1) Get Ready for Home Ownership
- Build a good credit history
- Get a mortgage pre-approval
- Find out what type of mortgages you quality for
- Save up for a down payment (typically 10-20% of property’s value; if FHA-qualified, then possibly less)
- Consider closing costs which can include taxes, loan fees, escrow fees and transfer fees
- Consider utilities and monthly bills, such as homeowner's assessments
2) Find a Real Estate Professional
- Get a referral from friends, family, and work colleagues, or search online for a Realtor with good client reviews
- Ask the real estate professionals you interview about buyer's representation contracts and agreements; make sure you understand the terms
- Explain your needs and expectations to the real estate professional you choose to work with
3) Find the Right Property
- Determine what is important to you, such as particular schools, neighborhood amenities, monthly mortgage payment, walkability, etc.
- Make sure you include homeowner’s assessments, utilities, and taxes when calculating the monthly mortgage payment
4) Finance the Property
- Contact your mortgage broker or lender
- The escrow company will run a title search to ensure there are no clouds on the title
- Make sure you understand the financing terms—ask the lender for clarification, if needed
- Be truthful on your mortgage application. You may think fudging your income a little or omitting debts when applying for a mortgage will go unnoticed. Not true. Lenders have become more diligent in verifying information on mortgage applications. If you fib, expect to be found out and denied the loan you need to fund your home purchase. Plus, intentionally lying on a mortgage application is a crime.
- Hold off on big purchases. Lenders double-check buyers’ credit right before the closing to be sure their financial condition hasn’t weakened. If you’ve opened new credit cards, significantly increased the balance on existing cards, taken out new loans, or depleted your savings, your credit score may have dropped enough to make your lender change its mind on funding your home loan.
- Although it’s tempting to purchase new furniture and other items for your new home, or even a new car, wait until after the closing.
- Keep your job. The lender may refuse to fund your loan if you quit or change jobs before you close the purchase. The time to take either step is after a home closing, not before.
5) Make an Offer
- Ensure the property is inspected by a licensed home inspector
- Read all contracts before signing—make sure you understand all of the terms, ask questions
- Place a competitive bid and be prepared to make a counter-offer
- Keep your credit score stable and in-check by waiting to purchase any big-ticket items until long after the closing
- Only one offer will result in a sale, so be prepared to move on if your offer is not accepted
- Meet contingencies. If your contract requires you to do something before the sale, do it. If you’re required to secure financing, promptly provide all the information the lender requires. If you must deposit additional funds into escrow, don’t stall. If you have 10 days to get a home inspection, call the inspector immediately.
- Consider deadlines immovable. Get your funds together a week or so before the closing, so you don’t have to ask for a delay. Plan to wire your closing funds a day or two prior to closing, not the day of your closing. In Santa Barbara, CA all paperwork needs to be completed and Buyer and Lender funds delivered to escrow on the day prior to closing, with possible exceptions being Fridays or the last day of the month.
- Treat deadlines as sacrosanct.
6) Closing and Life After the Big Purchase
- Protect your new asset by obtaining insurance such as homeowner’s, flood, disaster, and fire
- Weatherproof your new home
- Maintain files—digital or print—for all warranties, insurance documents, contracts, etc.
- Keep original closing documents in a safe place, preferably outside the home (such as a safety deposit box)
- Set up utilities bills in your name
- Implement desired aesthetic changes such as painting, minor construction, and re-flooring
- Set a move date and hire movers or plan a move party with your friends
- Get to know your neighbors and explore your new neighborhood
- If you're happy with the work of your real estate professional, be sure to recommend her/him to friends and family