First Time Homebuyers Guide

Purchasing your first home can be a stressful process. Yes, it’s one of the largest purchases you may ever make in your life. However, I want to make this process easier for you. I’d even like to make it enjoyable and exciting, as it should be. Whether you decide to use me as your agent or not, I would like to be a resource you can turn to, to find answers to some of the tough questions.

A loan application will include a credit check, two years of proof of income (either pay stubs or profit and loss statement), bank statements, documentation of gift money (if applicable), identification, and verification of other financial assets. Some other requirements that may be relevant to you are proof of currently owned property, divorce documentation, and disclosure of bankruptcy or foreclosure. Once approved, do your best to maintain your credit score. New lines of credit, debts, large purchases, or changes to current lines of credit can seriously hurt your ability to finalize your loan later. You can check your credit score for free here.

Choosing a Realtor

Upon your first meeting, realtors will request you sign a buyer agency agreement. This document informs you of your client-buyer relationship, assuring commitment from your agent. Note that you can cancel any time and comes with an expiration date. You’re free to cancel with notice if you’re not under contract.

After selecting me as your realtor, I will save your preferences to give you real-time updates when properties you may like come on the market or drop in price. If you prefer, I’ll set you up with automatic emails of homes that meet your criteria. Since I have access to the realtors’ private database, you’ll also receive “coming soon” alerts before public websites are updated. Tell me what homes you’d like to see, and I will set up the appointments to show you. It’s better for your buyers’ agent to show you a house instead of the seller’s agent because they are vested in the seller’s interest.

Submitting an Offer

Next, it’s time to submit an offer! Once you’re ready, my job is to advise you on the best strategy for your offer. The first thing to consider is the presence of other offers. Now, the sellers’ agents cannot disclose specific information about other offers. Yet, they can let us know if others exist and how many there are if the seller allows it. The next consideration is the state of the market. Sometimes the market prefers sellers and other times it prefers buyers. Do some research on the current real estate market before deciding on your offer. Thirdly, think about how long this property has been on the market. I will inform you how many days the property has been on the market through the realtors’ database. If the house has been sitting stale on the market for weeks or months, you have more room for negotiation.

Next, consider requesting closing costs assistance. So long as the market isn’t overly competitive, it’s quite standard for sellers to help cover your closing costs (up to 3%). I’ll walk you through your contract from beginning to end so you understand fully. We’ll consider what other terms are fitting for you. Don’t worry, the seller can always submit a counter-proposal. Most contracts have contingencies that enable the buyer or seller to get out of the contract. Commonly, buyers include contingencies such as loan approval, inspection, and appraisal. I’ll go into more detail when we get further through this process. For now, remember that the fewer contingencies in your offer, the more competitive it will be. Lastly, you’ll select a closing date. Closing usually occurs anywhere from three weeks to 60 days. With cash, it could happen sooner. Contrarily, the closing may be pushed back using an addendum all agree to.

Contract Contingencies

Ratification

If your contract is approved the sellers will sign it and send over a copy. At once, you must write the earnest money deposit check that was outlined in your contract. An escrow company holds onto that EMD to show good faith, that you are a serious buyer. Then, if you decide to drop out of the contract without reason the seller can keep that check. Otherwise, you could walk away with your deposit if, say, both parties cannot come to an agreement after something is found to be wrong with the home inspection. Assuming that everything goes right, your EMD can go towards your closing costs or down-payment.

Promptly, your loan officer begins to finalize your mortgage loan. As required to process the loan, they’ll charge a loan origination fee of about .5%-1% of the total loan. The whole process may take about a week. Until your loan is wholly approved, tat financial contingency is still hanging over the contract. Granted everything goes smoothly, the loan officer will provide a Closing Disclosure with all your loan terms. This must be presented to the buyer at least three days prior to settlement. Keep in mind that you can get to keep your EMD if you cannot attain financing.

Title Work

The primary job of the Title Company is to verify the seller’s rights to the property. A title documents the legal ownership of property. They may uncover property liens through this examination. Basically, liens are legal claims to a property that can be granted in court to cover unpaid debts. When the property is sold, a certain amount of proceeds must go to the creditor. Supposing the title company doesn’t find major issues, they assist the seller in transferring the title of the property over to you. Lastly, they’re typically responsible for hosting settlements. Often, they’ll manage the escrow account and mediate closing.

Title insurance is optional protection you may choose to purchase as the buyer. Essentially, this insurance means the title company must back the guarantee that you have free and clear rights to this property in case anyone files a future claim. I recommend this to my clients because it’s better to pay a thousand dollars upfront than to risk more liability later on. In total, this process presents another chance to get out of the contract if anything comes up within this usually 2-3 week period.

Survey

After your contract is approved, your clock starts ticking to get everything done by the closing date. As your realtor, I’ll help coordinate everything we need to complete and keep you updated on the next steps. I know it’s a lot to keep track of. One of the first things you’ll need to schedule is a property survey. Surveys map property boundaries, septic systems, and other underground improvements. Oftentimes, the title company is responsible for executing the survey.

They’re also meant to identify any easements or encroachments. An easement is a legal grant for someone else to use your property for a specific purpose. Commonly, an easement can be from a utility company to access electric infrastructure on your property. Contrarily, an encroachment is an illegal intrusion of a neighbor’s property onto yours. Some examples of encroachments are sheds, plants, and fences.

Overall, an average survey may cost $500-$600 or more. The results go from you, straight to the lender and title company. Lenders demand a survey to complete your mortgage loan. The title company may also use this documentation in their insurance policy or paperwork.

HOA and Condo Disclosures

Some houses are in communities with Home Owner’s Association regulations. An HOA or Condo Association is an elected organization within a neighborhood, condo, or subdivision that enforces certain rules in exchange for maintaining common areas. People have mixed feelings about HOAs because of their inherent advantages and downsides. On the positive side, homeowners have the security of uniformity knowing that neighbors cannot erect eyesores. Rules are in place to prevent overgrown yards, clutter, litter, unpermitted accessory structures, eccentric paint colors, and other eyesores. Also, these communities tend to offer allotted parking, some amount of lawn maintenance, trash services, and public amenities. On the negative side, people worry that there is a certain amount of freedom taken away and that they have to pay fees to these organizations.

It’s the seller’s duty to make all HOA documentation available to the buyer. These documents include disclosures of any current violations the property may have. Sellers are required to fix any violations before closing. After receiving these papers, the buyer has five days to cancel the contract and get their earnest money deposit back. Condo disclosures are similar except you have seven days after receiving condo documents to cancel the contract. 

contingency period that was specified in the contract. At this point, it is possible for either party to exit the contract. You, as the buyer, may change your mind because of something revealed through the inspection. Likewise, the seller may decide they will not accommodate requests made. In these cases, you would get your EMD back so long as negotiations are made within the agreed time.

Appraisal

Finally, the last hurdle to overcome in the contract is through the appraisal. An appraisal is an assessment of the property’s value made by a licensed expert based on comparable sales, square footage, bedroom count, bathroom, count, and so on. Moreover, the buyer can end the agreement if the property appraises for less than the contract price. That’s due to the fact that lenders can only provide financing for the appraised value. Sellers can agree to come down on the contract price to match the appraisal, however. A neutral 3rd party appraiser will have the results back no more than 21 days after the contract’s ratification. The cost of the appraisal is lumped in with the closing costs.

Preparing for Settlement

As you can see from the last section, negotiation skills are of the utmost importance. Try to remain flexible throughout the process and I will provide direction while mediating on your behalf. Subsequently, you should begin to prepare for closing. Congratulations!

Utilities and Mail

In order to avoid interruption in your utilities, you will want to get the utilities ready to transfer over at least a day before closing. I can help you to get the names of the utility companies, but it will be up to you to make arrangements. Then, make sure to set up mail forwarding to your new address. You’re almost there.

Walkthrough

Right before closing, either the day of or the days prior to settlement, I will walk through the home with you to double-check the property’s condition. Walkthroughs take about thirty minutes to an hour. We will check that repairs were made if agreed to and that all other terms of the contract have been met without new damages to the property.

Get All Your Ducks in a Row

Let’s do a final run-through of information you’ll want 

to have ready as closing approaches. Double-check the location of the settlement. Usually, closing takes place at the office of the title company. Fortunately, Samson Properties has a partnership with Cardinal Title Group. Then, make sure to authorize your bank to complete a wire transfer a couple of days in advance to cover your down payment and closing costs.

Next, review your closing documents. At least three days before settlement you should receive a packet containing closing disclosures, a promissory note, and a deed of trust. Pay special attention to your closing disclosure, which is a summary of your loan terms. They break down your loan terms, property fees, and monthly payments. You should compare this to your original loan estimate and ask your lender any questions you have. The promissory note is your contract agreement to adhere to the loan terms. A deed of trust demonstrates the legal transfer of property title to the lender until the loan is paid. It contains a description of the property so that everyone knows exactly what’s being transferred.

Homeowner’s Insurance

Home insurance is insurance that financially covers private property from certain damages ranging from theft to fire or natural disaster. Get it in place as soon as possible because your lender needs it to approve the loan. Rather, this is not necessary but still highly recommended if paying cash.

Closing and Onward

On the day of closing, all you need to bring is yourself and a form of identification. Any co-borrower should also be present. Fear not, I will be right by your side should any difficulties arise. I’ve dealt with my fair share of closing day dramas, and I always help my clients to overcome those. Don’t hesitate to call me if you have ANY questions after closing.

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