the time to really get to know your surroundings. You won’t regret it.
5. What You Want in Your Home.
Once you’ve narrowed down where you want to live, you then need to figure out what it is that you have to have in your home. Do you want a newer home with all the amenities or an older historical one that you can work on and renovate over the years? Do you want a large yard for children and pets, or would you prefer something requiring less maintenance so you won’t have to go out and spend your summer weekends mowing?
Do you want a porch or a fireplace? How many bathrooms must you have? Do you have young children? Is the house child-friendly? Do you like to entertain? Does the house have a good flow and a guest room? Make a list of all your Must Haves. Most likely you won’t find all of them in one home, but as you look at your potential homes you can start to prioritize which of these "Must Haves" are truly necessary and which ones you can do without. Be open to suggestions from your Realtor.
5. Take a Drive
Once you’ve searched the internet and found some homes that meet your criteria it’s time to get off the internet and see them in person. Photos can often be deceiving. Many listing agents hire talented photographers who can create images that can make rooms in a home appear larger than in real life. Often stagers and stylists are brought in to make a home look more inviting. On the flip side, an agent may have taken photos of the home that just don’t do it justice. The only way to know if a house is right for you is to go out and see it for yourself.
Enlist your agent to show you homes that meet your criteria as well as those that may be similar. Often agents will have suggestions that you might not ordinarily have chosen but now might be worth considering. Public open houses are another wonderful resource to be taken advantage of. If you attend an open house, it’s important to let the host know that you are already working with an agent.
6. Don’t judge a house by its cover
Try to look past the pink shutters! Most agents will recommend their sellers to do some staging to a home before putting it on the market, but this does not always happen. While staging a home can make a home look fantastic, it is important to look beyond the decor. Look at the structure and the flow of the home. Does she have nice bones? Look past the chintz curtains and try to imagine how your belongings will fit. Will there be enough room? Are the rooms large enough? Are the ceilings tall enough?
Don’t let the green shag rug from 1976 scare you away. Imagine the possibilities… beneath it there could be some lovely hardwood floors to uncover. The neon walls can be repainted, and the hideous light fixture over the dining room table can be replaced. Don’t sweat the small stuff, focus on the possibility and the potential that lies within the home. When everything is out of the home and it is yours, you have the opportunity to do whatever it is you want to do to the walls, floors, fixtures and property. Once the house becomes your own, you can add your own personal touches.
7. Have a Back-up Plan
It’s important to have a back up home. There are a number of things that can happen. You may have found the home of your dreams, but the seller may not agree to your price and terms, or issues may come up during a home inspection that are unable to be resolved. It is a good idea to be emotionally leveraged so that if your dream home does not work out, you have a plan B to fall back on.
8. Get to Know the Property
If you plan on working on the home it might be worthwhile to visit town hall to find out more about the property. Take some time to talk with the building and zoning departments to see what work has been done to the house, and that permits were pulled and a certificate of occupancy was granted. Building and zoning may also have a survey on file for you. If a survey has not been created you may want to consider getting your own done. There are other matters you should know as well, especially in light of recent weather-related events.
You should find out if the home is in a flood zone and insurable by contacting your insurance agent and giving them the address.
9. Keep your cool during the building inspection
Be prepared. Inspectors need to find everything wrong with the house – that is their job. Many of these issues are small, insignificant things. Others may not be quite so small or insignificant and yet others could potentially be quite grave. After the inspection, make a list of your priorities so that you can decide for yourself what’s a non-issue and what could potentially be a large problem. You can always discuss these matters with professionals to give you more information, as well as an estimate of the work needed to resolve the problem.
10. Know Your Agent and Understand Their Job.
This is a mutual search between you and your Realtor. They will send you homes, but it's okay to search on your own as well. You are working together. You may find as you look, the criterias you gave your agent change. If they are not apprised to what those changes, they should or will only be sending from the original criterias.
They should work solely for you. You should not feel that they are a "salesperson" but a negotiation expert, who can guide you through the in's and out's of a home purchase with their knowledge, experience and expertise.
Trust is imperative. If you don't trust or have concerns about your agents integrity in the beginning you owe them nothing. Fire them. You need to trust their honesty, ability to inform you truthfully of all occurences, and trust their instincts in a sale.
Experience is crucial. Did you know that the average home sale for agents in Washington State is 3 per year? It would be very hard to be a negotiation expert and get you the home you want in our competive market with just three homes per year. Additionally, it's imperative to an experienced agent who has gone through the in's/out's of the ever changing real estate market. It can change from one month to the next. You need an agent with some history, and who understands the odd things that can happen in any contract and know how to deal with them.
Now Go on and read Steps to Buying a Home
