The buying
process:
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Step 1: Choosing a Realtor® |
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Buying real estate is could be one of the largest
purchases and biggest decisions of your life. The first
thing to do is read through this Buyer's process and
then give us a call and it all starts from a
conversation. We can then let you know how we can help
you.
As buyer's agents, we represent clients who are
searching for real estate . We can save you time and
money by researching properties based on your criteria,
helping you secure the best mortgage rates and financing
circumstances, counseling you on the offer amount and
terms most favorable to you, and negotiating on your
behalf.
For buyers, there's really no downside to hiring a us
because the seller generally pays buyer's-agent
commissions.
As Real Estate brokers Licensed with the Texas Real
Estate Commission, we have a fiduciary duty to treat you
honestly and fairly. Our goal is to begin long term
relationship with all the folks in our network.
If you choose to have us represent you, we will
enter into a written mutual understanding that clearly
establishes the obligation of both parties and specifies
how we will be compensated. |
Step 2: Deciding what you need and want |
Needs and
wants list
Before you start looking,
make a list of what you want and need. Once your list is
made, go back over it and decide what is most
important--which items are musts and which you are
willing to give up. Assign each item a priority so that
you will know what to look for as you begin house
hunting.
Location
Deciding where you want to live may be the single most
important factor in choosing a home. Location to
employment centers, shopping centers, schools, major
traffic arteries, and other attractions are important
and have significant influences on value. Ask your real
estate if you have questions.
Your choice of location may
be limited somewhat by the price you can afford. Even
so, make sure you consider such things as:
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prices of properties and
property taxes;
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distance to work, schools,
shopping, and entertainment;
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proposed changes in land
use such as commercial shopping centers and roads, and
potential hazards such as flooding and noise from a
nearby airport or highways.
Type of home and lot
A single-family detached
home typically provides more living space and land area
than other types of living units and permits you greater
freedom (less restrictions) to remodel, expand, paint,
and alter the appearance.
If you don't like spending
leisure time on yard work, consider a condo or garden
(patio) home. Condos and garden homes often offer shared
greenbelts and garden areas or membership in private
recreational facilities such as swimming, golf, and
tennis.
New vs.
Resale vs. Fixer Upper homes
Pre-owned homes usually have established yards, and the
neighborhood or subdivision is usually built-out. On the
other hand, they may require more maintenance.
New homes are not without
problems. Although they require less maintenance in the
first few years, you may have to put in landscaping and
call the builder back to correct faults. And if
buildings are still active in the area, you may have to
endure nearby construction.
You could already have your
dream home in mind. Then again, you might not know what
you like until you see it. Either way, your Texas
REALTOR® will listen to your preferences and help you
find the perfect home.
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Step 3: How much can you afford? |
There
are typically three major areas of concern when deciding
what you can afford: down payment, qualifying for a
loan, and closing costs. But, depending on your credit
your options might be broader. We have a list of
reliable, lenders to help you with this if you need.
Down payment
A conventional loan typically requires a down payment.
It is not uncommon for buyers to place a down payment of
10% to 20% of the purchase price. For example, on an
$80,000 home, a down payment of $8,000 to $16,000 in
cash may be warranted.
Government-backed loans, insured by the Federal Housing
Administration (FHA) and the Veterans Administration
(VA) are particularly useful to first-time buyers and
often require 5% or less as a down payment.
Generally, a higher down payment means better loan terms
and a lower interest expense on the mortgage.
Qualifying for a loan
A lender will determine how much they think you can
afford. But remember, just because the lender says you
can afford one price doesn't mean that's what you should
spend. Be wise and thoroughly examine how much you
should spend on a home.
Be prepared to provide the lender with a two- to five-
year financial history that contains the following:
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Income: gross monthly income as well as employment
history, education, and any secondary income such as
bonuses, dividends, and child support. The lender may
require a letter from your employer, W-2 forms, or, if
you are self-employed, recent tax returns.
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Assets: current checking account balances, savings
accounts, stocks and bonds, certificates of deposit,
other property, insurance policies, and pension funds.
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Credit: debts on cars and appliances, debts on all
credit cards, and history of debt repayment. Your lender
may ask for a credit report, so you may want to clear up
any known negative terms in advance.
Your Texas REALTOR® can help you determine what price
range and monthly payment you can afford. The monthly
payment typically consists of principal, interest, taxes
and insurance--PITI, for short.
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Step 4: The Offer |
What to offer
We can help you find your perfect home, investment
property, lot, etc... but only you can decide how much
you are willing to offer for it. Ask your us about the
selling prices and marketing time of other real estate
in the area.
Once you have determined the amount you are willing to
spend, your We will help you prepare a written offer. In
most transactions you will offer to deposit earnest
money with the escrow agent, showing your sincerity in
making a reasonable offer and abiding by the terms of
the written contract.
Contract forms
We will help you prepare an offer using standard forms.
The offer, if accepted, will become a binding contract.
This document is the most important paper you will sign
because it lays out all the terms of the transaction. It
contains:
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a legal description of the
property,
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any property that will be
transferred with the home, (blinds, curtains, fireplace,
screens, etc.
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the price
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financing conditions and
contingencies
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amount of earnest money
deposit
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name of the escrow agent
and title company
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pro-ration of insurance,
taxes, and interest
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fees to be paid and who
pays for which
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rights to inspect the
property and for repairs to be made
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dates of closing and
possession
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what happens if either
party defaults on the contract
Inspections and warranties
Before signing the contract, take precautions to protect
yourself against unseen defects in the home. An
inspection by a qualified inspector can provide you with
unbiased opinions about the condition of the foundation,
mechanical systems, plumbing systems, appliances, etc.
If you can, accompany the inspector at the time the
inspection is conducted.
It's also a good idea to get a termite and other
wood-destroying insect inspection.
You may also want to have your REALTOR® request that the
seller furnish you with a one-year residential service
contract as part of the deal. This is common practice
with the purchase of existing homes (after the first
year, you'll have the option of renewing coverage at
your expense) and ensures that certain items will be
repaired by the company if they fail to function after
you move in. If you buy a new home, the builder may
offer a warranty as well. Whether you get a residential
service contract or receive any other warranty, find out
how claims will be processed and how any necessary
repairs will be made.
Seller's options
The REALTOR® working with you will present the contract
to the seller's agent or seller. The seller has three
options: accept, reject or make a counteroffer--a
rejection of the offer with a simultaneous offer from
the seller to the buyer. If the seller makes a
counteroffer, you then have the same three options. This
process goes on until a suitable price is agreed upon by
both parties.
Binding contract
Once you and the seller agree to the written terms and
both of you sign, the document becomes a binding
contract. Be sure that you pay close attention the
terms. Otherwise, you may waive some contractual rights.
The contract may also set out other contingencies that
have to be satisfied, so read the contract carefully and
comply with its requirements.
If repairs are required, the contract will specify who
will bear the cost of the repairs, who will arrange for
the repairs, and when the repairs must be made. Before
you close, be sure that the condition of the property
meets the required condition specified in the contract.
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Step 5: Financing |
SECURING FINANCING
Once a contract becomes binding, you'll need to secure
financing. Depending on the terms of the contract, the
purchase of the home may be contingent upon you finding
the right financing.
LENDERS
Most homebuyers get loans through savings institutions
and mortgage bankers and, to a lesser extent, from
commercial banks, credit unions, other private sources,
or even the seller. Sellers often can offer a
competitive interest rate and attractive terms. Check on
specifics.
Types of loans
In general, three broad categories of loans are
available:
1.
Private vs. government loans. Most mortgage loans are
made by savings institutions, banks and mortgage
companies. Generally, a lender will require you to buy
mortgage insurance, particularly if you make a low down
payment. This insurance may be paid at closing or added
to the loan amount. VA loans require no mortgage
insurance, but only qualified veterans may apply for
them. Mortgage insurance protects the lender, to a
degree, in the event of default.
On government (FHA and VA) loans, the government does
not actually loan the money but rather guarantees (or
insures) to repay the lender if you default for some
reason. Government loans have important advantages--they
generally require a lower down payment than conventional
loans and often have a lower interest rate or points. On
the down side, government loans limit the amount you can
borrow, often take longer to process, and sometimes have
higher closing costs.
2.
Fixed rate vs. adjustable rate. On a fixed rate
mortgage, the interest rate stays the same over the life
of the loan, usually 15 or 30 years. That means your
payment will not change except for adjustments on taxes
and insurance.
Adjustable rate mortgages (ARMS) have interest rates or
monthly payments that can go up or down over time. These
mortgages typically start out with a lower interest
rate, lower monthly payments, and lower fees and points
than fixed rate mortgages and often appeal to first-time
homebuyers, younger couples who expect their incomes to
grow in the coming years, and people who might not have
much cash for down payment and closing costs.
If you consider an adjustable rate mortgage, ask the
lender to explain the terms fully. Ask about the
interest-rate cap (the maximum rate you will be charged
no matter how high rates go in the market), the index
that will be used to calculate future interest rates,
and how index charges will affect your mortgage.
3.
Assumable vs. new loan. Some loans, particularly FHA and
VA loans as well as some adjustable rate mortgages, are
assumable. That means a buyer can assume an existing
loan usually on the same terms as the previous owner.
Assuming a loan may save some costs and time. As the
buyer, you would typically pay the lender a fee at
closing for processing the assumption.
The true price of financing
When shopping for a loan, don't judge the loan by the
interest rate alone. Compare several items in the entire
loan package, including:
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Points on a low-interest-rate loan can be double those
for a loan with a higher interest rate, causing you to
pay more up front.
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Total
fees charged by the lender. Some lenders will absorb the
cost of many services, while others do not, so ask in
advance.
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Term.
In general, the longer the life of the loan and the more
fixed the payment, the more you can expect to pay over
the life of the loan. For example, a 30-year, fixed-rate
loan will cost more in interest than a 15-year,
fixed-rate loan.
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Penalties. Ask what penalties will be charged if you pay
off the note early. A prepayment clause could require
you to pay a penalty if you pay off the loan early, such
as refinancing the loan at a later time.
Loan approval process
From the lender's viewpoint, approving the loan, based
on your financial standing, is only part of the risk;
the other part is the property itself. The lender may
require an appraisal to verify that the home is worth
the loan as well as a physical survey to discover any
encroachments on the property. Repairs may be required.
Insurance must be purchased. Verifications of
employment, deposits, and other matters must be
obtained. Loan documentation and conveyance instruments
must be drawn and approved. In addition, the title
company must research the title and arrange for paying
off any liens, taxes, and other costs. All these
conditions and others must be satisfied before a
transaction can close.
Hazard insurance
As another protection, the lender may require insurance
to protect against fire and storms. (Flood insurance
could be required if the house is in a flood plain.)
Even if not required by a lender, it's probably a good
idea for you to consider all types of insurance.
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Step 6: Closing the deal |
The closing is the end of
weeks or even months of research and decision making.
The closing could last less than an hour but may take
longer, depending on the complexity of the transaction.
It often occurs at the title company's office. The title
company officer will explain each document before you
sign. We will also be at your side.
Two basic kinds
of documents
If buying a home were strictly a cash transaction, you
would simply hand over the money and receive the deed.
More than likely, however, you are borrowing money for
the home, which means that you are actually making two
transactions--acquiring the loan and buying the home.
As a borrower, you will sign a note promising to repay
the loan and a deed of trust (also known as the
mortgage) pledging the house (or other collateral) as
security for the note. You will also sign numerous other
papers including acknowledgments, disclosures, surveys,
certificates, etc. Be sure to read each document
carefully. Ask questions if you do not understand
anything. There are no dumb questions. Seriously
consider having your attorney present at closing.
As a homebuyer, you will present a cashier's check (or
other good funds) to the seller, sign a document that
itemizes closing costs (the lender will have given you
an estimate in advance), and pay your share of the
closing costs. In return, you will receive a deed,
transferring ownership rights to you.
The home is yours
At the end of the meeting, you will likely receive keys
to the property. At that moment, the home will be yours.
Occasionally, possession of the property will occur
after closing. For example, the seller may have
negotiated with you for a few extra days after closing,
or the loan will not immediately fund, or other
concerns. But, in most transactions, you will be the new
owner at the end of closing.
Some other points to keep in mind:
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Pre-paids. You should be
aware that your closing costs will include prepayment of
an
escrow account to cover
insurance and taxes.
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REALTORS® are required to
make properties available without regard to race, color,
religion, national origin, sex, disability, or familial
status.
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Be sure to have a property
inspected by a Texas licensed inspector to determine: a)
the condition of the property (structural, mechanical,
electrical items, etc.); b) any environmental conditions
(asbestos, lead-based paint, toxic materials, etc.); c)
wood-destroying insects; and d) other matters. Brokers
are not qualified to perform such inspections.
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Residential service contracts can
offer repair to appliances, electrical, plumbing,
heating, cooling, or other systems in the property.
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Be sure to obtain a policy
of title insurance or have an abstract of title reviewed
by an attorney of your choice before buying a property.
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