Whether you are buying your first home or fifth, it’s good to review this step-by-step guide.
Organize your Finances
Are you financially ready to buy a home? Can you answer yes to the following questions?
- Are you out of debt?
- Do you maintain no or very low credit card balances?
- Do you have an emergency fund established (three to six months of living expenses)
- Are you comfortable devoting 20-25% of your annual income on mortgage payments?
- Do you have a down payment saved that is 10-20% of your anticipated loan amount for your home?
- Have you completed a mortgage calculator?
Know your Neighborhoods
If you live in Atlanta you probably know the neighborhoods where you want to live. If not, get familiar with a variety of neighborhoods: walk them; visit them at rush hour and stay for dinner; drive through them on a Saturday morning. Rank your preferred neighborhoods.
Establish your House Hunting Criteria
Decide what you want in your ideal house using the criteria below as a guide and add your own:
- Ease of commute
- School district (even if it’s not important to you now; it can improve resale value)
- Walkability to places that you like to visit
- Move-in ready or fixer-upper
- Floor plan requirements: bedrooms, private baths, basement, closets, storage, how kitchen relates to living spaces
- Garage and available guest parking
- Yard Size
- Style of living: house, townhouse, condo
Get representation in the Transaction
If you select me to represent you, I will personally guide each step, negotiate on your behalf, be responsive in answering your questions, remind you of deadlines, and communicate frequently. I will also recommend vendors such as mortgage lenders, closing attorneys, inspectors, surveyors, pest control companies, and contractors who can get the job done in the time frame you require.
Find a Lender
Talk to several lenders to discover who has the best options for you. Obviously price is important, but you also want a good communicator: someone who can explain the process, is responsive to our questions, and will update us frequently on each step.
Once you have chosen a lender and determined your price range, ask for a pre-qualification letter which will state the terms of your loan and the maximum amount. You will need to ask your lender to update this and attach it to each offer that you make on a house. In order for a lender to pre-qualify you, he or she must review your credit and verify income and assets. This is basically an initial and assessment by the lender.
I recommend you go one step further and submit the documentation necessary for pre-approval. Pre-approval means that the mortgage lender has reviewed your financial information in detail is willing to underwrite your loan based on certain conditions. A pre-approval greatly streamlines the process and saves you time. This process uncovers any unknown credit issues and gives you an estimate of your monthly payment.
The following documentation is typically required:
- Driver’s license and social security card
- Contact information on previous employers
- W-2s and tax returns
- Recent pay stubs
- Complete bank statements
The Search Begins Online
When we know your price range based on your pre-qualification letter, I will set you up on an automated search, based on your criteria, that sends accurate information on houses instantly as they go on the market. Your criteria will change which is part of the process. We will fine tune and adapt as we go through the process.
The first several viewing trips are usually exploratory as you see various houses within your budget. This may take a while. Your criteria will continue to evolve. Once you are thoroughly knowledgeable on the current market, we begin our “drop everything and go mode”. This is the point at which you have seen everything on the market that meets your criteria, and you know that your house is yet to be listed. When you get the email with a new listing that looks appealing, we will jump in our cars and go!
When you see a house that you really like, I will provide information for you to review:
- Tax records which will show ownership, mortgages, square footage, and assessed value
- Seller’s disclosures which will reveal age of systems, work performed. This may not be accurate which is why an inspection and research is performed during the due diligence period. Georgia is a “buyer beware” state. The burden of investigation is on the buyer.
- Flood Plain Information to the extent available.
- Information on what is surrounding the property
- Crime and offender statistics
- Recent sales prices of comparable properties
Writing an Offer
Is this the one? We decide on price, terms and write an offer. Beforehand, be thinking about:
- Length of due diligence period (all inspections, estimates from contractors and a survey). Typically 10-14 days.
- Financing Contingency (the time period and terms of the loan for which you are applying)
- Appraisal Contingency (a required part of the financing contingency)
- Closing and possession dates
- Identification of your closing attorney (I will recommend Campbell & Brannon)
- Special stipulations such as: seller-paid termite bond or home warranty, information to be provided or work to be completed by the seller.
When you submit your offer you will need to attach the following:
- An updated prequalification letter from your lender
- A personal check for the earnest money deposit totaling 2-4% of the offering price, made payable to Harry Norman, Realtors. The amount is negotiable, meaning it has to be acceptable to the seller. Your check is immediately deposited in our escrow account, and is refundable during your due diligence and contingencies periods. At closing, it will be applied toward your down payment.
You’re Under Contract and the Clock is Ticking
When all parties accept the offer terms, we have a contract. This is where our work begins with a definitive timetable. I will walk you through each step.
- Immediately apply for your mortgage and provide additional documentation.
- Order and pay for a survey ($400-600) so we can review during the due diligence period
- Immediately schedule and pay for your home inspection and radon test ($500-700)
- Immediately schedule a termite inspection and estimate for coverage (typically free)
- Schedule any visits by contractors from whom you need estimates (costs vary) during the due diligence period
- Review any additional documentation you have requested from the seller
- Give your lender permission to order appraisal if you are satisfied with your home inspection. The appraisal is usually wrapped up in your total closing costs.
- Schedule your closing
- Provide buyer information to closing attorney
- Attorney conducts title search
- Secure homeowner’s insurance
The Due Diligence Period
This is your chance to completely investigate the house and its surroundings, including some of the following:
- Home inspection to get a snapshot of the home’s condition to learn of foundation issues, plumbing and electrical conditions, check for past leaks and rodent infestation, and determine age of roof, hot water heater, and heating and air systems, among other things. An inspection is not a projection into the future performance of the house after you buy it.
- Radon Testing
- Termite Inspection
- Air Quality and Moisture Intrusion Issues
- Additional inspections by qualified specialists. as warranted
- Survey to determine boundaries, setbacks, easements, underground utilities, flood plain categorization and any other matters relating to your use of the property and resale
- Estimates from contractors for anticipated repairs or improvements
- Measuring for furniture, appliances, window treatments, flooring and anything else that you want to get scheduled prior to move-in.
- Ask questions of the seller
- Research the school district, neighborhood culture, homeowner’s association documents, noise level, traffic patterns, commute times, environmental or zoning issues affecting the property, proximity to places you may find objectionable.
- Research crime and offender statistics in the area
- Independently verify seller’s disclosure statement which the seller completes to the best of his/her ability (but it may not be factually accurate)
- Title search. The closing attorney will conduct a title search to uncover any liens against the property or unpaid taxes.
- Secure your homeowner’s insurance
- Determine your estimated utilities costs
- Negotiate with the seller on defects to be corrected before closing
The Appraisal and Loan Approval
Your lender requires, and you pay for, an appraisal on the property to provide an objective opinion of the market value of the property. This prevents you from buying a property that is worth less than your agreed-upon price. It also protects your lender’s investment. Once a satisfactory appraisal value is determined (for the amount of your loan or more) your file goes to the lender’s underwriting department for final approval.
A customary range is 2-5% of purchase price, but your lender will give you an estimate when you apply for your mortgage. The following are fees you will pay at closing and will have been included on the estimate you received from your lender after making your loan application.
- Survey (if you didn’t pay during the due diligence period)
- Home inspection and radon test
- Mortgage application and/or underwriting Fee
- Mortgage origination fee (lender’s administrative charge)
- Discount points (Fees you pay to buy down your monthly interest rate.)
- Escrow deposit (several months’ property taxes and private mortgage insurance)
- Homeowner Association Fees
- Pre-paid insurance
- Flood certification fee
- Tax servicing fee
- Credit report fee
- Bank processing fee
- Recording fee (recording the ownership change in city or county)
- Notary fee
- Title search fee (to discover unpaid loans, taxes or other fees as well as any liens)
- Lender’s Title Insurance
- Owner’s Title Insurance (always recommended for your protection against undiscovered title defects)
- Power of Attorney, if required
The Week of Closing
- Establish your utilities services
- Make arrangements to wire funds for the balance of your down payment to the closing law firm’s bank account prior to closing. This can take several days.
- Schedule a final walk through of the property a day or two prior to closing
- Review the preliminary settlement statement outlining the costs of the transactionBring two forms of government-issued identification to closing, as well as your personal checkbook for any last minute changes to your closing costs
- Closing will take place in the closing attorney’s office and is the process of signing your promissory note, deed and other documents.