Buying a Home?
Congratulations! The purchase of a home may be the biggest investment you ever make - one that First American wants to help you protect. Whether you're just starting to look at listings or you've already signed a purchase agreement for your dream home, we can help walk you through the home purchase process - and then help you keep your home protected.
Should I Buy?
Your specific reasons for buying a home will always be unique, but common factors to consider before deciding to purchase a home include:
- The current housing market
- Home prices
- Mortgage rates
- Residential inventory
- Value of long-term investment
- Benefits of renting vs. purchasing
Buying A Home Part 1
Buying a home is an exciting time, but the homebuying process can also be complex.
Buying A Home Part 2
You made an offer on a home and the seller has accepted. There are still some steps to complete before you can close the transaction and move in.
How Do I Prepare?
When you do find your perfect home, you may need to act quickly. That's why it's a good idea to make sure you have all your financial arrangements in order beforehand.
Before you start shopping, it's a good idea to:
- Set a budget (a mortgage broker can help with this)
- Plan for a down payment (typically between 10 and 20 percent of the asking price)
- Get copies of your current credit report
- Become an optimal credit candidate
- Get preapproved for a mortgage
What Will My Lender Require?
To get preapproved for a mortgage, you'll want to meet with a mortgage broker or lender, who will assess your credit and finances in order to determine whether you are financially able to purchase a home. Getting a preapproval letter can give you buying power when you're shopping around, since sellers may prefer to contract with a buyer who has already qualified for a mortgage. To get preapproved, your lender will request:
Who Can Help Me?
Purchasing a home may be the largest financial expenditure you make in your lifetime. For this reason, you may want assistance in navigating the real estate market and home-buying process. Hiring a real estate agent or broker can be a big help. A real estate agent can help you by:
- Finding budget- and location-appropriate listings
- Arranging viewings
- Communicating and negotiating with sellers
- Locating off-market listings
- Keeping the transaction moving
- Offering advice
How Do I Find the Right Home?
Once you've found a good real estate agent, it's time to start looking at actual listings. According to the National Association of Realtors®, the average homebuyer views 10 properties over a ten-week span before settling on a home.
Property Viewing Checklist:
- Be respectful of a seller's space and any possessions still in the home.
- Keep an open mind; your real estate agent can help you see the potential in each space.
- Consider taking a journal or photos to document the unique features of each property so you can accurately recall and compare features at a later time.
- Check for common structural problems that may present themselves in the form or cracks, chipping or water damage.
- Arrange a home inspector who will be able to recognize problems that may not be visible to the average homebuyer.
- Bring a tape measure; you may want to compare the space or determine how furniture and fixtures will fit.
- Listen for any environmental noise, including traffic, trains, airplanes, etc.
- Compare the listing details to the property's tax records. Unrecorded additions or disparate information could indicate title issues.
What if the Property is Distressed?
Sometimes, a home might hit the market at a bargain price due to previous financial problems. While you might be excited to "get a deal" on a property, there could be issues with the transaction and/or the property itself.
If a property is foreclosed, the ownership then transfers to the bank or lending company that financed the previous mortgage.
Other times, a homeowner mired in debt will seek to sell their property in what is called a short sale. Basically, the buyer agrees to take on a portion of the acquired debt in return for a large discount on the asking price. This allows a seller to put the proceeds toward their current debt, and allows a lender to forgive much of the final number. In turn, the buyer stands to profit from a discounted property, and could possibly make money on the investment in the long term.
Distressed properties can present a higher risk of title defects, so buying an owner's policy of title insurance at the time of purchase is important.
What About New Construction?
New construction is another option to consider when buying a home. This is a desirable option for many because the home they are purchasing is brand new; there is no need to deal with a previous homeowner, and the home condition is likely immaculate. In this situation, the agent or buyer negotiates directly with the contracting company that built the home. As part of your due diligence, make sure to do your research on the construction company before doing business with it.
Additionally, you should keep in mind that, although the structure itself might be new, the property you're purchasing is not; a title report and owner's policy of title insurance can help protect you from common title problems that could affect any home -- including new construction.
How Do I Make An Offer?
When you are ready to make an offer, you and your real estate agent will need to draw up a contract with the applicable information. Your real estate agent will then present this offer to the sellers (or sellers' real estate agent). The sellers may accept, decline or counter the offer.
Your offer might include:
- Sale price/offered price
- Street address and a description of the surrounding land
- Sale terms (cash purchase, mortgage financing, etc.)
- Seller's written intent to transfer title (ownership)
- The date the property will change hands
- Any agreements on the prorating of utility bills
- Payment of title insurance and home inspections
- Deed details
- State-specific required clauses (consult your real estate agent or broker for these)
- Offer timetable and expiration date
- Contingency plans that will come into effect as the result of a canceled/defaulted sale
What Are My Next Steps?
After a deal is accepted, everything that has been contractually agreed upon gets set in motion. The time between the offer acceptance and the closing of the transaction is known as "escrow." Depending on your geographic area, this process may differ, but will likely include third-party handling of transaction documents and funds.
Depending on negotiations, you might have to deposit money into an escrow account. The homeowner may then begin construction on any improvements/renovations required by inspections or the purchase contract, and you'll need to get your financial paperwork in order (including preapprovals, letters of intent and offer contract). All parties involved in the transaction will determine a tentative closing date, when the transaction should be finalized and you are scheduled to receive the keys to your new home.
After all the paperwork is signed, it's almost time to move in. If you think that a final inspection is necessary, be sure to include this in the language of the final contract; technically, you are entitled to as many walkthroughs as you want to determine if the sellers completed all agreed-upon repairs.
For more information on the escrow process, see our What is Escrow? page.Learn More