Buying A Home with the 12:45 Team
Buying a home is a very important financial step that should not be taken lightly. The 12:45 Team will help guide you step by step answering any and all questions you have. Our goal is to make this process as smooth as possible.
Start by prioritizing your needs.
Size & style – What are the practical daily needs of your household, and what type of house can support those needs? Do you need plenty of play space for children? An oversized garage for recreational vehicles? Outdoor entertainment space? One-story living for aging in place? Make a short list of your must-haves so you can quickly zero in on the houses most likely to suit your needs.
Location – The commute to work, schools, neighborhood culture, zoning and access to services and stores that are important to your household.
Monthly housing budget – Typically, no more than a third of your gross income. The monthly budget includes the mortgage, insurance, property taxes, fees, utilities, heating and cooling expenses, and a fund for repair, replacement and maintenance. Condominiums and gated communities also require monthly homeowners’ association fees to cover maintenance of common areas.
What You Can Afford
The first thing you need to decide is how much you can afford. Determining this early in the buying process will save you a lot of time and frustration. You will know what is in your price range and what is not.
To do this you need to get pre-qualified. The 12:45 Team can help you do this with one our lenders. Its no obligation and it doesn't cost you a penny. You will not be able to put an offer on a home until you get pre-qualified.
Pre-qualification - is a "guesstimate" of what a buyer might qualify for prior to actually submitting a mortgage application. Based on the unverified financial information you provide, the lender uses a quick calculation to arrive at a loan amount. Pre-approval means that the lender has verified your financial information and has actually committed money in your name for a specific loan type and amount.
Saving the down payment - The minimum needed to put down on a property is 3.5% with an FHA loan. If you are able to put 20% down, you will be able to eliminate mortgage insurance.
Searching For A Home
Now you have your pre qualification letter and your ready to start looking at homes.
We will set you up on a automatic email. This will email you daily when something new comes on the market, that matches your criteria. This is very important. The best homes go quickly and have multiple offers. We want to get our offer in before anyone else gets a chance to.
We will set up times to go look at homes that interest you. We also preview homes during the week. This allows us to eliminate homes that do not match what your looking for.
Making An Offer
Comparative Market Analysis - Once you’ve found a house that looks promising, we will want to research the price parameters of recently sold, similar houses. This will ensure that you are making an offer consistent with recently completed sales – and it increases the chance that your offer will be confirmed by the appraiser your lender will assign to confirm the validity of the deal.
Earnest Money Deposit -This proves to house sellers that you’re serious. After all, they’re going to take their home off the market on your behalf. Earnest money is typically between 1% -5% of the purchase price. The money should be held in escrow. Such a deposit does not mean you’re bound to the contract. Your full deposit is credited toward the down payment and closing costs.
Offer Accepted - Once your offer is accepted, it becomes a binding contract, we will include the necessary contingencies. Contingencies are clauses that, if not met, will render the contract null and void. Common contingencies are the sale being subject to approved financing, the sale of an existing home and/or a satisfactory home inspection.
You’ve made your offer, its been accepted, now you need to have an expert verify exactly what you are purchasing. We have a home inspector we trust and recommend.
A formal inspection determines if anything needs to be repaired or replaced. The home inspector will write up an inspection report with all minor and major defects itemized. Good inspectors will find minor flaws in nearly any home. It’s up to you to decide if these flaws are deal-killers. It’s also important to tour the house with your inspector so you can get an introduction to its mechanics and condition.
Title Insurance, Appraisal and Homeowner’s Insurance
Some people can get confused about this stage of the real estate transaction, but with a little knowledge and guidance, it’s easy to understand. We’ll break down the basics for you.
Title Insurance- When you buy a home, a title company examines the chain of titles (previous owners) to insure that there are no problems with obtaining clear title to the property. Parties other than the current owner of the home may have rights to it for things such as mortgages, liens due to unpaid taxes, lien claims to those who the owner owes money for home improvement projects and so on. As a new owner, you may know nothing about these risks, but you are still vulnerable to such claims on your property. A deed is not sufficient protection. That’s why title insurance is necessary.
It is very common for title companies to also handle the escrow portion of the transaction, meaning they serve as a neutral party to exchange funds and make sure both parties adhere to the agreed upon terms of the contract.
Home Appraisal- Lenders require appraisals to confirm that the home for which they’re providing you a loan is in fact worth what you intend to pay.
Your lender may also require a location survey that certifies the house is within the boundaries of the lot.
Homeowner’s Insurance-You will need to buy your own homeowner's insurance. Title will not be transferred until you can prove you have the home covered by insurance. This protects you and the lender from the unforeseen, such as fire, flood, tornados, or any other damage to the home. You may also consider additional levels of insurance to cover natural disasters that are more prevalent in your area.
Escrow and Closing
When the closing is schedule, you are getting close to the finish line. At the closing, your seller officially signs over the title to the house. Your lender releases the purchase funds to the buyer, and of course, you sign reams of documents pledging to pay back your lender.
The escrow agent conducts the closing and is often affiliated with the title insurance company. Their job is to ensure the buyer obtains a clean title, the lender obtains a good mortgage, that the costs of the transaction are paid, that the seller’s mortgage is paid off, and that the seller receives their proceeds.
The escrow agent prepares a closing statement that outlines what the required funds are, who’s paying and where the funds are to be deposited. The agent will not disburse funds until they can guarantee that the above noted items have been taken care of.
Utilities – Water, gas and electric meters will be read on the day of closing and the seller will owe for the utility usage up until that day. You may also need to make deposits with both the water and electric companies.
The check – The title/escrow company you are using will tell you how much you need to bring to closing. Personal checks are not accepted, so bring a cashier’s check.
Home Warranty – You might want to purchase a home warranty, especially if the heating and cooling systems and major appliances are not new. The warranty will cover the repair or replacement costs in case items such as appliances break down after you purchase the home.