Once you've found a home that meets your needs, it's time to make an offer
In deciding the amount of your offer you and your agent have to weigh several factors - asking price vs. comparable home sales, market conditions, other potential offers, how badly you want the home, the home's condition, if you're approved for a loan, etc. A good agent is invaluable in this step and can do wonders for keeping your inevitable making-an-offer jitters at bay. Make sure the seller knows you're approved for a loan when making your offer.
The purchase agreement:
You'll sign a purchase agreement that your agent will supply and that indicates the amount of your offer and may also include details that stipulates, for instance, which appliances stay and when you'd like to take possession, etc. You'll put down "earnest money," a deposit to show that you're willing and able to buy the home - earnest money is usually a small percentage of the asking price and later applied as part of your down payment. An earnest money deposit is a check you write to the seller and that your agent holds until the offer has been accepted.
The counter offer:
Your agent presents your offer to the seller's agent who in turn presents it to the seller. Then, you wait. It may seem like a long time because the waiting can be excruciating, but most offers stipulate a response within 24 to 48 hours. They either sign your contract agreeing to your offer, decline your offer or submit a counter offer. If they present you with a counter offer, you can either agree with their terms or make another counter offer. This process continues until you come to an agreement that satisfies everyone. Then it will be time for the inspection.
The home inspection:
You have a right to inspect the home you've made an offer on, and indeed, most purchase agreements are contingent upon inspection. You are highly advised to hire a qualified professional to inspect the home. It's the best way to be sure the home is in good condition and that some unexpected disaster won't strike like the plaster ceiling in the dining room dropping during your first dinner party.
What is it?:
A thorough inspection is an objective examination of the home, from top to bottom, inside and out including heating, cooling, plumbing and electrical systems, walls, floors, ceilings, foundation, roof, gutters, spouts, insulation and ventilation, major appliances, garage, etc. The inspector you hire should check everything and leave you with a detailed report listing the condition of each item, as well as recommended repairs.
What if the home inspection reveals problems?:
You don't need to be there when the home inspection takes place, but it's best that you are - it usually takes a few hours. You'll learn not only about the condition of the house but how everything works and you can ask questions as you go along.
If there are problems, don't panic. Most inspections of older homes will reveal a number of items that aren't quite right. You'll decide whether to deal with them or renegotiate with the seller. For instance, a seller may adjust the purchase price of the home or simply repair the problem - depending on what it is. There's always the chance that the home is in such bad shape or has some monumentally costly problem that it's out of the question. In that case, get your deposit back and resume your house hunting.
Where do I find a home inspector?:
Ask around - friends, family and colleagues - for someone they'd recommend. Your real estate agent should also be able to give you a list of names. You can even search for home inspectors in your area on the American Society of Home Inspectors website, www.ashi.com. Be sure to ask for references and check them. You'll want someone with a lot of experience.
How much does it cost?:
The cost varies from community to community and from state to state, but anywhere from $250 to $400, depending on the location and property.
Homeowner's insurance:
You'll need homeowner's insurance before you close on your home. No lender in the land will give you a mortgage without it. It's important that together your equity in the home and your lender's investment are insured against damage. You may have only a microwave, a futon and a spoon to put in your new home, but you'll want a policy that covers your personal belongings as well.
Once your home is inspected and you've decided to go ahead with the purchase, the processing of your loan really gets underway. It's at this time you'll need to show proof of homeowner's insurance. A good place to start exploring your insurance options is with the company that insures your car. Often insurance companies offer discounts when you hold more than one policy. There are many types of insurance policies; your agent will help you decide which is right for you.
What exactly are closing costs?:
It's one of the most asked questions by homebuyers. Lenders are required by law to disclose in writing - known as a Good Faith Estimate - your estimated closing costs and fees. Additional costs might apply depending on your state, your loan product and your down payment amount. For instance, title companies handle most closings, however there are some states that require an attorney to conduct the closing. In those states, borrowers are not required to pay a title company closing fee.
The closing:
The closing is the completion of a real estate sale and loan transaction. It's the final step in the home buying process. At the closing you'll not only sign your documents, but you'll get the keys to your new home.
When?:
The timing of your closing is important. You'll want to schedule it to your best advantage. For instance, you might want to schedule it toward the end of your lease so as to not pay unnecessary rent, or, if possible, around the time of the closing of the home you're selling.
Before your closing, you'll receive a document that outlines the costs you'll pay at closing. You'll be asked to bring a valid picture ID, a certified check if applicable and any other additional documents that your circumstances may require.
It's customary to take a final walk through of the property shortly before the closing to make sure the home is in the condition you expect it to be.
A closing can be attended by any number of people and may or may not include the seller, the lender, you, the seller's mortgage holder, respective attorneys, the real estate agent, the transfer agent (if it's a co-op), the managing agent (if it's a condo) and the title company representative.
Everyone signs the appropriate documents, checks are exchanged, you're given the keys to the home and you're done.
Keeping your paperwork:
Whew. You're done! You've bought your new home. You'll want to protect your investment also. The best way (besides insurance) is to keep your paperwork in order and in a safe place. That way you'll be able to access it easily when you need it, for instance, at tax time, to refinance, take a home equity loan or sell.
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