The Home Buying Process

| June 13, 2011 | 0 Comments

               The Home Buying Process: Searching For
       and Buying a Home!

The home buying process involves some very important decisions which need to be made at the beginning of the home search and others that need to made to made during the home search and home purchase.

The home buying process is more involved than just looking at houses!

Being informed and knowledgeable early in the home search can make the home buying process and home purchase more rewarding. Here is some helpful information in selecting an agent, obtaining mortgage pre approval, deciding on the right home and preparing the contract offer.

Selecting Your Real Estate Agent

Selecting an agent in the home buying process is the first step for a home buyer. A home buyer’s real estate agent will be very important throughout the home buying process.

Consideration should be given to whether the agent is full time or part time, how available they are and how they communicate information. A buyer’s agent should be familiar with the locations the buyer is looking in, know the real estate values in those areas and has sold homes in those locations. More importantly, a buyer’s agent should be helpful and knowledgeable in explaining and guiding the buyer through the home buying process.

A home buyer needs to be comfortable in talking with their agent and, more importantly, be comfortable with providing information to the agent. The more information the agent has about a home buyer’s needs, wants, desires and price range affordability, the easier it will be for them to offer assistance and suggestions about the most appropriate homes to look at. 

A home buyer can obtain a lot of information in their initial contact with an agent, whether it is on a phone call regarding a home they saw marketed or a for sale sign, an email communication on a home seen on the internet or at an open house they visited. Sometimes they just call their friend who is a real estate agent or are referred to an agent by one of their friends. Many times, this is just how a buyer finds their agent and everything works out well.

The first contact and first appointment can provide a buyer with a lot of information about whether this is the agent who can help them accomplish their goals in their home search in the areas they are looking to purchase a home in. Whether consciously or not, a buyer needs to think of this as an interview. The agent asking questions to obtain information to then set the most appropriate homes to look at and the buyer asking questions and finding out if this is the agent who can provide the information they need about the home buying process and the availability of homes for sale in the  areas they are searching in.

Some helpful hints in selecting an agent:

  • Did the agent review and explain how they work and the required agency disclosure?
  • How familiar is the agent with the price range, towns and neighborhood locations of the homes they will be searching for?
  • Is the agent a member of the primary MLS serving those areas? Do they have the appropriate lock box key for that MLS?
  • How accessible is the agent? Availability for appointments? Promptness of a return call or email reply?
  • Is the agent making home viewing recommendations or just sending email of properties for sale and just waiting for requests to see particular homes?
  • How thorough is the home showing inspection? Simple walk throughs or viewings and discussions of both the positives and negatives of each home?

There are noticeable differences in the level of services provided by real estate agents. A home buyer needs to select and work with the agent that can provide the level of service that best suits their home buying needs!

There is a difference in mortgage pre-qualification and mortgage pre-approval. Homes buyers need to know this. It can make the difference in getting a contract offer signed or make a difference in how smooth the mortgage approval process goes in the home purchase.

Why would a home buyer think they are qualified for a mortgage loan simply because they spoke with a mortgage rep who obtained their credit check , asked about their income and then provided a mortgage pre qualification letter? Home buyers need to know that the mortgage pre approval process is more involved than simply speaking with a mortgage rep and providing verbal information!

The mortgage application and mortgage approval process involves a very thorough review and analysis of a home buyer’s credit, employment longevity, income verification and asset verification. While there are differences in underwriting standards in each of the different type of mortgage loans(VA, FHA, Conventional) and from one lender to another, a home buyer needs to know what type of a mortgage and how much of a mortgage loan they qualify for as early as possible in the home buying process. What was acceptable in the mortgage industry relative to mortgage qualifying during 2003 to 2006 is not acceptable now!

Some helpful hints in being prepared for obtaining a mortgage loan:

  • It all starts or ends with Credit Check! Home buyers must know that their complete credit history will be reviewed and analyzed, and credit card payment history is as important as car loan/lease and student loan payment history. It is something that can be obtained quite easily, and it is FREE, even before starting a home search and meeting with a mortgage representative.
    AnnualCreditReport.com is the official site to help consumers to obtain their free credit report. This central site allows you to request a free credit file disclosure, commonly called a credit report, once every 12 months from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion.
    Resolving issues in a credit report can be extremely time consuming during the mortgage application process. Late payment history, credit card charge offs and credit card dispute issues will need to be explained and or corrected. Repairing or correcting these can become quite time consuming and could affect the mortgage interest rate and even whether mortgage approval is obtained.
    In addition, most lenders are ordering an additional credit check immediately before the closing to make sure that there haven’t been any changes in payment history or in debt load. Home buyers need to be careful in the amount of credit charges they incur prior to the home closing. In fact, charge card purchases for home purchase related items might be better postponed until after the closing and purchase.
  • Assets: A home purchase involves down payment plus closing costs. A home buyer needs to have an understanding of minimum down payment requirements and estimated closing costs. These funds will be verified during the mortgage application process, and more importantly, any recent large deposits will require explanation. Where financial assistance is coming from a family member, a gift letter and deposit verification will be required.
  • Income: Buyers will be required to provide current pay stubs and two years of 1040 Forms. Income is considered income only if is reported. Gaps in employment history must be explained. An income verification form will be sent to the employer during the application process, and a phone call employment verification will be made just prior to closing. Any employment off the books is not considered in the mortgage qualifying process. For self employed buyers, there are additional requirements.
  • Current Housing: A buyer’s current payment for rent or mortgage payment history will also be analyzed. If renting, home buyers need to be prepared to provide copies of checks for rental payments during the previous 12 months.

For most all buyers, obtaining a mortgage is required in a home purchase! Why not be prepared for what needs to be provided?

When a buyer likes a home and is considering making a contract offer, it is important that they go back and take a second look before making an offer.

There are home buyers who view various homes during a week or two and make an offer and purchase one. There are other buyers who search for a home over the course of months before making the decision to purchase. Sometimes the decison to make an offer is made on the day they saw a number of homes, and the one they are interested in was the first one previewed.

Viewing the home a second time is very important. One look is not enough for a home buyer to get a comprehensive view of the entire home,  a view that involves more than just room sizes and general condition. As important, many home buyers need to show the home to a parent or advisor for their inspection and approval. A second look and a viewing for parents is more appropriate before an offer is negotiated than afterwards, provided that this can be accomplished timely.

While taking a second look, it is also a perfect time to obtain a copy of the sellers disclosure form, if one is available. Having this disclosure will help when looking for the age of the essential systems and roof, and what recent repairs and  improvements were made and when. The buyer’s agent should be of valuable assistance in helping to point out what needs to take a closer look at.

Preparing Contract Offer

Home buyers need to know that price is only one factor in getting a contract offer signed by the home seller. Home buyers need to know that they may not be the only one submitting a contract offer to the home seller. It is important for home buyers to know that there are three separate parts of a contract offer which are important to home sellers: price, terms and conditions.

Making a contract offer to purchase a home can be emotional. Lots of different thoughts go through a buyer’s mind: is this the right home, what price to offer, is the contract offer binding, etc. A buyer should obtain a copy of the contract offer form early in their search for home and review it. It is so much easier being prepared to move forward with a contract offer when there is familiarity with the forms which need to be signed.

Some helpful hints in submitting a contract offer:

  • Price: Obtain the most recent comparable sales information; take advantage of the information, recommendations and knowledge your buyer’s agent can provide; understand that a home remains on the market during contract negotiation; when presented with a contract offer, a home seller can accept it, make a counter offer and perhaps just refuse it without even making a counter offer
  • Terms: Provide a copy of the mortgage pre approval with the contract offer; be prepared to offer a strong binder and earnest money deposit;
  • Conditions: Structure the offer and closing date to meet the sellers time needs; while price and terms are important in contract presentations and negotiation, it is quite common that the conditions in a contract offer are the reason the offer is not accepted and not the price; the conditions in the contract, such as mortgage terms, inspection time frames and other contingencies, are the most overlooked details by buyers in making a contract offer.

For more detailed information regarding preparing a contract, read Buyers: Be Prepared in Making Contract Offer.

Home buyers do need to be prepared and knowledgeable in order to make the home buying process and home purchase a happy time and a happy experience!

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About the Author:

David Fialk The above article was written by David Fialk, REALTOR, Broker Owner, Choice Realty Co., Iselin, New Jersey and regularly posts real estate articles of interest for home buyers, home sellers and home owners. David can be reached via email or by phone at 732-283-3400 or at www.DavidFialk.com. Licensed since 1971, David has helped over 1800 families move across town, across the state and across the country and specializes in the towns of Iselin, Colonia, Edison, Woodbridge, Avenel, Fords, Sewaren, Port Reading, Keasbey, Carteret and Metuchen in Middlesex County, New Jersey. Planning on purchasing real estate? Thinking of selling your home? For real estate information ”You Can Rely On, Contact the REALTOR You Can Rely On”.