Your Guide to Buying a Home
When you make that big decision to buy your first or new home, you might not know what to do first to be an informed buyer throughout the process. Our Guide to Buying a Home will assist you in understanding the steps and what to expect during the home buying process. Our Real Estate Brokers are experienced professionals that are more than willing to answer your questions as well; please do not hesitate to contact us if you would like to begin the process or if you have additional questions.
What's Your Goal in Buying a Home
This might seem like a silly question but understanding your wants and needs will help find a home that fits your lifestyle while staying within your budget. While you may want 4 bedrooms you may only need 3, while you'd love to have a garage you may not need one, you may want a gourmet kitchen but you don't cook, and so on. Make sure you understand what's most important to you and prioritize your wants and needs based on your budget.
What's your Budget
This is one of the most important questions you'll need to answer prior to starting the home buying process. Many buyers have a monthly mortgage payment in mind that they believe they can afford but neglect to factor in property taxes, homeowners insurance, utilities, and reserves for any needed repairs. Start with our mortgage calculator so you can estimate your monthly mortgage payment based on the purchase price of your new home. Now figure your debt-to-income ratio. Most mortgage lenders like to see a debt-to-income ratio in the 30% range with, on average, a maximum debt-to-income ratio of 40%.
To calculate your debt-to-income ratio, add up all your monthly debt payments and divide them by your gross monthly income. Your gross monthly income is the amount you've earned before any taxes or deductions are taken out. For example, if you plan to pay a $1,500 a month mortgage payment and you currently pay $200 a month for an auto loan and $500 a month for other debts your monthly debt payments are $2,200. If your gross monthly income is $6,000, your debt-to-income ratio is 37%. ($2,000 / $6,000 = 0.366 or 37%)
Get Pre-Approved For a Mortgage
This is an extremely important step in the home buying process for many reasons including: are you even qualified for a mortgage, what type of loan are you qualified for, is a down payment required and if so how much, what's your interest rate, will the lender require PMI (Private Mortgage Insurance) if your down payment is less than 20%, are you qualified to purchase a "fixer" or does the home need to be in good condition. These and possibly more factors will affect what you're eligible for. That's why it's critical to talk to a mortgage broker before beginning the process, so you're only viewing homes that fit within your budget.
Find Your Dream Home
Now the step you've been waiting for, finding your dream home. Over 90% of buyers are now searching online for their next home and for a good reason. Our website has a direct feed with the Northwest MLS (NWMLS) and the Regional MLS (RMLS) so you can be assured you're seeing every home listed. In addition, our website is updated multiple times an hour, you'll never miss the latest listings and if you sign up and save your searches with our free service we'll notify you if any new listings hit the market that matches your criteria. As always you can reach out to one of our Real Estate Brokers and they'd be happy to assist in finding you a place you can call home. Begin your search now!
Schedule a Showing
Once you've found a home or homes, you'd like to see you can either call our office or schedule a showing online. Our Real Estate Brokers are available seven days a week, and we can show you ANY home listed, including homes listed with other brokerages.
Make an Offer
Now that you've found a home that meets your criteria and fits within your budget it's time to make an offer. When you work with Pacific Northwest Realty Group we will sit down and structure an offer that's favorable for you. We will take into consideration the amount of time the home has been listed, price compared to other comparable properties, the type of loan you're approved for, and many other factors that will make your offer appealing to the seller while getting you the best deal possible. When we represent you as the buyer's agent our sole fiduciary duty is to you and only you.
Once your offer has been accepted by the seller the closing process begins. The ratified contract will be delivered to escrow so they can begin working on the closing process and request a title report. In addition, several timelines will begin and in order to be in compliance with the terms of the contract these timelines must be followed in order to protect your contractual obligations. Your Real Estate Broker will monitor these timelines in order to ensure we're protecting you during the closing process. Some of the timelines include: deposit earnest money with the escrow company, obtain and review the title commitment, schedule the home inspection and if necessary the well and septic inspections, ensure your lender has begun the loan process, negotiate any repairs based on the inspection report if necessary, and prepare you for closing by giving you a list of what the escrow officer will need in order to sign closing papers and record the sale.
A couple of days before closing your Real Estate Broker will arrange a final walk-through of the home. This is an essential step in the process ensuring nothing has changed since the last time you viewed the property, it allows you to see the house with no furniture, and wall decor provided it was occupied, and it allows you to make sure any items that were agreed to in the contract remain. If any issues arise the closing process can be delayed until the seller has corrected any problems.
The day you've been waiting for has arrived. Here's something to keep in mind with regards to the day you sign the closing papers and the actual closing date. The escrow officer will schedule a time and day for each party to come in to sign, once the closing papers are signed most lenders will want a final review of the documents to ensure everything was signed correctly. Once the lender has reviewed the closing papers they will release funds to the escrow office which allows them to record the sale with the local recording office. This process usually takes about 24 hours. This is why you'll usually sign a day or two prior to the scheduled closing date. The actual closing day, the day the sale has fully funded and recorded with the local recording office is the day you'll receive the keys to your new home.
A Home Buyer's Glossary to Real Estate
During the buying process, you may hear terms that you're not familiar with. While your Real Estate Broker is also available to answer any questions you might have it's also important to be an informed buyer. Below are some common real estate terms and definitions that may help you during the home buying process.
Abstract Of Title – A complete historical summary of the public records relating to the legal ownership of a particular property from the time of the first transfer to the present.
Adjustable Rate Mortgage (ARM) – Also known as a variable-rate loan, an ARM is one in which the interest rate changes over time, relative to an index like the Treasure index.
Agreement of Sale – Also known as a contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller and buyer agree to transact under specific terms spelled out in writing and signed by both parties.
Amortization – The process of reducing the principal debt through a schedule of fixed payments at regular intervals of time, with an interest rate specified in a loan document.
Appraisal – A professional appraiser’s estimate of the market value of a property based on local market data and the recent sale prices of similar properties.
Assessed Value – The value placed on a home by municipal assessors for the purposes of determining property taxes.
Closing – The final steps in the transfer of property ownership. On the Closing Date, as specified by the sales agreement, the buyer inspects and signs all the documents relating to the transaction and the final disbursements are paid. It is also referred to as the Settlement.
Closing Costs – The costs to complete a real estate transaction in addition to the price of the home, may include: points, taxes, title insurance, appraisal fees, and legal fees.
Contingency – A clause in the purchase contract that describes certain conditions that must be met and agreed upon by both buyer and seller before the deal is binding.
Counter-offer – An offer, made in response to a previous offer, that rejects all or part of it while enabling negotiations to continue towards a mutually-acceptable sales contract.
Conventional Mortgage – One that is not insured or guaranteed by the federal government.
Debt-to-Income Ratio – A ratio that measures total debt burden. It is calculated by dividing gross monthly debt repayments, including mortgages, by gross monthly income.
Down Payment – The money paid by the buyer to the lender at the time of the closing. The amount is the difference between the sales price and the mortgage loan. Requirements vary by loan type. Smaller down payments, less than 20%, usually requires mortgage insurance.
Earnest Money – A deposit given by the buyer to bind a purchase offer and which is held in escrow. If the property sale is closed, the deposit is applied to the purchase price. If the buyer does not fulfill all contract obligations, the deposit may be forfeited.
Equity – The value of the property, less the loan balance, and any outstanding liens or other debts against the property.
Easements – Legal right of access to use of a property by individuals or groups for specific purposes. Easements may affect property values and are sometimes part of the deed.
Escrow – Funds held by a neutral third party (the escrow agent) until certain conditions of a contract are met and the funds can be paid out. Escrow accounts are also used by loan servicers to pay property taxes and homeowner’s insurance.
Fixed-Rate Mortgage – A type of mortgage loan in which the interest rate does not change during the entire term of the loan.
Home Inspection – Professional inspection of a home, paid for by the buyer, to evaluate the quality and safety of its plumbing, heating, wiring, appliances, roof, foundation, etc.
Homeowner’s Insurance – A policy that protects you and the lender from fire or flood, a liability such as a visitor injury, or damage to your personal property.
Lien – A claim or charge on property for payment of a debt. With a mortgage, the lender has the right to take the title to your property if you don’t make the mortgage payments.
Market Value – The amount a willing buyer would pay a willing seller for a home. An appraised value is an estimate of the current fair market value.
Mortgage Insurance – Purchased by the buyer to protect the lender in the event of default (typically for loans with less than 20% down). Available through a government agency like the Federal Housing Administration (FHA) or through private mortgage insurers (PMI).
Possession Date – The date, as specified by the sales agreement, that the buyer can move into the property. Generally, it occurs within a couple of days of the Closing Date.
Pre-Approval Letter – A letter from a mortgage lender indicating that a buyer qualifies for a mortgage of a specific amount. It also shows a home seller that you’re a serious buyer.
Principal – The amount of money borrowed from a lender to buy a home or the amount of the loan that has not yet been repaid. Does not include the interest paid to borrow.
Purchase and Sale Agreement – A detailed, written document which makes an offer to purchase a property, and which may be amended several times in the process of negotiations. When signed by all parties involved in the sale, the purchase and sale becomes a legally-binding sales agreement.
Title – The right to, and the ownership of, property. A Title or Deed is sometimes used as proof of ownership of land. Clear title refers to a title that has no legal defects.
Title Insurance – Insurance policy that guarantees the accuracy of the title search and protects lenders and homeowners against legal problems with the title.
Truth-In-Lending Act (TILA) – Federal law that requires disclosure of a truth-in-lending statement for consumer loans. The statement includes a summary of the total cost of credit.
Title Search – A historical review of all legal documents relating to ownership of a property to determine if there have been any flaws in prior transfers of ownership or if there are any claims or encumbrances on the title to the property.