Step 1: Don’t Skip the Pre-Approval Process!
When making an offer on a home that involves you getting a mortgage, a pre-approval letter is required 100% of the time. Many buyers make the mistake of skipping this vital process and losing the perfect home to a different buyer who is prepared with all of their paperwork. During the pre-approval process, you will meet with your loan officer or your bank who will analyze your income, assets and credit report to determine the maximum amount of financing you qualify for. The pre-approval process will also give you an estimate of how much you will be paying each month. Many buyers who skip the pre-approval process end up backing out of purchasing at the last minute because the monthly payments are too high. You must be financially prepared when making the decision to purchase a home. If you are thinking of buying a home, contact your loan officer or bank and get pre-approved today.
Step 2: The Buyers Consultation: Meet with your agent and bring ALL decision makers
What are the most important things about the home you purchase? Do you need lots of space? Do you need a large parking space to park your SUV? Do you need to be near the train to commute downtown? Or maybe you really have no idea what you want. Meet with your agent to express your wants and needs. Your agent will show you what is available in your criteria as well as the market value for the type of home you are looking for. If the type of home you want is out of your budget, your agent can discuss all available options. Your agent will also discuss with you the home buying process and how they will be communicating with you.
Step 3: :Let’s Make an Offer!
You found the home you like. Pre-approval letter in hand, it’s time to make an offer! When it’s time to negotiate, your agent will be by your side. Swiftness is key to getting your offer accepted. In a fast paced seller’s market like New York City, many properties sell within weeks. Until the seller signs a formal contract of sale, they can still show their home and accept other offers even after they have accepted yours. According to the National Association of REALTORS®’ 2015 Profile of Home Buyers and Sellers, homes that sold in less than 1 week sold for full listing price 50% of the time and 19% sold for above the listing price. If a property is in a hot market, you must be competitive to get your offer accepted. If a property has been sitting on the market for a long time, the seller may be more negotiable on the price. Below is a national statistic for list price to sale price depending how long the property has been on the market
Step 4: Home Inspection. Know What You’re Buying.
Offer has been accepted! The next step is to make an appointment with a home inspector. An inspector will be able to identify latent defects, issues that are not visible to the naked eye. Make sure that the inspector you are working with is a certified home inspector, not just a handyman. They can also inform you of upcoming items that must be repaired or maintenance in the near future. After the inspection is completed, you will receive an inspection report. This report details the overall condition of the house and issues that must be addressed. If a major issue is found such as a structural issue or a roof leak; a credit or a repair is often negotiated by your agent. Keep in mind that the inspection report should not be used to negotiate cosmetic or minor repairs that are often expected in a home purchase. During this process, it is important to be decisive as other buyers still have the opportunity to make offers on the home.
Step 5: We want it! Sign the contract!
Inspection completed, you want to move forward and sign the contract. In New York state it is required that both buyer’s and sellers are represented by an attorney in a real estate transaction. The seller’s attorney will send your attorney the contract of sale, meet with your attorney to review the terms and sign the contract. At the time of signing, you will leave an earnest money deposit. This deposit will be held in escrow until the closing where it will be applied to your down payment. Typically the earnest money deposit will be 10% of the total sales price or the amount of your down payment if you are leaving less than 10% down. If there are appliances included in the sale or if the seller has agreed to make repairs, make sure that this is in the contract or there will be no legal obligation for the other party to comply.
Step 6: Your Mortgage Application, Revisit your Lender.
Upon receiving the fully executed contract of sale, meet with your lender to sign the mortgage application and provide them with all necessary documentation. Upon 48 hours of submitting your application, your lender will order the appraisal. The appraiser will value the property based on recent sales, market conditions and the overall condition. If the property appraises for below the sale price of the home, the seller must either reduce the selling price to match the appraisal or refund your earnest money deposit. In certain cases, the appraisal can be disputed by your agent if found to be incorrect. If the appraisal comes in at or above the purchase price, the appraisal report will be send to underwriting. The underwriting department will do a final review of the appraisal report and your financial documents. When approved, you will receive a mortgage commitment letter which will be sent to your attorney. Your attorney will now submit the title report to the bank attorney for review.
*During the mortgage application, it is important that you DON’T make any cash deposits, make any large credit card purchases, co-sign any loans, change bank accounts, apply for new credit cards, change jobs or miss any payments on your debts or credit cards.
Step 7: The Closing!
You have your mortgage commitment letter and a clear title. Just like purchasing a car, you must get your homeowners insurance policy ready and submit this to the bank. Once all bank conditions are met, they will issue a clear to close. You and your attorney will be notified of the clear to close and a date will be scheduled by the attorneys and the bank. Before the closing, buyers will do a final walk-through of the property to approve the condition of the house prior to signing the closing documents. At the closing, all parties will sign closing documents and certified check instructions will be provided to your before the closing.
The house is yours! Contact all utility companies, begin the process of grieving your property taxes and apply for the NYS Star Program which gives owner-occupants a reduction on property tax. Enjoy your new home!