|
..........STEPS TO BUYING A HOME..........
CHOOSING A REAL ESTATE AGENT Link to our Preferred Real Estate Agent
What does an Agent Do?
~Explains the home buying process including in many cases offers guidance in arranging financing.
~Pre-selects homes within your price range that meet your preferences for location, size, etc.
~Schedules appoints for you to see homes that interest you.
~Gives you market information regarding selling prices for homes similar to the ones that interest you.
~Provides information regarding real estate taxes, school districts and general community information.
~Handles negotiations over the price and terms of your offer.
~Helps schedule events which occur between acceptance of your offer and final settlement including home
inspection, termite inspection, mortgage loan application, etc.
What Qualities should your Real Estate Agent have?
~Honesty and trustworthiness.
~Knowledge of the community where you plan to buy.
~Professional and experienced as evidenced by real estate education certificates and past sales activity.
~Full access to area multiple listing services (MLS) and support of a fully staffed real estate office.
~Desire to understand your wants and needs and patience to find the house best suited to you without
pushing you into buying before you are ready.
CHOOSING YOUR FINANCING
Picking the Right Mortgage Lender
A good source of information for selecting the right mortgage Lender is your Real Estate Agent. They have first-hand knowledge of lenders who are active in the local market and who can provide quality service.
Avoid Out of area Mortgage Lenders - These lenders are not familiar with state fees that are customary and do not have appraisers and title companies to work with locally. An appraisal problem can be an unwelcome end to your mortgage application. An out of state lender not familiar with funding settlements in Pennsylvania can create difficulties at the settlement table.
Avoid E-Lenders who are solely web-based - Lenders who are unwilling to give a specific rate quote with a good faith estimate of all costs associated with the mortgage.
Getting Pre-qualified for a Mortgage
Before you start house hunting, you should determine homes that are in your price range. This is done by either the Real Estate Agent or Lender using a pre-qualification process. Most lenders use two formulas to determine how much buyers can afford and this calculation can vary from lender to lender.
The first formula calculates your maximim monthly house payment which consists of the monthly mortgage principal and interest, and 1/12 of the yearly real estate taxes and homeowners insurance which is refered to as PITI - this should not exceed 28-30% of your monthly gross income.
The second formula calculates your maximum monthly debt which includes PITI as well as other debts including car payments, school loans, credit cards, etc. - this should not exceed 36-41% gross income. The lowest result will determine what your maximum monthly housing payment can be.
Although the above calculation can determine a maximum monthly payment, it may not be the payment you can comfortably afford. By working with your Real Estate Agent and by considering your saving and spending habits and budget needs, you can determine the price range of home that works for you. For more information please visit our Mortgage Calculator.
Getting Pre-approved for a Mortgage
Pre-approval is the process by which a lender reviews the information provided by you proving that you can guarantee the loan. It is not mortgage approval because a specific property must be appraised and have a title commitment before the lender can issue a mortgage commitment. In some cases, Lenders may allow you to lock in an interest rate for a period of time. This is especially valuable if it appears that rates are moving upwards.
The advantage of pre-approval is that it strengthens a purchase offer. If the seller knows you are pre-approved, they will know that you can get the financing needed to buy their home. This will give you additional bargaining power.
In order to get a mortgage pre-approval a Buyer needs to supply the following information:
~Funds available for down payment and settlement cost
~Income and Credit history
~Employment record
~Assets (savings, investments, retirement plan)
~Debts (car and student loans, credit card balances, etc.)
FINDING A HOME
Decide What Features Are Important In the House You Buy
Before you schedule an appointment to view properties with a Realtor, decide on the area in which you want to live and the features of the house that are important. Writing them down beforehand will make your first appointment with your Real Estate Agent go more smoothly.
Things to consider are:
~Size and Style of Home
~Location and School District
~Number of Bedrooms and Number of Baths
~Family Room, Formal Dining Room, Eat in Kitchen, Fireplace
~Air Conditioning and Type of Heat
~Garage and Private Driveway
~Size of Lot and Landscaping
THE PURCHASE AGREEMENT
Agreement of Sale
When you find the house you want to buy the next step is to negotiate the purchase price using an “Agreement of Sale.” Your Real Estate Agent will help you in preparing this agreement. Once you and the seller have agreed to the terms and signed the agreement, it becomes a legal contract. For this reason, you want to do some research before signing this important paper.
Items included with the sale may be appliances, window treatments, rug and home furnishings. Items that are permanently attached to the house such as a built-in range, heating and cooling systems and kitchen cabinets are called fixtures and are considered part of the real estate and are normally left in place for the new owner.
Ask your Real Estate Agent for a blank copy of the agreement of sale at your first appointment and read through the form to understand the different parts of your transaction that need to be considered such as:
~Purchase Price
~Earnest money deposit
~Settlement Date
~Mortgage amount and interest rate
~Inspection contingencies such as Home Inspection & Termite Inspections
~Other contingencies and special requirements which could include repairs to be made
Research the Property
~Find out selling prices for similar homes in the area to justify your offer.
~What are general market conditions in the area, will the home have a good resale value?
~Check out the neighborhood, and talk to the neighbors.
~Where are local stores, schools and other community resources?
Understand the Circumstances of the Seller
~How long has the property been for sale?
~Why is the property being sold?
~Has the seller bought another property?
~Has the seller settled on that property or does your settlement date have to be the same as theirs?
~Structure your agreement to meet the needs of the seller.
SCHEDULE YOUR HOME INSPECTION
It is important that you select a highly qualified and trustworthy inspector because his report will serve as basis for any repairs or price adjustments that you and the seller decide must be made. Pick your inspector based on the recommendations of your real estate agent or recent home buyers.
Plan on walking though the property with the inspector. A home inspection will take several hours depending on the size of the house.
A good inspector will want you there so that defects can be shown to you first hand. A good inspector can also explain how the different systems in the house can be maintained once you become the new owner.
MAKE YOUR MORTGAGE APPLICATION
If you have been pre-qualified for your mortgage, your loan officer may already have much of the information required for your loan approval. A property appraisal must also be ordered. The appraisal is an evaluation of the property value and is done by an appraiser who visits your property and then searches the record for comparable recent sales in the area.
The following is a list of documents that most lenders will require at loan application:
~Picture Identification such as current driver’s license and proof of social security number
~Copy of fully executed agreement of sale
~Copy of earnest money deposit check
~Check for mortgage appraisal and credit report
~Earnings statements
~Names & address of employers and W-2 forms, recent pay stubs and tax returns for last 2 years or if
self-employed, need Profit and Loss statements for last 2 years
~Verification of Assets:
~List of bank account numbers, address of your bank branch, checking and savings account statements
for the last 2-3 months.
~List of bonds, stocks and other investments and their approximate market values
~Copies of statements for fully paid off motor vehicles
~Verification of debts:
~Credit card bills for last 2-3 months
~Other consumer debt such as car or student loans, with creditor addresses and phone numbers
~Evidence of mortgage and/or rental payments including contact information for the landlord
~Copies of alimony or child support
ORDER TITLE INSURANCE FROM COUNTY ABSTRACT COMPANY !
It is important to order a title commitment once the home inspection contingencies have been satisfied to allow enough time to solve any title problems which the title commitment discloses prior to settlement.
Please refer to the Commonly Asked Questions page of this website for further explanation.
Click here to calculate your Pennsylvania Title Insurance Rates.
ORDER HOME OWNERS INSURANCE
Homeowners insurance provides financial protection against named perils, including fire, smoke, extreme weather and burglary. A standard policy insures both house and its contents. Your policy also covers your liability or legal responsibly for injuries and property damage you or members of your family can cause to other people. Homeowners insurance is required by mortgage lenders and the annual premium must be paid at or before settlement. The claims history of your property may affect its insurability and the annual premium you pay, so it is worth investigating prior to settlement.
ORDER HOME OWNER’S WARRANTY
This type of warranty protects against unexpected repair costs to the structure, mechanical systems and major appliances of a house for a certain time - usually one year. Service calls are made through the warranty company and are subject to a deductible. The warranty is especially useful when purchasing an older home or properties that have been vacant. The seller will often pay for this contract if included in the agreement of sale but it can also be purchased by the buyer. Ask your real estate agent for recommendations.
PREPARE FOR SETTLEMENT
Schedule your settlement date and time with your Real Estate Agent
Settlement will take approximately one hour. Get a preliminary settlement sheet to determine the funds required for settlement. Get a certified check payable to County Abstract Company! Do a final walk through, once the seller has moved out.
Have the Utilities Changed into Your Name
Once you have a mortgage commitment and settlement date notice you can contact the utility companies to have services changed into your name starting on the day of settlement.
Things You Need to Bring to Settlement:
Certified check payable to County Abstract Company
Proper Identification such as a photo driver’s license
Homeowners Insurance Policy dated the day of settlement or earlier with coverage for one full year and coverage for at least the amount of the mortgage.
Any conditions required by your mortgage company
What Happens at Settlement?
The Buyer signs all of the mortgage papers and the Seller signs the deed. The final figures are calculated on the settlement sheet (HUD-1). The Keys to the property are exchanged!
|
