Home Buying 101

Before You Start Looking For a Home You Will Want to Take Care of Some Prep Work

  1. Check your credit report
    1. This is such an important step in the process and, yet, is the most neglected.
    2. The better your credit is, the better the rate you are going to get and the more option you are going to have when it comes to a home loan.
    3. www.annualcreditreport.com – you are allowed one free report every 12 months
    1. If there are discrepancies contact the credit companies to get them fixed. For fraud contact:
      1. Equifax: 1-877-576-5734; www.alerts.equifax.com
      2. Experian: 1-888-397-3742; www.experian.com/fraud
      3. TransUnion: 1-800-680-7289; www.transunion.com
    2. Try to pay down any of those credit cards especially if they are getting close to their limits. Debt-to-income is a vital ratio that banks look at when deciding what to loan you.
    3. Credit cards can be a good thing for your credit report if you use them properly. Don’t have too many credit cards open or too much debt.
  2. How Much Home Can You Afford? Meet With a Mortgage Professional
    1. Sit down with a Mortgage Professional to discuss how much home you can afford
    2. They will walk you through your options and help prepare you for getting the best loan possible
    3. These people are great resources. Ask them lots of questions!
    4. You can find a list of trusted and reliable mortgage professionals here
  3. Set Money Aside For a Down Payment
    1. The days of “No down payment” are all but history – there are exceptions of course
    2. 3.5%-20% of the purchase price will be needed for a down payment
      1. Example: $200,000 home – $7,000 – $40,000.
    3. Consider the different down payment options
      1. A gift from a family member
      2. Borrow money from your 401k. Just remember you will be charged fees for this.
  4. Get a Pre-approval Letter From Your Mortgage Professional
    1. This is an official letter from the specialist that shows what the maximum amount you can afford. This will later be used for making an offer on a home.
  5. Contact Urban Pacific to Set Up a Time to Talk About Buying Your Next (or First) Home
    1. If you are local we’ll get together at a convenient location and discuss what you are looking for.
    2. Don’t worry, you don’t have to know everything about what you are looking for; we can help you figure that out.
    3. And for those of you who are afraid to use a realtor because you think you will need to pay them, well surprise, the seller pays all of the realtor’s compensation. As a buyer, working with a realtor is FREE!
  6. The House Hunt
    1. When it comes to the house hunting, we have a unique approach at Urban Pacific that will make the house hunt fun and educational!
    2. After our initial meeting to discuss your specific requirements (location, price, bedrooms/baths, etc.) we’ll set up a 2-3 hour window to show you 6-8 homes.
    3. We’ll select homes from different neighborhoods, prices, styles and conditions so that you can see what is out there for your particular price range.
    4. Our clients have found this initial process to be very useful in narrowing down their searches and extremely educational!

The Home Purchase Process

  1. Write up an offer on a home. 
    1. For first-time home buyers, this is the scariest and the most exciting moment in the process, but just ask any of our clients how painless it really is!
    2. At this point you will need to have a good idea as to how much you can afford for a down payment. You will also need that pre-approval letter from the lender or broker.
    3. Included with an offer is an Earnest Money (EM) deposit. This deposit is used to show that you are serious about the purchase and is generally around 1% of the purchase price. The EM will be applied to the purchase in the form of a down payment and will usually be returned back to you if the deal falls apart, but can be kept in some circumstances.
    4. At this point the seller has 3 options:
      1. Reject the offer: rarely happens, as we work with our clients to make reasonable offer
      2. Counter the offer: often times the seller will respond with a counter offer that reflects different terms including price, closing date, or contingencies
      3. Accept the offer: that happy moment when you get your offer accepted!
  2. The Financing
    1. Now that you have an accepted offer its time to get all the financing in place
    2. The front end of a transaction is a busy time for the buyer as you will be working with your mortgage professional on getting them all sorts of paperwork.
    3. Your lender will require the home be appraised to determine the fair market value of the home. The bank does this because it wants to make sure that the property will sell for at least the amount of money it is lending, in the unfortunate case that the bank ends up with the home (foreclosure).
    4. Your mortgage professional will provide you with a Good Faith Estimate that breaks down all the expenses associated with the loan and the purchase as well as indicates your estimated monthly payments.
  3. Home Inspection: Read more on the home inspection process here
    1. Alright the offer has been accepted and now we need to get the home inspected. The purpose of the inspection is:
      1. To make sure that there and not any major issues with the home
      1. To educate you on the maintenance of your home and how things work and where they are (like you water shut-off valve).
    2. If there are any unexpected and reasonable repairs that turn up in the inspection report, there will be an opportunity to work with the seller on making those repairs before the transaction closes.
    3. If there are significant issues with the home you do have the option of walking away from the transaction with no repercussions (if you are within the inspection contingency period, which is written into the initial sales agreement).
  4. Closing
    1. The last major step in the transaction! This is the step in which you meet with the title company at their office and sign all the final documents. Stretch out those fingers because you are going to be signing a lot of autographs!
    2. The majority of the documents you will be signing are related to your new mortgage.
    3. The title company will contact you before the closing to let you know how much you need to bring to closing to cover your down payment and closings costs.
    4. You will need to bring a cashier’s check or bank certified check
    5. Once you and the seller have signed all the documents the title company will process all the money that is changing hands and submit the deed to be recorded with the county.
    6. Once the city records the transaction (usually 12-24 hours after both parties have signed) you will now have access to your keys and the home is officially yours!!