Alright, so we’ve gone through it all to get to here–The Closing.
1) Go to closing!
If everything went relatively smoothly-you will end up here at the closing table with whomever you’re buying the property with and generally you’re Realtor. If you’re wary of any of the paperwork, and you can afford an attorney to go through and triple-check it–I would do it. I will say, most folks do opt out of this.
Basically, what’s going to go on here is that you and the home’s seller are going to sit down (sometimes at different times) on the date you agreed upon in the contract and ‘sign your life away.’ It’s a giant stack of paper that the title company has put together–it includes the mortgage documents, title paperwork (to make sure there are no other claims against the property), insurance, home warranties—it’s a lot.
You’ll want to bring a certified bank check–this would be for the down payment. If your closing costs weren’t rolled into the loan/mortgage-you’ll want to bring a second bank check for those costs, as well.
For the mortgage, you can get with your mortgage lender and let them know they can wire the major funds to the chosen title company–that way you’re not carrying around a check for hundreds of thousands of dollars and a target on your back 😉
2) Get keys!
After you sign all the paperwork–they will slide you the keys. It is at this point you might get heart palpitations, sweat, bounce in your seat or make inaudible high-pitched squeals. You can totally do that. 🙂
3) Go to your new home, unlock the doors, and run around the entire living square footage.
I’ll tell you what we did, we stopped got a bottle of wine and a loaf of Italian stick bread (a Sicilian tradition when you buy a new house)–went to the house, took silly pictures of us around the house, and then jumped in the pool. No furniture moved in, but we wanted to stay in the new home so badly we broke out a blow-up mattress and a cooler for milk 🙂
And that’s it–I know-it seems like a long road, but once you’re enjoying your home a few months out, smiling coming through the door for what you’re working your butt off for, you’ll find home ownership is SOOOO worth it.
Okay, so we briefly (not not so briefly depending on your definition) went over putting in an offer on a home and the basics of doing so.
So what happens after you go under contract? It happens quickly!
1) Earnest Money to Title Company, Option Fee to the Seller’s
Basically, that check you wrote for the earnest money is given to the chosen title company. If you decided to go with an option period, that check is given to the seller’s to deposit.
Unless the seller of the home DOESN’T have an existing survey that is acceptable for the title company or your chosen lender, either yourself OR the seller will be required to order a survey This would be stated in the original contract. Surveys can run $400-500. Not terrible, but let’s hope the seller held onto theirs–a good listing/seller’s agent would have this uploaded with this house listing when first putting the home up on the market.
3) Home inspection!
Your Realtor should recommend a home inspection and you’ll want to get this done in an option period if you’ve chosen to do the option–THAT WAY if something horrific comes up in the inspection (ex: foundation is shot, leaks will cause a second floor to cave in, etc.) You can back out for just your option fee–earnest money returned to you. My recommendation is to get it done early enough in your option period so you ample time to discuss the problems in the inspection report with your Realtor and see which repairs, if any, you want the seller to fix prior to closing.
I also recommend that you attend the inspection–not everyone does, but the inspector can give you a brief overview of what he finds that day so you know what to expect.
3B) Termite inspection
This will run you about $75-100, but again-CYA (cover your ass) here. AND your lender is going to require it, but better to know if there is any evidence of termites now then do have something terrible happen later–knowing that you could have avoided huge costs for $75-100…you might kick your own ass.
It is at this point you have more options as a buyer.
a)There are repairs you don’t want to deal with in any scenario-if you paid an option fee you can forfeit that option fee and walk away.
b)Still within an option period here you can get with your Realtor and decide what repairs you’d like to negotiate on. As long as you negotiate within the option period, you can still back out for just your option fee, if you need to.
c) You didn’t pay an option fee-or time ran out on the option? As long as you specified that you would want to the seller’s to pay a given amount towards repairs-they would need to do that said amount of repairs. You should receive receipts on such repairs, and if you want, get your original inspector out to the house to re-inspect. Usually, this cost is far lower then the original inspection.
d) For whatever your reason, you didn’t want to do an option fee and you didn’t ask for any seller repairs in the offer–No matter the inspection, no matter what repairs you may need, you will still be under contract to buy the home. You aren’t totally lost yet–check out this list of what you can do in this situation.
e) In Texas, a lender can require repairs on the home. If the repairs are in excess of 5% of the purchase price-you have the ability to back out of the contract without penalty–Option period or not.
Okay, done the repairs/negotiating repairs/ect–You still want your house! Excellent. Let get back on track with:
Your lender is going to order an appraisal on the home you’ve chosen to make sure that the house is worth what you’ve negotiated to pay for it. Thanks, lender! They are covering you, but just as well, themselves–they don’t want to lend you $200,000 on a home that’s only worth/appraised for $160,000. Makes rational sense, right? In most cases, the listing agent did the legwork to make sure the seller was listing the home at a price that it would likely appraise for. However, it DOES happen that the appraisal comes back lower then what the house is listed for. In this case, the seller can drop their price to meet the appraisal and have the sale of the home go through–OR you can walk away-another out here–which, honestly would really stink. But here’s the reality:
Listed Price: $200,000
Appraised value: $160,000–lender will only lend 90% of THIS value in a modern day 90:10 conventional mortgage ratio. Meaning you are bringing 10% down to the table–in this case $16k. Which, to come full circle, would mean your lender MAX would lend you $144k. Do you have that extra $40,000 stashed somewhere for a rainy day? Most folks don’t.
But, let’s say all in hunky dorey-we move to:
5) Confirm mortgage terms/rate
At this point, you should know what type of loan you’re getting (conventional/VA/FHA) and get a solid idea as to what your rate is. It’s at this point it’s just piece of mind to confirm all these details so you don’t crap your pants from a surprise at closing.
You should find and select an agent for your property insurance. I found, when I was buying our home that we already had used GEICO for our car insurance, and when renting used their affiliate for rental insurance. So, to me, it made sense to check with GEICO again for property insurance. They just happen to be affiliated with Liberty Mutual-and the agent I spoke to was excellent. I filled out an application online, she called me back to clarify a few home details, and that was about the long and short of it. Generally, your chosen property insurance company will get with the title company and lender to get the policy in place. Most folks opt to have the lender pay the property insurance bill-and what happens there is that the property insurance is tacked onto the mortgage. It adds a little to your monthly payments every month you don’t have to worry about a separate bill. Although, if you’re into paying it as a separate bill every month–you can let the property/home insurance and your lender know that’s what you prefer to do.
OKAY, NEXT–It’s the last part of the home buying experience and what we all look forward to–CLOSING!!
Til Part V-CLOSING CEREMONIES!
So, we’re covered the prep-work, and you’ve done the hunting with an awesome Realtor–You’ve found THE house. It’s got 90% of ‘your list’, you’ve seen it at different times in the day, it’s in your price range, the taxes are reasonable–now what?
1)Let your Realtor know you’re ready to make an offer-and have them get you a CMA(Comparative Market Analysis)
Don’t just throw out a number-get with your Realtor and have them run a CMA for you (a good one will do it if they know you’re ready to submit an offer anyways). Go over the “Comps” with your Realtor–see if the listing price seems right in comparison to similarly sized homes (Beds, Baths, Sq, Amenities, Ect) in the area that are on the market, pending, or sold recently. You’ll have to take into consideration the location of the home relative to the “Comps” (is it closer to the highway then the others?) and the condition of the home, as well.
Think of it as CYA (Cover Your Ass) research. You wouldn’t go to the store needing a fridge and just point to one that looked good and said-“I’ll take it–FULL PRICE-DONE!” right? You’d look at reviews online, check out the different features in comparison to other brands, and the prices at different stores. Same concept-bigger purchase–go in educated!
2)Come up with reasonable offer with your Realtor, draw it up
After looking at all your “comps” and deciding what you’d like to offer the home’s seller-have you’re Realtor draw up the offer. The offer can be as simple as what folks call a “Clean Offer”–Asking for nothing more than the house and what is built into it. Or, you can ask for items in the home. Lots of people will ask for the fridge, but you can ask for that awesome 60″ HD TV, or the sectional that worked perfectly in the game room. They don’t have to say ‘yes’, but you can ask for them 🙂
It’s at this point, too, that you can add contingencies (‘I will buy your house if this happens’) to your offer.
For example-let’s say you need to sell your home before you can actually buy this new home. Lots of times this happens when YOUR home you’re selling is “under contract/contract pending” waiting to close so you can get your funds. Or, if you’re like most folks and need to secure financing (a mortgage) to buy the home-this is when you would let the seller’s know. Another contingency is that the home would have to have an inspection by a home inspector of the buyer’s choosing in X number of days. There are forms from the Texas Real Estate Commission for all sorts of contingencies, these are a few examples tend to be the ones we see the most of.
It’s snowballin’ right along here…
A written offer is good. A written offer with earnest money is excellent. Earnest money is generally a check or money order you submit along with the written offer as a show of “good faith.” This money end up going toward your down payment if the buyer accepts your offer and you go under contract. How much depends–usually a small percentage of the purchase price. If the contract falls through for some reason other then you-the buyer-defaulting on the contract–generally the earnest money comes back to you.
4) Option Fee?
This one is up to you-but in the most basic way of explaining-you would pay an option fee for a given amount of time (5-14 days, it depends) with which you could back out of the contract at any time. You don’t get this fee back-but some people think of it like an super short-term insurance policy.
5) Submit your offer, and wait!
Have your Realtor submit the offer–from there, you wait. That what this step is all about. Sometimes seller’s and their agents are super quick to turnaround and address your offer, other times-given circumstances-it can take longer–in instances where a seller may no longer be living in the home, be out of state, if the seller is a separated couple–you get the picture.
6) Counter offer, Decline, Acceptance?
No, these aren’t the psychological steps to homeownership…One of these is what you will most likely hear from your Realtor about your offer.
a)Decline the offer: The seller’s didn’t like your offer, and didn’t wish to give you a counter offer. A lot of times this comes hand-in-hand with “low-balling”(making a much lower offer on a house then reasonable-a good Realtor will steer you away from such practices).
b)Counter offer: The seller’s did accept your offer, but in return send a counter offer. The ball is now in your court, as they say.
What you have to remember here is that your first offer no longer exists. If you offer $200k on a home that was listed at $220k, and they counter at $210k, you counter back with $190k, and the seller freaks out and goes, “No, no–We’ll take $200k!” Too late–the offer on the table is simply the $190k, everything else is void.
Sometimes counter offers go back forth a number of times–especially when personal property (the goodies that DON’T come with the house-fridge, TVs, sectional) is being thrown in the offers.
c) Acceptance: The seller’s accepted the offer.
You’re going under contract, baby! I’ll pause here–you go ahead:
That was a long one-Part IV will cover what “Going under Contract” means-and what you as the buyer need to do!
This upcoming weekend should be great–who wants to go look at some homes?! 🙂
Good morning, ya’ll! A gorgeous beginning to the day here in Austin area 🙂 AND it’s a Friday–yay!
I hope everyone found Part I of the “How the Heck Do I Buy A House?” Series helpful. It’s a lot of information-and seems like A LOT to do in preparation, but trust me, it will save you endless headaches in the end. When it becomes crunch time in a closing of a home-and you’re a week out from being a homeowner and an W-2 from a former employer two years ago becomes a hang-up, you’ll be glad you have it on hand. Been there-done that 🙂
So, the second part of the series I want to talk about shopping for a home. It sounds pretty straightforward, right? Especially now since you’ve got your pre-approval letter in hand, RIGHT? RIGHT?! 😉
Without further ado, PART II:
1) Interview a few Realtors and get a Buyer’s Representation Agreement in place
Try a few on for size–see who you feel comfortable with, and who you might feel comfortable calling/texting/emailing in a panic during closing with questions. Myself, I keep my phone on at all times 🙂 It dings away–and I’m happy to talk my clients down from the proverbial edge and address their concerns. You want a Realtor who is knowledgeable (goes without saying, right?), listens (not just HEARS-there’s a difference), confident, open, and someone who isn’t going to just “fluff your feathers” sort-to-speak at every house you see (“Oh, this is the most BEAUTIFUL house. LOOK at that yard, yada yada).
At the top of my website here, you’ll see the Information about Brokerage Services Form–Make sure you read this. Every single Realtor/Real Estate Agent in Texas should be handing you this upon conversing about specific properties. It gives the duties of what a Buyer’s Agent (and Seller’s Agent-but we are talking buying here) can do and what you can expect when signing the Buyer’s Representation Agreement. Which leads me to….
The other thing to do is to make sure you’ve got a Buyer’s Representation Agreement signed with your chosen Realtor. This establishes the fiduciary relationship–meaning, full commitment to you as a their client.
Yay-a chart that explains what being a client (signing a Buyer’s Rep Agreement) means VS. being a customer in the Real Estate world.
2) Get together with your Realtor/Agent and make THE LIST
What I mean here, what are your “Must Haves”, “Nice to Haves”, and “Deal Breakers”?
How many bedrooms do you absolutely need to have to consider the house? How many bathrooms will you need so that the kids aren’t knocking each other or YOU over trying to get ready? Do you want move-in ready? A fixer-upper to add your own touch? Would it be nice if it already had granite counters in the kitchen and hardwood floors throughout? If a big yard with lots of grass to mow causes you to deflate-you’ll want to list that under ‘deal-breakers.’
Those are just a few of the things you’ll want to think about for your list of things you need/want/cannot have in your home. If you already have list, awesome–it’s nice to go over it with your Realtor and will help you gain some perspective on certain items on the list that can be changed to make your house hunt a little easier.
It’s important to keep in mind that you probably will NOT find a home with 100% of everything you want on your list–and comprising on smaller issues may be key. Remember, things like wall colors and outdated light fixtures can be changed fairly easily. If you are able to see past the smaller issues to hit all the ‘Must Haves’ on your list-you’ll be golden.
3) Check the Seller’s Disclosures and HOA regulations, if any
If you’ve begun to fall for a home-make sure you get your Seller’s Disclosure. This is a report by the home’s current owners’ , filled out to their current knowledge. It will let you know if they are aware of any roof leaks, plumbing issues, lead paint, roof type, wood rot, electrical issues, ect. ect.
For a great, thorough example of a Seller’s Disclosure Form–check out The Austin Board of Realtors’ version.
Also, if the home you’re crushing on is in an HOA (Home Owner’s Association), a great thing to do would be to check out their rules/regulations/restrictions. Some HOAs require dues, others require prior notice before making any change to the exterior of your home (doors, paint, landscaping), others don’t allow certain dog breeds and others restrict the amount of cars that can be in a driveway for a given amount of days.
HOAs can sound like a pain, but in the right community-they can be great. They can keep the community landscaped, may have security features, and can offer events for folks in the community to come together and meet–Ex: Neighborhood garage sales (love those), Movie nights in the community park, ect.
Okay, okay-Krissy, we are in love with a house-we can afford it, it meets 90% of “The List”, and the Seller’s Disclosure didn’t have us running for the hills flailing our arms…NOW WHAT?!
At this point, it’s time to make an offer, baby! Which is what we’ll discuss is Part III of the series 🙂 We’ll cover making an offer, the different outcomes of offers, and what happens after going “under contract.”
Have an excellent weekend, folks 🙂
I remember when my husband and I decided to finally buy a house. It was the second our best friend bought a gorgeous four-bedroom home in a beautiful neighborhood and school rankings that made your jaw drop(even without kids at the time!).
The thing is, I had no idea where to start. Fast-forward 6 months later, and we too, were our own amazing 4BR, 2.5BA house WITH A POOL, no less! Okay so, Krissy, you ask-how do you pull that off?
Well, my friends, this is why I’ve decided to write up a series call, as you may have already guessed:
“How The Heck Do I Buy A House? PART I-Prepare”
The check list I’ve put together seems daunting, but I promise you, I’ll break it down piece by piece so it doesn’t seem so scary that you’ll throw your hands up and pay rent forever. The best thing you can do for yourself is to get prepared. Houses in the Austin area market are moving ridiculously fast lately-so you want to be sure that when you’ve found YOUR home, your ready to move on it (aka put an offer in) ASAP. A real world example: my in-laws were looking at homes in Round Rock and Georgetown-and fell in love with a number of houses-even WITH being financially prepared-they were still missing out on houses after listing were out for less than a week!
1) Check your credit, know your score and where you stand.
Everyone is entitled to a free credit report every year at www.annualcreditreport.com These reports cover the BIG 3 credit companies, however will not give you an exact score. If there are dings on your credit-they should show up here, regardless. For a hard number FICO score, I’ve found that Credit Karma doesn’t require a lot of hassle or a credit card to sign up-Nice. (Note: I don’t receive anything from Credit Karma for this-I just have personally used it and found it helpful).
Credit card balances, students loans, car loans, other mortgages you may have will be listed on a credit report, and whether they are in good status, delinquent, in collections, or charge-offs. If you are unsure of the validity of anything on your report, you can contact the agency associated with the account to find out what the deal is, and dispute it.
The point here-try to get your report looking as good as it can. Pay down some credit cards, and make sure accounts are listed accurately. Once you do have it in order, DON’T OPEN ANY NEW ACCOUNTS OR TAKE OUT ANY LOANS UNTIL AFTER CLOSING. I can’t stress that enough. We’ll get more into this later-but during closing your credit is checked-often times more the once, and more certainly before closing. If you roll up in your new convertible to take up space in that new spacious garage prior to your closing, don’t be surprised if you can’t close. No matter how big or small–just don’t flippin’ do it!
2) Determine how much you might need for a down-payment and save, save, save.
It’s hard to know EXACTLY what you’ll get pre-approved for–but try one of the million mortgage or affordability calculators on the web. It won’t be exact-but you’ll get a ball park estimate. So, let’s say your looking to save for a home that will cost about $200,000.
Now, everyone and their grandmother is going to tell you you’ll need 20% down on a home–and it’s NOT a terrible idea. It’ll make the amount of money you need to finance lower, and it looks far better to any lender when weighing risk. However, nowadays the 20% down is not the end all, be all. There are now FHA (Federal Housing Administration) insured loans that only require 3.5-5% down payments. On a $200,000 priced home, that’s about $7k-10k for a down payment. Still a lot of dough-but something a lot of first-time home buyers are more likely to save. VA (Veteran’s Administration) guaranteed loans are also out there for our veteran’s and their families-sometimes even for 0% down. Seriously–but I can’t recommend the mindset that you’ll need nothing down-it’s just not common sense.
Point here-Save. My husband and I were saving a little bit when we were renting, but once we were motivated by our friend’s home and a few open houses–we saved everything we could and racked up over $10k in a few short months. It can be done!
3) Get all your financial paperwork organized and ready, early.
Okay, get this done now, because when it comes to pre-qualification and the much lengthier process of closing-you’re going to need a lot of your financial paperwork from about the past two years.
-W-2s or 1099 Tax statements from the past 2 years —You know that document you get so you can file your taxes every year? Those. If you didn’t keep them, contact your current or former employer–They can get you a copy-in my experience through snail mail…so again, get this done ahead of time.
-Federal Tax Returns from the past 2 years–That stack of paper you get back from your CPA/H&R Block/Person you know that does taxes every year. Again, you can always request a copy of these from those folks if you don’t have them already. I almost always use TurboTax–and luckily, as long as you can remember your log-on from year to year, you can sign on and just download those puppies. Beautiful!
-Bank Statements from the past few months-year–Usually, if you’ve got your bank accounts set up online-you can go through and print the monthly statements straight from there. If you have any problem, you can always go to your nearest branch and ask an associate to mass print these for you.
-Payroll/Check Stubs for the past few months–Again, some bigger companies have online access to payroll summaries-which is great. If not, contact HR and they can get you hooked up.
-Proof of any other income–This can range from investment income, if you’ve been taking money from your 401k, ect.
-Student Loan documents-This is something a lot of people don’t mention, but if you’ve got student loans-having documents about these loans, how much, their interest rates-whether or not you’ve consolidated is super important. This is where our mortgage kept getting hung up and I had to keep producing more and more proof of the loans and that I could indeed pay them based on our income. This is one I wish someone would have mentioned to me ahead of time, because the stress behind trying to get these documents in the weeks preceding closing was ridiculous. I think it’s safe to say I cried a few times thinking we’d lose the house over my loans.
4) Get pre-approved for a loan
Getting pre-approved is pretty simple, generally. You can do it online or over the phone, usually in one sitting. Keep in mind, though, it’s not a guaranteed loan. Your credit will be held until a much closer microscope once you’re under contract for a home. For now though, you’ll get a better idea of what you can afford and what you should be looking at when you’re going out with your Realtor. Having this pre-approval will allow you to make an offer on a home, as well. It’s important to keep in mind that pre-approvals are typically good for 90 days.
Some solid places to check out for pre-approval:
Coldwell Banker Mortgage I know, I know–I am biased here-but honestly, these are the folks I used for my own mortgage before I was a Realtor-and they were so quick about everything. Lots of personalized service when we ended up picking them as our mortgage company in closing. Can’t say enough good things there.
USAA If you’re a vet–check out USAA for pre-approval. Our best friends and my in-laws used them and found them helpful for their pre-approvals and mortgages.
University Federal Credit Union-A local credit union who I’ve had a lot of great luck with–again, lots of personal service here. Lot of Austin locations.
Alright, folks-that’s a lot of information for one night–so be like the sponge and soak it in 😉 Questions, leave it below or give me a shout at firstname.lastname@example.org