Are Your Purchasing Your First Home?
Now that you’ve made the decision to join the ranks of homeowners, you need expert guidance to find the right loan, the perfect location, and the resources to help you settle in and make the house your home. Here are some general guidelines, but your agent can give you more specifics and help you through the process with great ease.
Your first step should be to get pre-qualified for a loan. This will help you understand your options for a down payment, as well as help focus your efforts on looking at properties you can afford. During the loan application process, your lender will ask you for personal information. You can help speed up the process by gathering some of it in advance. You are likely to need your last two years’ tax returns, and your most recent two pay stubs. Your lender will process your credit report, and ask you to complete an application, then will investigate various loan programs that might be available for you.
Government-backed loans through the Federal Housing Authority (FHA), Fannie Mae and Freddie Mac all offer lower down-payment options, and there is even a loan that will allow you to wrap any costs to remodel the house into a loan. If you are a Veteran, VA loans are a great way to go. Please note that most FHA loans are available for homes priced below a certain price point, so check with your Realtor for the limits in your area.
Conventional loans usually require a minimum of 20% down payment. If you can’t qualify or the house costs more than the FHA loan limits, a conventional loan is probably your best option. Interest rates are at a historical low, so it’s a great time to buy and lock in a low interest rate for the full term of your loan.
Adjustable rate loans are also available. These loans allow you to pay a lower monthly payment during the first few years you own the home, (usually 3 or 5 years) but then the interest rate can go up based on market conditions.
Focus on Your Wants and Needs
It’s always tempting to look for everything you have ever dreamed of having in a home, but keep your budget and your requirements in mind. Make a list of the features you absolutely have to have—how many bedrooms? Bathrooms? Garage spaces? Distance from work or school?
Once you have the minimum requirements, you can add some of your desired items—would you really like a pool? Or a larger lot? Keep in mind that you may find some homes that have one or two of these extra, desirable items, but make sure the home has your essentials first! It’s easy to get overwhelmed by the features, and forget the basics.
Start Looking at Properties
Now that you know what you can afford, and what absolute essentials you must have in a home, it’s time to start looking! You may want to begin by looking at websites on the Internet. This is a great way to see what is available, and get a feel for the type of neighborhood or area of town that might be best for you. A word of caution, however; many websites are not associated with the local MLS and may have outdated information.
Working With Your Agent
As your real estate agent, please ask lots of questions! I am your expert in the area, and can help you focus on areas of the Valley that will meet most of your needs and desires.
As you tour homes with me, make notes on each house you see. After you’ve seen multiple homes in a day, they all start to blend together. Keeping notes on each property as you tour will help you remember what you liked about each home—and what you didn’t like. Let me know what appeals to you so I can focus future tours only on properties that will meet your needs.
You may drive by numerous homes that I may not show you. There are many reasons for this– the home may already be under contract, the price may be beyond your budget, or the home doesn’t meet your needs. Know that as your trusted agent I have your best interests in mind, and will only show you what will work for you.
Making An Offer
Once you find that ideal house, it’s time to make a purchase offer. I will review the Arizona Purchase Contract with you, and help you understand the buying process from this point forward.
You will be required to submit a Pre-Qualification letter from your lender with most offers—I can work with your lender to prepare this. Each Pre-Qualification letter is specific to the property you are making an offer for, so it cannot be prepared in advance.
When your offer is presented to the seller, the seller may decide to issue a counter offer to the price or terms you offered. I will help you review any counter offers, and discuss the implications with you.
When negotiations are complete and you and the seller have agreed on price and terms, you will need to provide a check for an Earnest Money deposit. These funds are deposited with the title company specified in the purchase contract, and can later be used to pay for part of your down payment or closing costs.
The Escrow Process
Once you and the seller have agreed on terms, you have a period of time to perform any inspections you think are important—a home inspection, termite inspection, structural inspections, roof inspection, pool inspection, etc. At a minimum you should have a home inspection done by a qualified home inspector. In Arizona, home inspectors are certified and must meet minimum performance standards.
A home inspection may point out certain issues with the home (such as electrical or plumbing problems, roof repairs needed, etc.)
Once you have reviewed the report prepared by the home inspector, you can ask the seller to make repairs. The seller may respond by indicating they will make all repairs, just some of the requested repairs, or may refuse to make any repairs. Once you receive their response, you have an opportunity to decide if you wish to move forward with the purchase.
During this period, you also need to finalize your loan, and if necessary, lock in your loan rate. Speak with your lender about the best time to lock your rate, as loan rates fluctuate almost daily, and your lender has the best idea of where rates may be going in a few days or weeks.
You also want to plan your move. Keep in mind that the Close of Escrow date may change by a day or two, for any number of reasons. It is best to give yourself a day or two after close of escrow before you hire the moving company, painters, etc. Don’t count on moving in or having any work done to the house on the day you are scheduled to close escrow.
A few days before the scheduled close date, your lender must send final loan numbers to the title company, who will prepare a Settlement Statement. This will indicate for you how much money you will need to bring to the closing table—and it must be in the form of a cashier’s check, so make sure the funds are available and arrange to get the check in advance!
You will need an appointment with the title company to go in and sign the closing paperwork, which includes lots of documents, including your loan documents. Set aside at least an hour for this process, and don’t be afraid to ask questions—this is a large financial transaction, and it is important that you understand your commitments.
The seller will also sign paperwork, but in Arizona the buyer and seller generally do not sign at the same time.
Once the title company has all paperwork signed, has received the down payment from you, and the remainder of the purchase price from your lender, the title company will record the transfer of the property to you. This is considered the official Close of Escrow, and you will get the keys and own the property.
Packing and Moving
As you prepare to move into your new home, organize your packing to make it easy for you to get settled in. Purchase packing supplies and start packing non-essential items early. Label each box with a general description of its contents, and indicate which room in your new home it should be taken to.
If you plan to hire movers, make sure to contact them at least 3 weeks prior to your scheduled move. At the end of each month, moving companies tend to get booked quickly, so plan ahead!
As you approach the time of your move, plan to pack an emergency supplies box. Move this box in your car so you have access to it immediately upon arrival at your new home. We recommend you put the following items in your emergency box:
- Paper plates and plastic utensils
- Napkins and/or wetnaps
- Tape, scissors and pens
- Paper towels
- Roll of toilet paper
- Small snacks
- Pet treats , water dish and food for your pet
- A small first aid kit
- Bottled water or other drinks
- Any other essentials you may need immediately at your destination