Home Buying 101

Real estate is usually the largest purchase people make in a lifetime.  It's no wonder that psychologists rank buying real estate high on the list of stress-producing events.  But with the right guidance and advice and increased understanding on the many subject matters pertaining to real estate, the more patient you will be  because you will identify what your own specific objectives are faster.  This will make the whole real estate buying process relatively easier. 

People buy real estate for many different reasons whether for personal or professional use.  The steps and strategies that they should follow will vary accordingly to whether you’re a first-time buyer, upgrading, or downsizing.  Buying real estate will be typically one of the biggest investments you will make in your lifetime, so you want to be sure you do all your homework before diving into a deal. 

Acquiring real estate can be a complex procedure with many important, physical, financial, and legal details that required close analysis and understanding in order to achieve the greatest value for your investment.  It is important to be familiar with the process of buying real estate, as well as how your specific needs may fit into your search for the optimal piece of property.

Step 1: Finding a Realtor

Why enlist the services of a Realtor?  These professionals are trained to help you with your search and have insider access to real estate listings within your price range.  More importantly, they are intimately familiar with the whole real estate buying process and can advise you through the various steps.     

Finding the right Realtor can make the buying real estate easier than you thought!! At Active Real Estate, Inc, we are devoted to providing our customers with professional service.

Step 2: Credit Check

There is no point in buying real estate if you don’t have the capital now, or in the foreseeable future.  That is why the first errand you should run is to check your credit.  This is important because you’re not likely to pay for the piece of property in cash money.  The vast majority of homeowners purchase their home with some type of home loan or mortgage.  The kind of home loan or mortgage you get is heavily dependent on your credit history since all prospective lenders will have a look at your credit report before offering you any home loans or mortgages. 

Your entire credit history will calculate to an overall credit score, which ranges from 340 to 820, with 340 being the worst and 820 being the best score.  Where you are on the spectrum will determine what kinds of offers you’ll get.  If you have poor credit standing, you should expect few or less-than-stellar home loans or mortgage offers.  Conversely, if you have excellent credit standing, you will receive very good offers.  Be sure to get a copy of your credit report and check it out before they do.  You want to scan for errors and report them if they are evident - you’d be surprised at how common mistakes are.

You can obtain a free copy of your credit report on line by visiting www.annualcreditreport.com.  For an additional fee, you can obtain your credit scores.

Step 3: Get your Mortgage Pre-Approved

Many people often bypass this step and opt to go search out real estate before getting a mortgage pre-approved.  This is perfectly fine for the buyer who is just scouting out the real estate market, but if you’re seriously interested in buying relatively soon, then we can’t emphasize how important getting your mortgage pre-approved is.  Imagine that you’re selling a home and you receive two offers.  One person quotes you a lovely number.  The other person quotes you a similar number and hands you a piece of paper from a lender, guaranteeing that this person actually has access to the money he or she is promising.  Who will you sell your house to?  Chances are, you’ll trust the written word over the spoken word.  You’d be surprise how often this occurs particularly in competitive real estate markets.  That’s why it’s important to get pre-approved for a mortgage.

We recommend that you investigate potential lenders after you have your credit checked.  The lender (banks, brokers, wholesale lenders) can check out your credit history, and give you an official letter stating how much of a mortgage you qualify for.  Having this number in writing will make you more attractive to sellers since it shows that you’re serious.  Also, this is a necessary procedure, so why not find out how much of a loan or mortgage you qualify for, which will undoubtedly influence the type of real estate you can afford. 

Step 4: Identify What You’re Looking For

You already have some idea of what kind of real estate you’re interested in, but it is often a very useful and enlightening exercise to actually list down on paper what you actually want in your property.  Real estate experts suggest breaking down your list into: (1) “Must-have features” – this may include the size of property you want, number of rooms, location, etc.  Be as broad as possible – the point is to identify what must be on that property in order for you to be interested.  (2) “Absolutely Not” – this is the opposite of your “must-have features”, and represents features that you will not tolerate. 

Knowing what you want and what you don’t want can greatly narrow down your search when the time comes to actually go out and hunt out some real estate.  Think about the property’s desirable features, and weigh it against its undesirable features.  Another important consideration is resale potential, especially if you are buying real estate strictly for investment purposes.

Step 5: The Hunt Is On!

This is usually the most exciting time – when you actually get to go out on your quest for the property you desire.  Maybe you’re determined to live in a particular neighborhood; maybe you’re looking for a particular type of home, and are flexible about the location as long as it has all the features you want.  In any case, the best source to find leads about the property you want include the Multiple Listing Service (MLS), Internet sites, and newspaper classifieds.  Another way that has been extremely fruitful to many people is to go out and explore neighborhoods, and be on the lookout for any For Sale signs.   

A Realtor can show you all the listing belonging not only to them, but the listings of other Realtors as well!!  Think about it as “One-stop-shopping”!! 

Step 6: Making An Offer

After viewing many properties, you have hopefully found something that you would like to consider more seriously.  Before you make an offer, be sure to be critical of the property – its structure, features, contract contingency basis, deed restrictions, how much renovations may be needed – everything!  The input of your Realtor is paramount here, as they possess the know-how and experience to properly advise you with your best interests in mind.  When you both feel that this is the piece of real estate you want to pursue, then you can make an offer.

Making an offer involves a lot of strategy.  You don’t want to turn of the seller by low-balling him, and at the same time you don’t want to pay too much for the property.  Your Realtor should be involved in brokering the offer, as they can advise you on a realistic offer that maximizes your chances of buying that property.  The seller will most likely have their own Realtor, and they will want to maximize the sale price.  So don’t get into any negotiations with that Realtor without the presence of your own Realtor. 

Step 7: Real Estate Inspection

This step pertains mainly to houses, townhouses, condominiums, and cottages.  In some states, real estate inspections are accomplished before the final purchase contract is signed.  In other states, inspections take place after an offer is finalized.  No matter when you do them, this is a critical step to more comprehensively know what status your property is in.

You’ve made the offer or the offer has been accepted, now you must confer with your Realtor or other advisors to find out when inspections should be handled and if additional types of testing are important for your specific area.  It is usually the buyer’s responsibility to conduct this home inspection, and to carry out and fund any possible work orders that result from a less than satisfactory inspection.  You should not close the deal until all home inspection has been completed. 

Every home inspection should include a checkup of the following:

• Foundations
• Roof
• Heating and air conditioning systems
• Ventilation
• Common areas (for condominiums)
• Septic tanks, wells or sewer lines*
• Insulation
• Plumbing and electrical systems
• Ceiling, walls and floors
• Doors
• Hazardous materials concerns

Step 8: Closing the Deal

Once you and the seller have agreed to the deal, then there will be plenty of administrative tasks (paperwork) to be done in order to finalize the deal.  Although this may be tedious, you should be very detailed-oriented in this task to avoid any mistakes that could prolong the process.  It is absolutely important not to irritate your lenders, they hold amazing sway at this time since you are dependant on them to operate in an expedient manner.  DO NOT affect your mortgage qualification by making any other major purposes and don’t switch jobs.  This is just added hassle that will prolong the process.  Also be sure to obtain hazard insurance, and switch utility providers, and don’t forget to cancel any services in your name at your old home!