Tuesday, January 22, 2013

Let's Talk- Buying Houses

Seeing as we are smack dab in the middle of buying our first house, I figured I would answer some questions about the whole process!  This will be very user friendly, because it is all new to me.  I am answering questions that I have asked others, and will be answering as if talking to a first grader...not to insult any of you, but because that is how I needed to be talked to through this process, lol.  Just so we're clear, I am by no means any kind of expert...I just thought it would be easier to write about it as I am actually going through it, rather than try and remember the details later.

1)  Ok, where on earth do you even start when you want to buy a house?
You have 2 choices when you want to buy a house, and it depends on what your timeline is.  If you are really ready to buy and want things to move right away, then you may want to get a pre qualification for a loan first.  If you are just starting and want to look around casually, then find a realtor and start looking at houses you like.  Here's why: when you are looking at houses, if you find one you love and know you want, then you are going to want to put an offer in on the house- and to do that, you need a pre qualification letter from a lender.  (By the way, a pre qualification is when you go to a bank or any lending place and they basically run your credit, find out how much money you make, how much debt you have, etc. and then determine if they think they will lend you money for a mortgage.  It is not the official process where they actually decide, it's just a good indicator that they will lend to you.  You can walk into a place and have a pre qualification that very same day.)

2) I have a pre qualification letter and I found a house I like.  Now what?
Now you tell your realtor that you want to make an offer on the house.  Depending on the market and what other houses in your area are going for, you will then make the seller and offer.  The tricky part is knowing what to offer.  If you really low-ball them, they could get offended and reject it without even offering a counter offer...or someone could swoop in and offer higher and then you will get the boot.  But if you go too high, well then obviously you may end up paying more than what they would settle for.  You have to know how bad you want the house and how high you are willing to pay.
So once you are ready to make an offer you will sit in your realtors office and sign about a thousand papers.  This is the contract.  It says what price you are offering and what conditions must be met. Then you sign the contract and write a check- this is earnest money.  Is around $500-$1000 and it is to show the seller that you are serious.  This money is put aside and you get it back at closing (it actually is put toward closing costs).  If you walk away from the sale for any reason, you lose your earnest money.  So after all that, the realtor sends the paper work to the seller and you go home and wait for a call.  Usually within 48 hours the realtor will call you let you know if they accepted your offer or if they countered your offer with a different amount.  Then you decide if you want to accept of counter their offer.  This all happens through your realtor, mainly over the phone.  Once a price is agreed on, then everyone signs the contract and you are locked in.  You then have 10 days to get any inspections you want (laws and timelines may vary with different states).  After that, you meet with your lender and bring your entire life in paperwork and sign another million documents.  Then it goes to underwriting where they make the ultimate decision about whether they will give you the money or not.  Once this is complete, if there are no hurdles or setbacks, you then move on to closing.  This is where you and the seller sit down and sign everything and you pay a ton of money and then get handed the key.

3) When do you need actual cash and how much?
Ugh.  This one always takes you by surprise if you are not prepared.  You need cash...your loan pays for the house, but you pay for a whole lot of things before it becomes your house.  You need earnest money, money for any inspections you are getting on the house, money for a lawyer, money for the lender to process your application, money for a down payment, money in advance for a year of taxes and homeowner's insurance...the list really goes on.  The good news is that most of this stuff is paid in one big chunk at closing, and you will have a good idea what that number will be before you start.  The bad news is, some of this you need to pay along the way and might take you by surprise.  The lender processing fee, any inspections you want, and earnest money are all out pocket along the way.  The amount you need at closing will be your down payment (which totally depends on the type and amount of your loan), prepaid taxes and insurance, and a million fees and taxes that you totally have no idea what they are but can come out to a few thousand dollars.  I am only saying all this so that you know it's not just about coming up with a down payment...there are a lot of fees and things along the way so just have a heads up.

4) How long does the process take from start to finish?
That depends.  If there are no issues with the house during the inspection and if there are no issues with the loan and it goes through smoothly, then it doesn't take long at all.  We have a closing date (if all goes well) of Feb. 28th...we first saw the house early January, so that's about 7/8 weeks start to finish.  But some loans are faster than others, and sometimes inspections come back saying that things need to be fixed first, and in these cases it will take longer.

5) What is closing like?
I have no idea...I will be sure to tell you when it happens!!

Well I hope this gives you a good picture of what home-buying is like.  Again, I am right smack in the middle of doing this for the first time, so that's good and bad.  Good, because I can give really detailed info as I am going through it, but bad because I don't know what kinds of surprises or hurdles can come yet.  But oh well, we can go through this together. :)  Hope you have a great week, and I will see you Friday!

If all goes well, this will be our new backyard!

1 comment:

  1. As for me, buying houses is really something anyone should underestimate. When I bought a commercial real estate Dallas, i really thought that I can pay for it without anyone's help. I ended up getting a mortgage loan.