This blog post is meant to outline the basic process of buying a home. Of course there will be differences in each transaction that we do, but it would be impossible to detail each of the possible nuances that may or may not occur. Your financial standing, work situation, time frame, current living situation, and a myriad of other things could either speed up or slow down the process. Keep in mind that these special circumstances are one of the reasons you have an agent. Also know that if any of these steps are confusing or if I missed anything, that that is also the reason you have an agent. Hagan agents are trained to handle whatever is thrown at them. We know this process inside and out and have the resources to help you work out any hiccup that might occur.
Go to a bank and get a prequalification or preapproval letter
This doesn’t even have to be the bank you ultimately go with for your mortgage. But in order to know the ballpark price of a home we’re helping you find, we need this letter. It should only take a few hours to a day or so for the bank to get you this letter. Keep in mind that this number is very preliminary. The bank won’t go too in depth looking at your finances, and will really just scratch the service of how much you make and what your debts are. If you want to be really on top of the game, request a preapproval letter instead. The difference being that the bank will ask you for more information and will preapprove you for a loan. This is a more solid offer from the bank and will give you a better idea of what they are willing to lend to you. You’ll likely want to pull your credit report as part of this step. Your bank may or may not give you a copy with your letter. If there are mistakes on your credit report, you’ll want to make sure to fix them right away.
Figure out how much you can afford
Start with the number that the bank gives you on your preapproval or prequalification letter. There are dozens of mortgage calculators online that use factors such as interest rate, term length, and down payment to determine what your monthly payment will be. You can also work backwards and start with your monthly payment to see how much of a home that will get you. Sure there are loans out there that don’t require any down payment, but you’ll need to take into consideration that your interest rate may be higher and/or you’ll need to get private mortgage insurance until you reach 20% equity in your home. You also don’t want to push your limits. Be realistic about your numbers. If $2000/ month is what you can afford, stick to that, no matter what the bank tells you they will loan you.
Find an agent
Look no further. You’ve come to the right place.
Find a house
You’ll likely have a checklist for your agent. You may know exactly what features you’re looking for and in what areas. Be open and honest with your agent about your desires and expectations. Also be open to your agent helping you think outside of the box. Sometimes a fixer upper will suite your needs a lot better than a brand new home. Whatever the case, you’ll probably visit a dozen or so homes before you make a decision. Remember to keep an open mind and an open dialogue going with your agent. We promise we’re listening and have your best interests at heart.
Find a lender
Now that you’ve found your perfect home, it’s time to shop around for lenders. This is one of those steps that may be out of place depending on your circumstance. If you have less time to make a decision, you’ll want to do this either before or concurrently with your home search. If the market leans heavily toward the buyer, you’ll also want to do this before your find the perfect home. Securing a lender and having a firm loan approval from a bank will be far more attractive to your seller and will work in your favor in negotiations. You’ll want to talk to your agent about finding a lender. They can help you figure out the type of loan you might be looking for, give you a ballpark for what a good interest rate is, and just help you get started. Talk to many banks and get them to compete over you. It will help to lower your interest rate or get you better loan terms.
Make an offer and negotiate
Your agent can help you with a good starting point for offers. This all depends on the home, the current buying climate, the area, and the listing price. Your agent will pull comparable homes to help you get started. Keep in mind that this your offer will probably turn into negotiations. Be prepared to walk away from a home if the price or terms don’t work out to what you need them to be.
Make an earnest money deposit
This check goes into escrow. It shows the seller that you are serious and that you plan on purchasing the home. The check is not made out to the seller, but rather an escrow company. At this point you’ll also want to get your escrow officer’s name, file number, and telephone number to give to your lender and your insurance agent.
Order an appraisal
The bank will require this step, and, in fact, may order the appraisal for you. They want to make sure the amount they’re lending to you is justified. If the home is appraised at higher than your agreed upon price, wonderful for you; if it’s lower, you may want to go back to the negotiating table. Your agent can help you figure out what to do if that happens.
Get a home inspection
Many agents have inspectors that they have worked with on a number of different transactions. It is important that you find an inspector who is certified and reputable. Shop around, ask your friends, take your agent’s recommendation. Just be prepared that the inspector will almost certainly come back with a list of repairs. Many things are fixable, negotiable with your seller, or livable. Talk to your agent to decide what items on the list fall into which category, and discuss where you want to go from there. Maybe there is an item on that list that is a total deal breaker. It is always better to find these things out ahead of closing rather than after.
Do your final walk through
Make sure that the things you wanted to be fixed are actually fixed and that there aren’t any new issues. You won’t be able to peak into walls or inspect the foundation, but you should have a good idea that things are in the same or better condition than when you ratified the final contract. If they aren’t, bring it to your agent’s attention, and he can help you decide what to do.
You made it. What an exciting day. You’ll sit down at a table to sign all of the final documents to sign the home over into your name. By this point we hope that you aren’t intimidated by the number of documents you’re about to sign. We will do our best to prepare you and explain to you what all you’re putting your signature on. We’ll also be there to answer any questions you may have and to be your advocate should any issues arise.