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Home Buying 101

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Congratulations!  You’ve taken the first step in the home buying process and are doing your research on what it takes to purchase a home in California. The decision to purchase your first home is one of the biggest and best decisions you could ever make.  After all, your home is the largest (and most emotional) investment you will eve make.

 

In other parts of the country, home buying is very different.  Just because you own a house in Florida, doesn’t mean it’s the same process here in California.  Make sure you consult with a real estate professional before you jump into things.

Benefits of Home Ownership

  1. Homeownership Builds Wealth Over Time
  2. You Build Equity Every Month
  3. Mortgage Tax Deduction Benefits
  4. Tax Deductions on Home Equity Lines
  5. You Get a Capital Gains Exclusion
  6. A Mortgage Is Like a Forced Savings Plan
  7. Long Term, Buying Is Cheaper than Renting

1. Choose a Real Estate Professional

When you’re looking for a real estate professional to help you, know that above all else, good agents put their clients first.  This is your dream, and your agent is your advocate to help you make your dream come true.  Find an agent that you like and get along with, not an agent with the most sales or boasts about their successes.

 

A great agent will:

  1. Educate you about the current market conditions.
  2. Guide you to homes that fit your criteria.
  3. Negotiate with the seller on your behalf.
  4. Check paperwork and deadlines.
  5. Solve any problems that may arise.

PRO TIP:

Don’t set yourself up for disappointment.  Speak to a lender first, to see how much you can afford.  Then, start searching.

2. Get Finacing

Obtaining financing is one of the most important parts in the buying process.  Ask your agent for lender information and they will be able to put you in contact with trusted lenders. While getting pre-approved can be stressful, it will ultimately determine how much you can afford.  When you have that number, you’ll be able to start your home search.

  1. Choose a loan officer.
  2. Make a loan application and get pre-approved.
  3. Determine what you want to pay and select a loan option.
  4. Obtain funding at closing.

3. Start Your Home Search

So you are pre-approved and ready to begin your search.  But how or where do you begin?  There are a lot of homes out there and diving in without a guide can become overwhelming and confusing.  A great agent will help you more accurately pinpoint homes that fit your criteria.  The right home will meet all your important needs, and as many of your additional wants as possible.  Some questions you might ask yourself include:

You’ll learn as you look at homes, your priorities will probably adjust along the way.

  • What do I want my home to be close to?
  • How much space do I need and why?
  • Which is more critical: location or size?
  • Would I be interested in a fixer-upper?
  • How important is home value appreciation?
  • Is neighborhood stability a priority?
  • Would I be interested in a condo?
  • What features and amenities do I want? Which do I really need?

4, Make an Offer

Once you’ve found a home you love, the next step is making a compelling offer.   Your agent will research similar properties in the neighborhood to help you determine the market value, and fair price, for your home.  Look to your agent to explain and guide you through the offer process.

  •  Price is the dollar amount you are approved for, willing and able to pay.
  • Terms cover the other financial and timing factors that will be included in the offer.
  • Contingencies are clauses that let you out of the deal if the house has a problem that didn’t exist or which you weren’t aware of.

5. Perform Due Diligence

Just because you love a particular property doesn’t mean that it’s perfect.  In fact, this is where reason has to trump emotion.  You’ll need to have a property inspection (which we highly recommend you attend) that will expose hidden issues.  This way you’ll know what you are getting into before you sign closing papers.

  • Don’t sweat the small stuff. It’s the inspector’s job to mark everything discovered no matter how large or small.  The inspectors report may be long, but, things that are easily fixed can be overlooked for the time being.
  • If you have a big problem show up in your inspection report, you should bring in a specialist and if the worst-case scenario turns out to be true, you might want to walk away from the purchase.
  • Even if your home passes inspection, you’ll still need to buy a home owner’s insurance policy that protects you against loss or damage to the property itself and against liability in case someone sustains an injury while on your property.

6. The Closing

Once you’ve made your offer and have completed the inspection process, you’re in the “home” stretch!  But, in order to ensure that you don’t put your closing date, or your mortgage at risk, you have a few pre-closing responsibilities that you’ll need to be mindful of.  These include:

  • Staying in control of your credit and finances.  If you are tempted to make any large purchases during this time, it’s best to talk to your lender first.
  • Keeping in touch with your agent and lender, returning all phone calls and completing paperwork promptly.
  • This is usually crunch time and everyone has to work together make the closing go smoothly.  If the lender or agent needs a document, you need to get it to them as soon as possible.
  • Communicating with your agent at least once or twice a week, and verifying with your lender that all mortgage funding steps are completed.
  • Conducting a final walk-through of the home with your agent.
  • Confirming with your agent, home insurance professional, and lender that you have the settlement statement, certified funds, and evidence of insurance lined up prior to closing.

7. Protect Your Investment

Congratulations, and welcome home!  The home-buying process is complete, but just like any big process, there’s a maintenance plan! It’s now your responsibility, and in your best financial interest, to protect your investment for years to come.  Performing routine maintenance on your home’s systems is always more affordable than having to fix big problems later.  Be sure to watch for signs of leaks, damage, and wear.

 

And remember, just because the sale is complete, your relationship with your agent doesn’t need to end! After closing, your agent can still help you – providing information for your tax returns, finding contractors and repair services, and even tracking your home’s current market value.

COMMON CLOSING COSTS   >>