Buying a home is an exciting time in your life, and my goal is to make it easy by helping my clients with information so they understand the process and know what to expect.
Choosing a Lender and Obtaining a Pre-Qual
If you are not paying all cash for your property, then you will be financing the purchase which is the most common way people buy a property. If you will be financing, the first step is to speak with a lender to determine how much you qualify for. Make sure you choose a lender who will call you back, and help you through the process. A bad lender can be detrimental to your purchase. Ask me for referrals! Your chosen lender will have you complete a loan application and talk to you about your monthly payment amount including taxes, insurance and interest. The Pre-Qual is the first step so you can understand what purchase price you qualify for, and how that translates into a monthly payment you are comfortable with. The good news is that most of my buyers monthly home payment is less than what they were paying in rent. You will be very surprised that buying is a better use of your hard-earned money.
Understanding All Costs Involved – closing costs
Your lender will explain what your minimum down payment amount is. First-time buyers down payment can be as low as 3% with the right qualification. A common down payment amount is 5 – 20%. If you put 20% down you avoid paying mortgage insurance each month or yearly. Let’s say your down payment is 5% on a $200,000 property, that would be a $10,000 down payment. You would need to have the $10,000 at closing. In addition to the $10,000 down payment for closing, you would need to have Closing Costs. Closing costs include title and escrow fees, HOA fees (if applicable), loan costs and prepaid taxes and insurance. Closing costs are roughly 1.5% of the purchase price, and you need to pay those costs in addition to your down payment at closing. This is called Cash to Close, in this instance your closing costs on a $200,000 purchase price, with $10,000 down payment and $3,000 closing costs would be $13,000 due by the close of escrow date. The close of escrow date is when you take possession of the property. We can ask the Seller to contribute up to 3% concessions towards closing costs. This contribution comes directly from the sellers proceeds from the sale. Closing cost concessions cannot be put towards your down payment. Some lenders only allow up to 2% closing cost concessions. We would discuss whether you would like to ask for concessions prior to submitting any offer. Many of my buyers like to ask for closing cost concessions so they are left with more cash after closing for their move, furniture, home improvements, etc.
Meeting with your Realtor
Once you have a Pre-Qual from your lender in hand, it is time to set an appointment with me, your full-time professional Realtor. It is best for us to have at face to face meeting so I can get to know you better and understand your home buying goals. Read my past client reviews here. Many of my buyers have already been on Zillow and have a couple homes they’d like to get into asap, and I am happy to show anything they find online. In our meeting we will discuss what type of property you would like to purchase, which upgrades are most important to you and what “must-haves” you cannot live without. We will review what is available in your price range and criteria. Next I will set up automatic e-mail updates that send properties to your inbox when anything new comes on the market. We see new homes listed each week. Some of the best homes and best deals go under contract quickly, especially when they are priced right. I check the MLS daily for you and reach out to my network of agents to ensure we are the first to see any properties that fit your criteria. Remember, Zillow is not up to date, and you will see properties that look available on Zillow but are actually already under contract with another buyer. Focus on my e-mail updates to ensure you are seeing truly available properties.
The title company choice is up to the buyer but sometimes the seller has a special request and we can negotiate title company in our offer. The title company is who will be handling the transfer of the home title from the seller to you, the new buyer, and coordinating all documents and funds for closing. The title company charges closing costs, and calculates the settlement statement which reflects all of your cash to close.
A home warranty is a choice you have to incorporate in your offer. A home warranty is a plan that you purchase (or ask the seller to pay for), that is typically for a one year term beginning at the time you take ownership of the home. The home warranty covers the basic mechanicals of the home, and structural features like roof, windows, plumbing, electrical, etc. In the event you have a leak at the home, the A/C fails or refrigerator breaks down for example, you can call your home warranty company and submit a claim for a repair. The company charges a “trade call fee” ranging between $25-$75 to complete the repair. The home warranty is optional and some buyers see the value and others feel they will not use it, so it is up to you whether you choose to incorporate a home warranty in your purchase.
Making an Offer
When we find a home you love, the next step is to write an offer to the seller. If you love a property, keep in mind, others might love it to, and only an accepted offer secures your interest in the property. The offer has several components
- Offered or Purchase price: The price you are willing to pay for the home. I will run comparable sales for you to review, the comparable sales show other similar properties sold and at what price, so you can feel comfortable that your offered price is within the market range.
- Earnest money: Once an offer is negotiated and accepted, the earnest money are funds you deposit to show your good faith and intent to the seller, immediately. The earnest money is deposited with the title company via a check or wire transfer from your bank. The earnest money goes towards your down payment/ cash to close. We typically offer 1-2% of the purchase price as earnest money.
- Down payment: We will need to show the amount of your down payment and financing of the purchase price. This needs to coincide with what your pre-qual shows. If needed, we will get a new pre-qual from the lender to ensure we only show the seller that the amount we can qualify for is the same as the purchase price (and not more). We submit your pre-qual with the offer.
- Close of escrow date: This is typically 30-45 days from the time we write the offer, and the close of escrow date is when you take possession of the property and when the down payment and cash to close are due. A 30 day close of escrow date is usually more appealing to the seller.
- Home warranty: We will elect whether we want a home warranty or not and who will be paying for it.
- Closing cost concessions: If you are using financing and would like the seller to contribute towards your closing costs, then you ask for concessions of 1 to 3%. Think of the concessions as a reduction in your offered price, since it will reduce the seller’s net proceeds at closing. For example, a $200,000 offer with 3% concessions ($6,000 for buyer) does not look as good to the seller as a $205,000 offer with 3% concessions ($6150 for buyer) so calculate your offered price accordingly.
- Escrow company: We write in whatever escrow company you would like to use, escrow/fee quotes can be made available before we make an offer.
- Time of acceptance: We provide a fixed amount of time the seller has to respond to our offer, 24 hours is typical unless it is a weekend or either party is out of town. If the seller does not respond by our time of acceptance cut-off than the offer is no longer active.
- HOA addendum: If the property is within an HOA than we will incorporate an HOA addendum into the contract that states who will pay for which required HOA dues and transfer fees at closing.
Counter offer: If the terms are not acceptable to the seller they might respond to our offer with a counter offer, typically adjusting terms such as title company, close of escrow date and most commonly, purchase price. They will also give us a fixed time of acceptance to respond. We can negotiate counteroffers until we arrive at acceptance by all parties. Until your offer, or counter offer is accepted by all parties the property is available to other buyers. All dates within the contract are calendar days, and not business days.
The Inspection Period
The inspection period begins the day after contract acceptance and last 10 days. During the inspection period you have the opportunity to complete due diligence on the property and schedule needed inspections (at buyers cost). I recommend that my buyers hire a licensed inspector to complete a comprehensive inspection on the property, this costs $350-$500 depending on the size of the property. The inspector will give us an inspection report which shows any problems with the property, typically 15-40 pages. There are always some small problems, but the severity of the findings will determine what we ask the seller to repair, if repairs are needed. We will also need to have a termite inspection completed, and this costs $49, to ensure there are no active termites at the property or termite treatments needed. If the property is older than 1965, I recommend the buyer consider having a sewer inspection completed. During the sewer inspection, the sewer line plumbing is looked at with a camera snake by a licensed plumber. This usually costs my sellers around $150 and gives peace of mind with the underground plumbing. We also want to ensure we will have (if applicable), mailbox, pool key, house keys, gate/garage remotes and other applicable access controls to avoid problems after closing. Once the inspection period is completed, we will have all of our reports and can determine if there are any problems with the property that the buyer would like to have fixed. If the buyer would like to request repairs then we submit a formal document called the Buyer Inspection Notice & Seller Response (BINSR) to the seller. As long as all parties are reasonable, a resolution to repairs is usually made within 5 days of submitting the BINSR and the seller confirms repairs will be completed before close. Do not worry, I will help you coordinate and be completely available during the inspection period. This is one of the most active times during the home buying process and very important to complete thoroughly.
An appraisal is required if the property is being financed, and takes 1-2 weeks from the date it is ordered to be completed. The lender needs the appraisal to move the file into underwriting, and I recommend to order the appraisal with plenty of time to avoid delays. The appraisal is usually paid for by the buyer but it can be negotiated, or part of the closing cost concessions. Appraisals run between $300-$600 depending on the size of property. If the appraisal does not meet the purchase price, then the new value will have to be negotiated between the parties. Your lender will only lend based upon the appraisal value, so if it is lower than the purchase price we work with the seller to find a resolution. Most commonly, the properties I bring buyers to appraise at purchase price.
Final Walk Through
Between the end of the inspection period (day 10 after acceptance), and 3 days prior to closing, the buyer does not have access to the property unless specifically requested. At 3 days prior to closing, buyer will have an opportunity to walk through the home to ensure any required repairs to be made by seller have been completed and also, that the property is in substantially the same condition as it was when buyer made the offer. We also make sure seller has removed all personal belongings and that washer/dryer and refrigerator are still at the home if these were negotiated in the contract.
Close of Escrow Date and Signing (Cue Champagne & Fireworks!)
As we approach close of escrow date, we will have walked through the property and ensured it is acceptable to buyer. At least 3 business days prior to closing, the buyer will have received the Closing Disclosures from the lender and have confirmed. Buyer will attend the signing appointment along with me, your Helpful Realtor, and sign the loan and title documents to take ownership of the property. Buyer will also bring their cash to close via cashier’s check or wire to the escrow company who will be handling all funds. On the close of escrow date, the lender will fund the loan to the escrow company account, who will then send all of the signed documents to the Maricopa County Recorder. And sometime, typically between 1-5PM on the close of escrow date, YOU buyer become the new owner!! I will meet you at the home and give you keys! Congrats!
PS: Remember to call the utility companies before the close of escrow date to have utilities turned on in your name to avoid any outages.
This presentation is made for you exclusively by: Francesca Hamilton PROFESSIONAL REALTOR 50 STATES Realty Copyright 2017 © Francesca Hamilton PLLC