Home Buying 101: Here’s How it Works
First, how much can you afford?
Are you paying cash, or will you be financing the purchase with a home mortgage? If you are financing the purchase, which most people do, you will need to get a home mortgage. A bank, mortgage company or lending agency provides home mortgages for buyers. Be sure to compare various lenders in order to ensure the best rate and fees for your mortgage. Walk through your financials with your lender to gather insight into how much home you can afford. As a general rule of thumb, your mortgage payment should be less than 25% of your income. A mortgage lender will walk you through the process of getting pre-qualified or, even better, pre-approved.
What does a pre-qualified or pre-approved buyer mean?
A lender will provide a buyer with a pre-qualification letter once they have completed an initial screening of a buyer’s financials. A pre-qualification letter will include a rough estimate of how much a buyer can borrow. A pre-approved buyer means that a lender has dug deeper into the personal financials and taken into account a buyer’s income as well as past financial history. Buyers who take the extra effort to get pre-approved will appear to sellers as a more serious buyer. When there are multiple offers on a property, buyers who include a pre-approval letter with their offer will be at an advantage over buyers who are only pre-qualified.
I found a home, how do I make an offer?
You can hire a real estate attorney to draft an offer letter, or use purchase and sale agreement (PSA) documents found online. We, respectfully, recommend using www.fsboHandshake.com to make an offer and complete the transaction. fsboHandshake is an online platform that simplifies the entire home buying process. We provide instruction and personal guidance from offer to close; fsboHandshake supports both buyers and sellers. Is your seller not yet signed up with fsboHandshake? Let them know you’d like to use fsboHandshake to make your offer and complete the purchase process. If your seller chooses not to use fsboHandshake, you may want to consult a real estate attorney to assist you with the offer process.
You have signed the contract, now what?
Once both parties have agreed upon the purchase terms, it is referred to as being “under contract”. The purchase agreement is sent to the escrow company that is listed in the contract. An escrow agent is a neutral third party that will carry out the instructions detailed in the contract and will hold the funds in an escrow account until the transaction is finalized. A buyer will deposit money with their escrow agent to be properly managed. To avoid fraud, always work with an escrow agent and never give money directly to a seller.
Once under contract, there are several tasks to complete prior to getting the keys. First, if you have included contingencies in the contract, you will need to carry out their tasks prior to closing. Typically a contingency item will have a specific date to be completed by. If a contingency item fails to be completed within the timeframe identified in the contract, that contingency item is considered waived. Common items to complete at this time are the home inspection, appraisal, confirming a mortgage lender, finding insurance for the home, and reviewing the seller’s home disclosure. If you are using fsboHandshake, a detailed and tailored list of your tasks and deadlines will be provided to you.
Last step, getting your keys.
Once you have completed the items detailed in your contract (i.e. home inspection, appraisal, final walkthrough, etc.) you will work with your escrow agent to sign the final closing documents. The escrow agent will walk you through each document at the closing, this usually takes place at the office of the escrow company. If you are financing the purchase, your lender will be in contact with you and your escrow agent to ensure the mortgage is ready for closing. Be sure to have your closing and down payment funds ready and available for closing. You will need to fund any down payment amount and closing costs prior to closing. Once both parties have signed the final paperwork you will receive the keys to your new home.
fsboHandshake provides the tools and guidance to complete for sale by owner real estate transactions with confidence, all the way from initial offer to close.