So you're ready to buy a home? Great! Here is a guide to the home buying process.
1. Find out how much you qualify for: There are a lot of mortgage calculators online, but eventually you will need to work with a loan officer to find out how much of a mortgage you qualify for. I always recommend that my buyers choose a loan officer that they feel comfortable with and "speaks their language." You want to choose someone that explains things in a way that makes sense to you and someone that you are comfortable asking any kind of question of—even if it seems trivial or silly. Your real estate agent can probably recommend a couple of loan officers that they trust to be ethical, professional, and most important—dependable and timely!
Most buyers like to "shop" for the best rate. This is a wise thing to do but be careful not to sacrifice service and reliability. The old adage, "If it sounds too good to be true, it probably is," definitely holds true. On more than one occasion, I've seen buyers go with an unknown company that promises great interest rates, only to find that they are paying for the slightly lower interest rate with astronomical settlement fees, or the loan is in jeopardy of not getting approved in time for settlement.
Once you've chosen a loan officer, move forward with the loan application process so that the loan officer can give you a pre-approval letter that you can submit with any offer you make. Most listing agents in Northern Virginia will request this letter when they receive a contract from your agent, but if not, it makes your offer that much stronger--giving the seller a sense of assurance that you can qualify for the mortgage.
2. Choose a knowledgeable Realtor®: Realtors (here is an article on the difference between a Realtor® and a real estate agent) have knowledge and experience because this is what they do every single day. One thing, however, that most buyers and sellers don't realize is that often the time that a Realtor is most needed is after there is a ratified contract.
3. Decide on a search criteria for your new home: Some criteria is easy to decide on—number of bedrooms, number of baths, school district, etc. Some criteria will be partially determined by how much of a mortgage you qualify for—single family home or townhouse, closer in or farther out, etc. Some criteria is not so easy to put into words, and this is where an experienced Realtor comes in handy. Once I have been out with buyers a time or two, I start to form a picture of the qualities they are looking for that you can't search for in a database—modern open feeling or classic character, lots of landscaping or minimal yard work, etc.
4. Put an offer on a home: Your Realtor will show you what similar homes have sold for and help you make an offer on the home that protects your best interests and accommodates any needs you have. Be prepared for the seller to counter your offer. They may counter on the price, the settlement date, the time-frame for contingencies, or all of the above. Your Realtor will be your negotiator and advocate during this process--helping you and the seller agree to terms that are mutually beneficial.
5. You have a ratified contract: Your Realtor will make sure that your loan officer and the settlement company get a copy of the contract so they can move forward with their part of this transaction. The loan officer will order an appraisal and collect any final information from you that they need to complete your loan application.
The settlement company will do a title search to make sure there are no liens on the house that would prevent it from being sold. They will determine what applicable property taxes and HOA/Condo Association fees need to be collected, and have an attorney prepare the necessary legal documents. Your Realtor will coordinate with the settlement company to make sure that all of your closing costs are correct. Again, your Realtor will have settlement companies that they have worked with and can recommend.
6. Get final loan approval: The completed application, along with the appraisal report, will go to an underwriting committee that will review your qualifications—income, debt, credit, assets, etc.—and give final loan approval, assuming you meet the conditions of the mortgage that you are applying for. This should just be a formality because of the up-front work you did with the loan officer before starting your home search. Once the loan is approved by underwriting, the loan instructions, including the amount of funds that need to be collected from you at settlement, are forwarded to the settlement company.
7. Remove contract contingencies: Your Realtor will stay on top of the contingency due dates to make sure they are met. A typical contract will include a Financing Contingency, Appraisal Contingency, Home Inspection Contingency, Radon Contingency, and HOA/Condo Association Disclosure Packet Contingency. Your Realtor will have several home inspectors whose services they can recommend. During this time you'll be setting up utilities, arranging for the move, etc.
8. Settlement: Be prepared to bring a cashier's check made out to the settlement company or have the funds wired to the settlement company ahead of time. You'll also need to bring a photo ID. The buyer has more documents to sign than the seller because of all of the paperwork associated with the mortgage. The settlement agent will explain each document to you before you have to sign it. A typical settlement takes about an hour. After you have signed your last document, you get the keys to your new home! Congratulations!
I blog about real estate and life in Northern Virginia at MargieMac.com.