Home Buying 101
If you have purchased a home before, you can skip this post. It is good reference for some of the things to think about if you've only rented, or lived with family up until now.
If you're reading this, you've thought about buying your own place. If you've scratched the surface, you have probably discovered there's a whole lot more to it than you realized. Take a deep breath, and I'll lay out the process. Remember, a good REALTOR is there to answer any questions and walk you through the whole process. You're not in this alone, and while it's a big complicated step for you, the professionals surrounding you do it for a living, and can help you every step of the way.
There is a lot to think about when buying your first home: Cost, payments, financing, location, neighborhood, utilities, property taxes, homeowners insurance, school districts, HOAs, and let's not forget, in addition to all the details, you might actually want to buy a place you'd like to live in!
So where do you start? The first place to start, is to have a constructive conversation with your REALTOR to discuss the things that are most important to you. Which high school district you are in might be of lesser or greater importance to you than someone else. Once you have had this initial conversation, then we can put a plan in action to find you the perfect place to call home.
Here are the steps:
- Partner with a responsive lender. Having the right mortgage product, and the right person putting it together for you is essential. We will partner with a lender I trust. Think of it this way: If you go find a lender through an ad or an internet special, they will try to earn your business and get you the best rate. If things don't work out, if they drop the ball, if you don't end up getting the house- they lose a commission, but you were just one of many leads they get every month. If you work with a partner of mine, I do a lot of business. I am very selective regarding who I work with. If a lender I partner with runs into a problem with your loan, they're not risking only one commission. If they don't perform, and do everything they can to serve you at the highest level possible, they risk losing my partnership, and all the business I bring to them. Believe me, their motivation to do everything possible is very high when we are partnered. I only work with people I trust to be ethical, responsive, and committed to doing the right thing for you, and my expectations are high.
- We'll figure out your budget. A good starting place when thinking about a house payment is looking at what you pay for rent. The mortgage lender will look at your credit and other debts, and will determine what is possible for you to borrow, but more importantly, make recommendations on what is reasonable and prudent. The industry is rampant with people trying to sell homebuyers the absolute maximum amount they can afford. I won't work with people like that. I want you to have the right-sized home, with an affordable payment, one that is the best option for you. If we are going to work together in the future, and you are going to recommend your friends and family to me, that is only going to happen if I'm looking out for your best interests, not trying to get you to buy something you can't afford.
- Begin the search. Now that we know your needs and desires, and we've figured the financial piece, now it's time to look at houses. (The biggest mistake most people make, is looking at houses before they figure out the finances. This is probably the largest factor resulting in people buying more house than they can comfortably afford.) You'll receive emails directly from the MLS meeting your criteria, along with homes we can find on Zillow and other commercial advertisers.
- Make an offer. Most buyers I've worked with did not end up with the first home we made an offer on. This step requires us to pace ourselves a little bit. We will put together the offer that is in your best interest, not just the price, but timing, closing costs, appliances, and even the amount of earnest money required. Essentially, we will write the strongest offer possible, resulting in you getting the best deal possible. As a point of clarification, "concessions" is the term used for the closing costs that the seller might pay on your behalf. In addition to the price of the house, there are also costs for your loan, the HOA, and the title company. Many of these costs are negotiable between buyer and seller, so for example if you have plenty of cash on hand to cover a sizable down payment, your strongest offer may include your paying all of the closing costs and a smaller purchase price. If you have a small down payment, we might be in a better position to write your offer with a higher purchase price, with the seller agreeing to pay some of the closing costs. Once the offer is accepted, we will open an escrow account with a title company. Your escrow money is a good faith deposit, proof that you actually intend to buy the house.
- Negotiate for repairs. The offer process has two steps. The first step, where we made the offer, was mainly concerned with price. Once the offer is accepted, we will have time to conduct inspections of the property. We can inspect all the major systems and make sure that you are thoroughly informed about the condition of the home. Typically, the inspections will result in issues being discovered. If there are major problems with the house, for example, if the roof is caving in, we can walk away and get all of your earnest money back. Usually there are some items that need to be fixed, but nothing big enough to make you walk away. Once we have the lists of recommended repairs from the inspectors, we issue an inspection notice to the sellers, where we ask them to fix the problems we're concerned about. This begins the second round of negotiation, where the seller may or may not agree to fix what you have asked for. This can go back and forth until both parties agree. Sometimes repairs are agreed to, sometimes a price adjustment in lieu of repairs is agreed to, it all depends on the transaction. If no agreement is reached, you get your earnest money back. If an agreement is reached, then your earnest money becomes non-refundable. This is the point where you and the seller have reached a final agreement for price and repairs.
- Happy Day! The only thing left is to close on the house. Plan to take a couple hours out of your day to go down to the title office to sign all the paperwork. Depending on the time of day you sign, it might be the next business day before you get the keys to your new home. The title has to record with the county before you are the legal owner. Usually if we sign in the morning, you can receive the keys later that afternoon.
As you can see, while it is a straightforward process, there are a lot of bumps and pitfalls along the way. By far, the most fun part of my job is working with new homeowners, people that have never purchased before, or at least have never purchased in Arizona. Once you've done it a few times, it becomes routine, just like anything else... but that first time, all the planning, all the hopes and dreams, all the focus on the future and what could be, what will become of the life lived in that home, that's the best part of my job, and why I'm excited to work with you.