The Home Buying Process
Everything in today’s world seems more complicated than it was when your grandparents bought their first home. Because it is complicated there are several things we advise homebuyers to be aware of when they begin the “home buying process.” Most people do not wait until they have saved enough cash to buy the home they want. If cash is available then the financing of the home may not be needed. There are reasons why an individual who has cash may not want to pay the entire purchase price in cash. There are certain income tax advantages and options available to homeowners who finance the purchase. These are given as an income tax incentive for people to buy homes. Also many owners want to keep cash available for emergencies and other investments.
When one thinks of financing a home there are many options. I will mention only a few of them. The type of financing that best fits you will depend on many factors. The seller may finance the purchase for you. That is called seller or owner financing. Today most sellers want their full equity out of the home so that they can purchase another property, use the funds for other investments or to settle or pay debts. Your banker may have a finance program. Banks are normally used for short-term money unless the bank has a long term mortgage program. Banks also have higher short-term interest rate requirements that may not be to your advantage. Credit Unions may be a source of funds also. Again they normally offer short-term programs that may not allow you to borrow the amount of money you may be able to borrow on long-term mortgage programs. Some credit unions have long term money available also. Also the yield requirements of a credit union may not allow you to borrow at a competitive rate when compared to long term mortgage lenders. In ALL financing programs the borrower needs to consider the cost of borrowing the funds over and above the interest rate on the note itself. In most cases, homebuyers will use one the following programs to purchase their home: long term conventional loans, FHA loans, and VA loans. Each has different down payment requirements, closing cost, and eligibility criteria. A conventional loan is a generic term for a long term, non FHA or VA mortgage.
After you have decided on the type of loan you wish to apply, then you will want to get pre-approved or pre-qualified by the lender for the maximum amount of money you will be qualified to borrow. Of course, you don’t have to borrow the maximum amount. The prequalification amount will give you a guide on the price range of home at which you will want to see and consider. The lender will also give you a good faith estimate of the cash you will need for down payment, closing cost, and prepaid items (taxes, insurance, etc.) under the program you may want to use for your home purchase. The total of the loan amount for which you will qualify, your funds available for down payment and funds available for closing cost and pre-paid items will determine the upper price range of your home.
$$$$$$$$$$$$$$$$$$
HOME-CONTRACT-INSPECTIONS-EARNEST MONEY
Now that you have a price range we can start the home search process. The Texas REALTOR will explain the “agency disclosure” to you and you will make a choice of which agency relationship you and your agent will have. The Realtor you choose to work with will research the market place for homes that fit your needs. These needs will include the size of the home, number of bedrooms and baths, location, schools, price, neighborhood, etc. You can assist your agent by searching homes through the internet and driving neighborhoods you like. Appointments will be made to view the homes to find the one that fits you the best. You will want to go back and view those homes a second or third time that interest you. It is very hard to see everything on one visit to a home. Also it is a good idea to create a system to keep track of the pro and cons of each of the homes. After viewing homes that you and your agent have selected, you then make a decision which home you want to attempt to purchase.
The REALTOR will prepare an offer for you to sign and earnest money may be put up with the offer to show your interest in the property. An option fee for a specific time period may be paid by the buyer to allow him to withdraw from the contract without any liability for any reason. The option fee paid gives you this right if accepted by the seller in the offer. The earnest money will not be deposited if you are not able to reach an agreement with the seller or if one of the terms of the contract is met or not met that allow the return to you. The earnest money is optional on a contract but it is normally required by the seller. If you just decide not buy the home and nothing in the contract allows this decision then you could loose the earnest money. You will want to have a home inspection by a licensed inspector as one of your contract contingencies on the home you select to make an offer. The home inspection helps a buyer to determine the condition of the improvements and potential future maintenance cost. There are many legal stipulations in the contract that are binding on the buyers and sellers. Buyers and sellers may want to consult with an attorney. The earnest money you put up on the contract will be applied to your cost at the time of closing.
It is a good idea to get a blank sales contract when you start looking at homes to make sure you have ample time to review all details of a contract. All Texas licensed agents are required to use contract forms and addendums from the Texas Real Estate Commission. Agents are not allowed to draft their own forms unless the agent is an attorney. The Texas Association of Realtors also has recommended forms for its member’s use that include the TREC wording. Three things can happen when you make an offer on a property at some terms other than at the asking price and terms from the seller. The seller can reject your offer, the seller can accept your offer, or the seller can counter your offer. Any action by the seller other than acceptance is a rejection of your offer. If the seller counters your offer you then have the option of accepting the counter, rejecting the counter, or countering the counter. Either party may withdraw from negotiations without any liability at any time prior to all parties having signed a final agreement. All terms are to be in writing and signed by both buyer and seller.
LOAN APPLICATION-INSPECTIONS-CLOSING-POSSESSION
Now that you have an agreement with the seller, what is next? In most contracts there are property inspections that need to be performed and time frames met on this and other issues. The formal application with your lender will need to begin immediately after the contract is signed. Many other tasks must be completed before posesion of the property and your Century 21 REALTOR will help you understand andguide with the entire home buying process. Best advise- " Do not buy a home on your own, ask a Century 21 REALTOR for assistance to avoid any costly mistakes."
