Before you begin

Before you start looking for homes or talking with a lender, you need to prepare yourself for a home purchase. Regardless of whether you are buying your first home or your tenth home, the first thing you need to do is identify the reason for buying. What are you hoping to accomplish with this home purchase?

• Is this your first home and you're ready to start building equity?

• Have you outgrown your current home and need more space?

• Has a new job or relocation required you to consider a purchase in a new area?

• Empty nest? Ready to downsize?

• Are you looking to add to your investment portfolio?

• Are you looking for a vacation or a second home?

These are just a few of the reasons people begin to think about a home purchase. Some buyers find it's helpful to create a list of musts/needs/like-to-have aspects of the new home. The list should include the home specifics, such as a chef's kitchen or workshop space, as well as community elements such as school district or proximity to shopping. Your list will be as unique as you are, but by building your criteria in advance, you will save time and avoid making expensive mistakes. It doesn't matter if you've been considering a change for months or you were inspired by an open house you viewed, it's important to understand your motivation so you can ensure you find the right home and it fits your needs.

Talk with a Lender

The next step you'll want to take is to speak with a lender. Even if you intend to pay cash for your home, you might want to talk to a lender about financing, just so you know your options. The lender can be your bank, credit union or mortgage broker. Your lender is a crucial member of your home buying team, so it’s important to find someone who can not only offer you great loan options but also provide one-on-one guidance and support to make sure you get the right financing for your needs. Your agent is an excellent source for a recommendation. There are free online courses that help people understand the buying process but speaking to a recommended lender is the best source of accurate information. It's important to get a firm answer right upfront about how much home you can qualify to purchase, so this is a vital first step in your home search.

When you meet with the lender, be prepared to bring all your information with you. Generally, you can follow the 'rule of 2"; you will need the 2 most recent pay stubs, W2s, bank account statements, and tax returns. You also need to provide information regarding all properties you own by providing the most recent mortgage statements, HOA fees if applicable, and proof of tax insurance costs if there is no mortgage (or if those payments are not included in your mortgage payment). Because it is necessary to disclose your debt, the lender will run your credit and use your FICO scores as well as the debt listed on the report to determine your maximum loan amount.

Though it varies by the loan program, you will typically be able to borrow up to 45% of your gross monthly income with housing and all other debts combined...these are estimates and your lender can help you further with this. It's important that you disclose all your debt, even if it doesn't seem to be on your credit report. Your lender is your advocate, but the last thing you want is for something unexpected to pop up at the last minute and lose you the loan and the home.

There are some important things to avoid while you're trying to get a mortgage:

Don't apply for any new credit such as credit cards or car loans
Don't pay off a credit card balance
Don't close any credit cards
Do not max out a credit card
Do not pay off any collections or old charge offs
Do not change jobs

While some of these things seem counter-intuitive, credit is a touchy animal and even doing things that seem 'good" could actually lower your score and cost you a loan. Consult your loan officer first.

Establish a Price Range

Now that you know how much you can qualify for, it's time to decide how much you want to spend on the new home or condo. these are not necessarily the same thing. Even though you can qualify for up to about 45% of your monthly gross income, that doesn't mean you want to do that. It’s easy to be excited about a price range and pre-qualification, but before you head out to see homes, take a moment to understand how that monthly mortgage payment might affect your lifestyle.

What other expenses do you need to include in your monthly expenditures? Do you enjoy dining out on a regular basis or perhaps o round of Sunday golf? What about vacations and children sports clubs. There are many other demands on our Income and It’s easy to feel 'house poor' by delegating too much for the mortgage payment.

Lenders will help you consider all your loan options as well as give you an estimate about extra costs involved in buying a home such as homeowner's association dues, property taxes and extra fees or where you would like that vacation home. It’s important to remember that these costs will vary depending on the home you find to buy: for instance, homeowner's association fees can vary drastically from one community to another. As you review the information you receive from your lender, make sure you notice how much is budgeted for these extra fees.

The last step you should take is to consult your tax professional. Learn how a possible new purchase will affect your taxes. If you are a first time home buyer, you might find that even with a larger monthly payment, you actually save money due to the tax savings.

Evaluate Possible Locations & Communities

Now that you have an idea of your budget, it's time to consider where you would like to live. If you are simply looking to up or down-size, this might be as simple as looking around the corner or down the street, but most of the time it's more involved than this. You might be moving across town or even across the country, and you will want to decide where the best possible community is for you and your family.

Fortunately, there are many online tools available to help you. With websites offering everything from home listings to school and crime statistics, you can do some preliminary research to help you identify some possible options. You can also contact an agent and ask for their insight into what type of home and where would best suit your needs. Of course, unless you're already familiar with the area, you'll need to see the neighborhoods in person, but you should be able to narrow the search by spending a little time online and speaking to an agent.

Searches should include:

Home listings
Local schools and rankings
Crime statistics
Local cultural events, theater, art
Shopping and dining

There are many sites available for you to peruse. Another tip is to use Google Earth to zoom into the communities and homes you see.

Viewing Homes & Writing Offers

Now comes the fun part....Looking at homes. This is where that list you made comes into play. Most buyers today have already done some searching on the Internet and have a few homes they want to see. Your agent will sit with you and talk about the homes you have an interest in and perhaps offer suggestions for some you haven't seen or are new to the market. Even if you come prepared with a list, it's important to listen to what your agent tells you about each one. They might be aware of a neighborhood issue or new road which will affect the noise level of the property.

If you are relocating from out-of-town, your agent can assist you by performing virtual showings, and provide live stream or video content for you to have an up close and accurate view of the home. Consider your list of musts, needs, and wants as you view each home and make sure you do not compromise on essentials because you've fallen in love with the kitchen backsplash. A few things you need to think about are:

• The road, noise, and traffic

• Neighborhood amenities

• Homeowner's Association, cost, and services

• Property taxes and special assessments

• Schools and crime statistics

Once you do find a home, you'd like to write an offer on, you and your agent will discuss price and terms. Even if you can't offer the most competitive price, there are other strategies your agent can suggest that can make your offer more attractive and increase its chances of being successful.

Find a Good Buyer's Agent

There is a difference between a good listing agent and a good buyer's agent. At times they are the same person, but the activities they perform are different. The buyer's agent represents YOU and only YOU in the real estate transaction. From the very first meeting, they listen to your ideas, needs, wants, and financial goals. They will then work with you to find the right home based on this information. They have a fiduciary duty to protect your interests and not the interest of the sellers. They will be your personal representative in the process and handle all the negotiations for you, ensuring you get the best possible sales price and terms.

A buyer's agent will bring a team of experts together to work with you depending on your needs. This might include a tax consultant, mortgage broker, credit counselor as well as home inspector. They will help you explore communities and help you learn about the neighborhood, community amenities, school districts, resale value, and all the other aspects that you should consider to make an educated home purchase.

Once you go under contract, your buyer's agent is there to guide you through the contract to close the process. They will not only negotiate the price and terms of the offer but assist with issues that arise during the due diligence period. You might also need help with selecting a closing attorney, obtaining insurance quotes, navigating appraisal problems, determining what inspections you'd like to have, and solving any potential title issues along with the help and guidance of your attorney. These are all situations your buyer's agent is prepared for and has experience in solving.

While the buyer's agent is most commonly paid their commission from the seller, they are the buyer's representative only and have a fiduciary duty to put your interests above all else. The buyer's agent will help the buyer write the purchase offer, negotiate repairs and other adjustments during the transaction and manage the buyer's side of the transaction until it closes.

What happens when you're under Contract

Once the sellers accept your offer, you will enter the Due Diligence period. There are two important elements to this period. The first is that you will arrange financing if you are planning to use a loan to purchase the home. Your lender will start the process of getting the final approval for your loan. They will work with your closing attorney to get the data they need about costs and present you with a Good Faith Estimate of your costs and terms of the loan.

The lender will also order a formal appraisal of value. The appraisal value must match or exceed the amount you offered for the home or the lender will not be able to lend the full value you are expecting. The next section will discuss the due diligence period in more detail, but it is important to understand law operates under the doctrine of 'caveat emptor' when it comes to real estate purchases. Better known as "Buyer Beware." What this means is that the seller of a property has no obligation to disclose anything about the property to a prospective buyer.

It is the duty of the buyer and buyer's agent to ensure that the property is in acceptable condition to complete the purchase. During the buyer's due diligence period, the buyer has the right to terminate the contract for any or no reason at all and recoup their earnest money deposit.

Due Diligence

As soon as you have entered into an agreement with the sellers, you begin the due diligence period. This is the time to do all your investigations regarding the property and your ability to enjoy living in the home. The most important aspect of the due diligence period is the inspection period. You will want several inspections depending on the property including, but not limited to:

• home inspection

• pest inspection

• well inspection

• septic inspection

• land survey, and others

Your agent will help you navigate these inspections and determine what, if any, repair concessions can be further negotiated with the sellers. At the same time as any inspection issues are being resolved, your buyer’s agent will work closely with your lender to ensure the loan process is moving swiftly along, the lender's appraisal is being completed, and that you are being kept aware of what to expect every step of the way.

By the end of the due diligence period, your agent will have helped you to make sure every aspect of the property has been scrutinized, any repairs have been negotiated and agreed upon, the lender has provided a commitment to lend and you are ready to move onto the final step, the closing!

Request for Repairs

If the home inspection discovers an issue the buyers are uncomfortable with, they can ask the sellers to make repairs. This is a formal request for repairs and it's important to take this step once all inspections have been completed and issues uncovered. While there was once a time when buyers could request that torn window screens are replaced, today the request for repairs is reserved for more serious issues...true deal breakers. Your buyer's agent will walk you through the inspection results and help you understand common requests and what you might expect.

Once the seller receives the request for repairs they can:

• Agree to the requested repairs

• Refuse to do any or all of the repairs

• Offer a monetary amount in lieu of making repair

If the seller does not agree to complete any/all repairs or offer a sufficient credit amount, you can work with your agent to determine if it's wise and appropriate to exercise your right to terminate the contract and recoup your earnest money deposit, or to move forward with the purchase of the house as-is.

The Close

The closing is often not as dramatic an ending as you might expect. By this time the loan approval has been completed and mortgage documents signed. The close is really just the day the title transfers from sellers to buyers.

This is accomplished in a series of steps which involve:

• Funding the loan

• Reconciling the funds and paying the sellers

• Title change and recording