Buying a home is often the biggest financial transaction in which most people are involved.  The numbers are big, but the aggravation and the stress don’t have to be heavy.

One of the key components in a smooth and successful home buying experience is a professional Realtor who can guide you through the process.   For a good real estate agent, all the potential complications of a real estate transaction are just another day on the job.  An excellent relationship between Realtor and buyer is crucial to a smooth transaction.    Do you “click” with your Realtor?  Are you totally confident in their abilities?   Your client-agent relationship should be comfortable and you should have the utmost confidence in their ability to find you the right home.

Buying a home is comprised of only a few steps – but each step has multiple components.   The first step is getting preapproved for a loan, the second step is finding a house, the third step is getting your offer accepted, and the fourth is closing the transaction.    

Loan Pre-Approval

Why, you may ask, is this important?   There are several reasons.  First, it’s crucial that you know exactly how much money a lender will loan you and how much it’s going to cost you each month.   Don’t waste your time shopping for a $500K home if what you can afford is a $350K home or even a $700K home.   A good Realtor will always advise you to get pre-approved by a lender before the home-shopping begins.   Notice that I said “pre-approval” not “pre-qualification,”   because there is an important difference between the two.   A pre-qualification can be done by a lender over the phone with no documentation provided to verify the information you tell the lender.  This doesn’t mean that you aren’t telling the lender everything intentionally, but many of us don’t have the memories of credit reporting agencies (which we all know is impeccable, for better or worse).   A pre-approval requires that all documentation be provided to the underwriter.  These documents include the completed loan application, credit report, pay stubs, two years income tax returns, bank statements, employment verifications, mortgage verifications if applicable, and any other paperwork the lender asks for.  Without the verifiable documentation, a pre-qualification is not a binding agreement to give you money and a good agent representing a seller knows this.   When a buyer is approved, it is rare for a lender to rescind the loan offer and this typically only occurs is there are changes to your financial status after approval.

Once a buyer knows how much house they can afford, the shopping begins.  Their Realtor can show them homes based on a preferred neighborhood, school district, price range and many more factors.     It is then up to you, the buyer, to pick out a home in which to make an offer on. 

The offer is written by the Realtor and either delivered to the seller’s agent or presented directly to the seller.  The offer is accompanied by an earnest money deposit often referred to as “good faith money” this shows that you are a good buyer making a serious offer in good faith.  The amount of earnest money can vary from state to state, but the earnest money deposit usually ranges from 1% to 3% of the offer price.   The seller has 3 options to deal with the offer: 1) accept the offer 2) reject the offer 3) or can counter the offer.  Often offers are negotiated back and forth multiple times until agreement is reached.  Once the buyer and the seller have a “meeting of the minds” – when the offer is accepted and signed by both parties, the contract is said to be “executed” and the house is sold. 

Offers have timeframes within which financial and property conditions must be approved and respective contingencies removed (contingent upon selling your home before you buy the new one, contingent upon having the home inspected and being satisfied, contingent upon appraisal, etc, etc) and your Realtor can guide you through these steps.   Once this happens, all that’s left is a final walk through of the property, the sign-off of the sale documents and the transfer of ownership to the new home owner.

I’m sure you’re thinking, “It can’t be that simple!”  You’re right!  But, this is a good overview to get you started.  For more details check out the other topics in the “Buying” section about this process or contact Miranda.