So You Want To Buy A Home
Here is the typical process
Pre-Qualification – The buyer works with a mortgage lender to get pre-qualified to determine eligibility for a home loan. It is not a guarantee of the loan. The buyer will receive a pre-approval letter from the lender. The buyer’s debt, income, and credit are reviewed and the lender pre-approves the loan. It is best, and sometimes required, to provide your agent with a copy of this letter so he/she knows what type of loan you are eligible for and what price range to search in.
Prepare In Advance For These Expenses – You will have expenses along the way that you will need to be paid before or at closing. Many are paid at the time of service. Some examples are below but this is not a complete list.
Earnest Money – can range from $500 up, depending on the price of the home but this can also be negotiated as part of your offer to purchase a home. The amount is typically 1% of the purchase price. This is money payable to and held by the Title Company and shows the seller you are committed to purchasing the home. This money will be credited to the purchase of the home at closing.
Payments To Your Lender – While working with your lender, you will have to pay for a credit report, an appraisal, as well as some other fees. Check with your lender for a list of things for which you will need to pay.
Home Inspections – It is advisable to get a home inspection and a termite inspection as well as some other types of inspections, such as Radon or Property Surveys, depending on the situation. Regular Home Inspections can range from $350 – $500 and Termite Inspections can range from $40 – $80. Most inspectors publish their prices online for different types of services and your agent will help you navigate this process.
Closing Costs and Title Expenses – You may be able to ask the seller to pay your closing costs and title expenses as part of your offer. However, they may not be willing to do so. If they are not willing, you will be responsible for paying these at closing. Your lender can give you a firm number but you should estimate 3 – 5% of the price of the home. Some types of mortgage loans cover these costs so check with your lender for the most accurate information.
Buyer Agent Compensation – If the seller of the home you choose does not agree to pay your agent’s compensation, you will need to be prepared to pay the amount you and your agent negotiate and agree upon in your signed Buyer’s Representation Agreement. The amount is always negotiable and not set by law. The amount is typically a percentage of the price of the home but could also be a flat fee.
The Search – The buyer can search for homes in the price range they are comfortable with and that fit the approved loan amount. When a pre-approval letter is submitted with an offer, sellers know the buyer is ready, willing, serious, and able and can shed a favorable light on the buyer.
Stay Focused – Don’t do anything that will affect your credit negatively. The lender has pre-approved your budget and the night before closing, they will run a new credit inquiry on you. If you bought a new car, quit your job, or purchased anything with financing or credit, it could knock you out of being able to purchase your home.
You Found A Home – You will work with your agent to submit an offer. You and your agent will work together to complete a Purchase and Sale Agreement as well as other required documents and the terms of the sale are negotiated, including the price, move in date, earnest money, etc. Once the offer and terms are accepted by both parties, and the contract is bound, the buyer’s agent will collect the earnest money check from the buyer and submit the check to the seller’s agent’s brokerage or to the Title Company. It will be held in an escrow account to be credited to the buyer at closing.
Really Check It Out – The buyer’s agent orders the desired inspections of the home/property. These include a home inspection, termite inspection/letter, survey, roof inspection, septic tank inspection, etc. The buyer will pay for these inspections. After the inspections, the buyer works with their agent to submit any repair proposals to the seller for review and negotiation (if applicable) or will complete a form stating they accept the home as is. The buyer must direct all questions to professional inspectors for clarification and further details to fully understand what requests the buyer may have for the seller.
Get the Mortgage – Within 3 days of the binding agreement, the buyer must make application for the loan and will pay for the credit report. The buyer and buyer’s agent will complete the Notification Form notifying the seller’s agent of having applied for the loan, ordered the credit report, and providing the lender’s name and contact information.
Within 5 days of the binding agreement, the buyer and buyer’s agent will complete the Notification Form notifying the seller that the buyer has instructed their lender to order the appraisal.
The Title Company – A title search, which searches for any liens against the property, is conducted by the title company. The buyer can choose their preferred title company and does not have to use the same title company as the seller. Your agent can help you with this and may have a recommendation.
Getting Ready – The lender will send all information to their underwriter for review and approval. The underwriter makes the final decision about loan approval. Once financing passes underwriting, the title company completes the closing documents. In the meantime, the buyer plans for and makes arrangements for having utilities transferred to their name, any locks that need to be changed, installations of security systems or other equipment, etc. The buyer can show a copy of the Purchase and Sale Agreement to utility companies that require it for transfers.
Almost There – The final walkthrough is scheduled, typically 1 – 2 days before closing. This allows the buyer and buyer’s agent to address any issues with the seller and seller’s agent before the closing date.
Close and Move In – Sit down at the closing table to sign the paperwork and take ownership of your new home!
Tere Priest, REALTOR®
United Real Estate Solutions 308 N. Peters Rd. Suite 225, Knoxville, TN 37922
Cell: 865-386-2419 Office: 865-244-4000
Email: terepriestrealtor@gmail.com
Tere Sells Homes 