The Home Buying Process

Camelot Realty of America, Inc. offers this brief outline of the home buying process to help buyers understand each step in the process and to know what to expect at each step.

Whether you are a first time buyer or a veteran home buyer, the process starts the same way. You decide you want to buy a home. First, you need to determine your priorities and those of your family. Where do you want to live? Do you want to live in the city, in the country or in a suburb?

You must also decide what type of home you wish to buy – a condominium, a town home or single-family home?

You may begin by looking through the classified and real estate sections of your local newspaper, search the internet and begin going to open houses in the locations you are interested in, to see the types of housing available, and obtain information about prices and the amenities available in various neighborhoods.

Buying from a Developer

If your dream home is being sold by a developer, the developer can help you through the buying process. The developer or developer’s agent will help you determine how much house you may be able to afford and refer you to lenders in your area to help you begin the pre-approval stage of the buying process.

The Difference between Pre-Qualifying for a mortgage and Pre-Approval for a mortgage.

Pre-qualification is an informal way to see how much the lender thinks you will be able to borrow. You can 'pre-qualify' over the phone with no paperwork by telling a lender your income, your long-term debts, and how large a down payment you can afford. The lender will then provide you with an estimate of the amount you may be able to spend on your new home.

Pre-approval is when a lender actually commits to a dollar amount to lend to you. It involves pulling together all your financial records and going through the preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.

Buying Through a Real Estate Agent

Another good place to start is to find a real estate salesperson that will act on your behalf as a buyer. A real estate broker can also help you determine how much house you may be able to afford and refer you to lenders in your area to help you begin the pre-approval stage of the buying process.

A real estate broker charges a commission which is generally computed as a percentage of the purchase price of the home. The commission is generally paid by the seller of the home.

Making the Offer and Earnest Money

Once you have found the home of your dreams, you (or your broker) will make an offer to purchase the home. The price you are willing to pay for the home will be based on the area the home is located, the price of comparable homes in the same area and the amenities in the home. Also at the time of the written offer, you will be required to pay a deposit or “Earnest Money” in the form of a personal check or cashier’s check.

Your earnest money does not go directly to the seller at this time but is held by the real estate brokerage or designated title insurance company. This represents your sincerity in the attempt to purchase the home and is fully refundable if the offer is not accepted by the seller or if your loan is not approved in a timely manner (in the event your offer contains a mortgage contingency).

Making the Loan Application

The loan application process can take place anytime before selecting your home, but should not occur later than five to seven days after the seller and the buyer sign the real estate purchase contract. Typically fees charged by lenders are the application fee, the fee for a credit report and an appraisal.

Getting the Home Inspected

It is extremely important to have the home inspected for problems that may be lurking that are not readily apparent to a home buyer. This may be done anytime after the offer has been accepted and the earnest money has been paid. If there are particular areas of the home that you are concerned about, it may be beneficial to engage an additional home inspector qualified in that particular field of expertise. There are fees associated with the home inspection.

Do I Need a Lawyer?

Buying a home is complicated. Therefore, it is a good idea to retain an attorney to help you through the process. The attorney will review all the loan documents, the deed, title report and survey to make sure that your interests are protected.

At Closing

Closing on your home usually occurs between 30 and 60 days after the real estate purchase contract has been signed. Your attorney should attend the closing with you. You will need to present your paid homeowner's insurance policy or a binder and receipt showing that the homeowner’s insurance premium has been paid. The closing agent will then list the money you owe the seller (remainder of down payment minus the earnest money already paid, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide proofs of any inspections, warranties, etc.

Once you have read all the documentation, are sure you understand it and your attorney has approved all the documentation, you will sign the lender’s mortgage note. The mortgage note sets forth your agreement to repay the loan and the interest being charged. The mortgage provides that if you don't make the mortgage payments the mortgage lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. The seller will transfer the title to the house to you through a signed deed.

You will pay the lender's agent all closing costs and, in turn, he or she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the county in which you purchased your home.

What You Will Receive at the Closing

• Truth-in-Lending Statement
• Mortgage Note
• Mortgage or Deed of Trust
• Signed Sales Contract (prepared by the seller; your lawyer should review it)
• The keys to your new home