Buying a home is the single biggest investment most of us make in our life, yet few of us are familiar with the process. Oh … I know you may have been through it, but that doesn’t mean you did it right. Could you have saved time or money? Or found a better home? Or made a better deal, with better terms?
I am a firm believer in following basic steps in all of our consumer transactions. So here are my recommendations when it comes to buying a home:
- Select a buyer’s broker. This is very important and does NOT add to the cost of the home. All listed homes have “built-in” commissions that are paid out of sales proceeds. Whether or not you use a buyer’s agent the commission will not change. Commission will be paid so you may as well have someone on YOUR side.
- Pre-qualify for a loan. This is the most important step! It tells you what you can afford, hence what homes to shop for. Make sure it is a real pre-qualification – meaning that your loan amount is fully approved (providing the house has an adequate appraisal).
- Parameters – This identifies the kind of house you want and it helps your buyer’s agent to shop for you. Identify the size you want, the number of bedrooms? Baths? Do you want one story or two stories? And what are your preferences in a neighborhood? Make a checklist and use the list to rank properties. It will save you a lot of time!
- Credit Tweaking. Did you know there are minor things you can do to raise your credit score? In doing so you can get better pricing on loan fees and interest. But most people do not know how to tweak their credit. A good lender can give you suggestions that will help. For example, each credit cards should not have an outstanding balance more than 75% of your credit limit. And inactive cards should be resurrected and used – with minor charges that can be paid off at the end of the month. Do not close accounts.
- Shop! This is the fun phase. It’s when you actually start looking at homes (that have been narrowed down using your list).
- Write an Offer. If the home meets your approval, make an offer. This is where a skilled buyer’s agent with negotiating talent can help you make the right offer and arrive at a deal that is beneficial to you.
- Due Diligence. This step involves inspecting the home and neighborhood. When it comes to the home, you should have a good general inspection but you also need a specific stucco inspection if the home has stucco on it. When it comes to the neighborhood you need to know if there are covenants and if you can live with them. You also need to know what taxing districts affect you. For example, water and sewer districts, park and recreation districts, fire protection districts and others can affect the taxes you pay. And if one of the districts is in financial trouble there could be massive assessments in your future.
- The Closing. A good buyer’s agent will be sure to get copies of closing docs in advance for review. Do NOT wait until the closing to get your first look at the docs. The purpose of the “closing” is to “close” the deal. It makes payment and transfers ownership, plus adjusts the price for taxes and escrow payment.
All real estate transactions should follow these basic steps. Use them as a guide and avoid big problems!
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