10 Steps to Buying a New Home
Are you curious about the steps in the home buying process? Are you wondering what you need to do to prepare for your home search? Take a look at my Home Buyer’s Guide. Contact me if you would like a physical copy and I’ll send it to you.
Buying a home in Sonoma or Marin County.
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In order to make your dream of buying a home a reality, you will need to save cash for your down payment, earnest money, closing costs, and home inspector.
If you don't plan on buying a home with cash, you will also need to apply for a loan. Your credit score may affect your ability to qualify for the loan that you want, so it is a good idea to check your credit before applying for a loan. You can obtain a free credit report from www.annualcreditreport.com.
A down payment is typically between 3.5% & 20% of the purchase price.
Earnest money is money you put down to show you’re serious about purchasing a home. It’s also known as a good faith deposit.
Closing costs for the buyer run between 2% & 5% of the loan amount.
A home inspection costs $300 to $500.
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In addition to your mortgage payment, you should consider the cost of property taxes, insurance, and maintenance. Depending on the type of home you buy, you might also have monthly homeowner association dues (HOA dues). A mortgage broker can help you calculate your average monthly cost of owning a home. Once you understand the costs involved, you can decide on a home price range that fits your individual needs.
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Speak with a loan advisor who can help you sort through the various loan programs that may be available to you. Some common loans are conforming, jumbo, FHA, and VA loans. Loans can either have a fixed interest rate or an adjustable-rate.
Once you decide on a loan, make sure that you get a mortgage pre-approval letter. Being pre-approved, unlike being pre-qualified, means you have actually been approved by a lender for a specific loan amount. Your credit and financial information will be reviewed and verified by the lender in order to receive this letter. A pre-approval letter will make your offer more competitive than a pre-qualification letter from a lender.
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Make a list of the things you'll need to have in the house. Ask yourself how many bedrooms and bathrooms you'll need and get an idea of how much space you desire. How big do you want the kitchen to be? Do you need lots of closets and cabinet space? Do you need a big yard for your kids and/or pets to play in?
Once you've made a list of your must-haves, don't forget to think about the kind of neighborhood you want, the types of schools in the area, the length of your commute to and from work, and the convenience of local shopping.
Find properties in your price range in your preferred neighborhoods. I can help with your search. Visit open houses and schedule private showings.
Evaluate the neighborhood and surrounding areas:
•Are the surrounding homes well maintained?
•How much traffic is on the street?
•Is it conveniently located to schools, shopping, restaurants, & parks?
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Your finances are in order, your ideal neighborhoods identified — next up is finding that perfect property and making a competitive offer. More importantly, one that is accepted over other offers. As more and more people are looking to become homeowners, it’s important to prepare yourself for the mortgage process, home search, bidding wars, and what you’ll do next if you do not get the home of your dreams.
Here are my 6 strategies for getting your offer accepted!
1 - Competitive Offer
A good rule of thumb, specifically in a seller’s market, is to start strong. To do this, we will assess the property’s market value with a CMA and determine what it's worth in the current market.
2 - Earnest Money
This deposit signals how serious a buyer you are. Try doubling the amount that the seller requests or that is customary in the area. If you back out of the contract for no good reason, you might lose your earnest money.
3 - Gift of Time
Express your willingness to work with the sellers’ timetable to go to closing. We can ask the sellers when their ideal closing date would be so the offer will make them feel like they are winning!
4 - Offer a Leaseback
A leaseback allows a buyer to rent the property back to the sellers, letting them stay in the home for a predetermined amount of time after the closing. Offering the seller a leaseback can be a major bargaining chip when there is a shortage of housing inventory.
5 - Limit Contingencies
Contingencies can add time to the negotiation process. They are beneficial to buyers, but can be a nuisance to sellers who are ready to move on fast. According to the National Association of Realtors, the offer with the fewest contingencies is often the most attractive.
6 - Escalation Clause
An escalation clause is a way to automatically escalate your bid by a certain dollar amount, up to a certain dollar amount. Keep in mind, you’re risking the seller seeing the true amount you’ll pay and maybe paying significantly over the home’s appraised value. Is this home truly worth it?
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A home inspection can help identify deficiencies in a home you are considering purchasing. If the inspection reveals problems and repairs are needed, you may be able to negotiate with the seller to fix those issues.
During the inspection period, we will schedule an inspection with a licensed home inspector to do a thorough investigation of the home. Once this is complete, the inspector will provide us with a list of findings.
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Here are your options after a home inspection reveals problems:
-Ask the seller to make the repairs themselves.
-Ask for credits toward your closing costs.
-Back out of the transaction (if you have an inspection contingency in place).
-Move forward with the deal.
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When your home is under contract, you can’t move forward with the sale until an appraisal is done on your home. The outcome can affect whether or not you make it to closing and whether the price in the offer is the price you’ll end up with on settlement day. You don’t want the appraised value of your home to come in below the price you’ve negotiated with the buyer as that can affect the loan you are able to acquire. The main purpose of the appraisal is to establish the collateral value for the mortgage.
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Closing is the last step in the home buying process. It can also be the most overwhelming step. You will be presented with a mountain of documents to review and sign. Please take your time with this process. You are entitled to read, understand, and have all of your questions answered before you sign any document. You may also ask for your loan documents in advance so that you can review them before signing.
You will also receive a Closing Document (CD) three days before signing loan documents. The Closing Document breaks down all of the closing costs, features, and requirements of your new loan. You will be asked to sign a copy of the CD with your loan papers.
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Congratulations! You have made it through the home buying process and now you own your home. As you get settled in and get to know your neighborhood, don't forget to keep in touch. I can give you tips on where to eat, where to go, and what to do in your new hometown!
Petaluma, California
