Congratulations! You have decided to purchase a new home. Now that you will become a new homeowner, there are some basic steps that will facilitate the process whether you are a first time homebuyer or plan to invest in your second home:
Step 1 - GET PRE-APPROVED: The first and most important step is to find out what you will qualify for. Based on your income, debts owed as well as you credit score, you will know what type of property and in what price range you will be able to afford. It is recommended for you to evaluate your monthly expenses and determine how much you want or can pay for your new home. This is very important. Lastly, if you happen to find your dream home, you not only want to place an offer for it but want the seller of that home to feel confident that you will be able to obtain financing for it. That will also show the seller that you are serious, motivated and can afford to buy it. Your mortgage broker will work on your pre-approval based on the following:
Step 2 - HIRE A REAL ESTATE PROFESSIONAL: The second most important step in this important process is to hire a real estate professional that you feel comfortable with and feel confident that they will look out in your best interest. Make sure, your realtor knows the specific details and criteria your new home has to have as well as the neighborhood you are interested in so you only see those homes that fit your needs. You should specify:
area/neighborhood in which you would like to live in
type of property, condo, townhouse, villa or single family home
important characteristics your new home should have such as; garage or not, pool or not, waterfront or not, number of bedrooms and baths, one-story home vs 2-story home to name only a few.
Keep in mind the difference between “needs” and “wants”….Remember, “needs” are a necessity that you can’t go without and “wants” are just an added bonus you would like to have but don’t necessarily need.
Step 3 - EVALUATE MORTGAGE RATES & TERMS: There are many financing options available to you and this will also depend on various factors such as amount of down payment for the purchase and your particular credit score. Shop around to make sure you get the best possible rate and terms that are convenient to you.
Step 4 - START VISITING PROPERTIES:This is the time that your realtor will coordinate showings of homes and make the necessary appointments to view these homes based on your schedule. Make sure you keep track of all properties viewed and if possible, take down your own notes about each one of them so you can identify them later. Make sure you ask important questions such as tax information, maintenance fees, if any, school district, year the home was built and about all the information that’s important for you. Write down the positives and the negatives of each home visited so you can narrow your decision process.
Step 5 - PREPARE AN OFFER: Once you decide on the right property for you and the one that meets your expectations, then you will be ready to prepare an offer for your new dream home. This is the time when you will need your realtor to show there true experience and determine a fair offer for the home you are interested in. An experienced realtor will negotiate with the seller and the seller’s agent on your behalf to get the best possible terms for you. At that time, your pre-approval letter will come in handy and will most likely be the determining factor for the seller’s acceptance. It will also be a good idea to include a copy of your earnest money deposit check which will be applied towards your down payment or closing costs if your offer is accepted. Bottom line, your offer has to be strong! Sellers can sometimes counter your offer and then it will be up to you to accept it or not. Once all parties (both buyer & seller) agree and initial all the changes, then you can say you have won half the battle!
Step 6 - MEET YOUR CONTRACT DEADLINES: Make sure you keep up with all the important dates stated in your contract. A good idea is to keep a calendar and mark all the terms and conditions that should be met in order to move along with the contract but most importantly, to avoid any liability that may arise or cause you to default. If there are certain deposits due at a particular date, make sure you have the necessary funds in your account to cover them and deliver them with sufficient time to your escrow agent which is usually your realtor, title company and/or attorney.
Step 7 - SCHEDULE AN INSPECTION: The majority of contracts specify the amount of time you have to schedule a home inspection. A home inspection is very important because it will determine any (big or small) problems that the home you are about to buy may have such as a leaks in the roof, foundation problems, cracked walls, insect infestation, mold, chinese drywall and/or electrical problems and plumbing related problems. Once the inspection is complete and finalized, you will be able to determine the cost of these problems, if any and you will be able to renegotiate the terms in the contract to get you the most for your money or if these repairs are above expected, then you could always withdraw your offer based on the inspection reports.
Step 8 - GET A LOAN: Decide which mortgage lender or mortgage company you will go that offers the best programs (usually done with the lender or broker that pre-approved you) and get the loan. Try and get the best possible rate and type of loan. Once you decide, he/she will guide you through the process. Make sure you provide them with all the needed paperwork to ensure a smooth and complete final approval of the loan. Remember, time is of essence when you are shopping for a loan especially when there is a certain time frame in your contract.
Step 9 - PASS APPRAISAL: Make sure you have your lender order the appraisal as soon as possible. Appraisal is the value given to the property you plan to buy based on the latest sold homes in the same area where the home you are buying is situated on. Appraisers will evaluate the prices of the homes that have closed within the past 6 months and that have similar characteristics as the home you are buying. They usually determine the home value based on:
property sq ft living area and lot size
number of rooms and baths
extras such as garage, pool or if home is waterfront
same neighborhood of property
any upgrades in homes
*The appraisal is very important to ensure you are paying what the home is worth. Also, in most of the transactions, an appraisal is required to ensure financing of the property*
Step 10 - ASSOCIATION FEES: Depending on the type of property you are planning to buy, some may be part of a condominium association or homeowners association. The majority of condos here in Miami are governed by a condominium association that will require you to submit an application in order to get approval by the board before you go to closing. This could take anywhere between 2-4 weeks and you will need to apply as soon as possible to ensure you are approved in time for the closing.
If this is the case, then once you get the approval by the association, then you will be required to pay a maintenance fee charged by the association on a monthly basis. You may want to keep this in mind when deciding to buy the property but most importantly to know that this will be part of your home payment every month as well as your mortgage payment.
Homeowners associations are similar and in some will also require approval first. These fees usually pertain to townhouses or single family homes that could be part of subdivision and will also require you to pay maintenance fees on a monthly basis. They are usually much lower than condominium association dues.
Step 11 - SCHEDULE A WALK-THRU: It’s always a good idea to schedule a walk thru at the property one or two days before the closing to ensure the property is in the same condition in which you originally purchased it and that the seller has done the necessary repairs, if any, as agreed upon in the purchase contract.
Step 12 - GET READY TO CLOSE: Have your realtor give you an estimate of your closing costs to avoid surprises the day of the closing. That amount could vary but at least you’ll get an idea of what to expect. You will get a chance to review the settlement statement, which is typically referred to as the HUD statement. This document gives you breakdown all the fees that you will be required to pay at closing. Closing costs could range anywhere between 3-7%, typically 6% in most cases.
Once you get to closing, the title agent or attorney will go over all the details with you and explain every document you are required to sign. Make sure you read what you are signing and ask any questions or concerns you have. At this point, the seller will officially sign over the home to you, which means you have become a new homeowner. Congratulations! You are ready to move in.
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