Whether a home or investment property, the purchase of real estate requires a great deal of documentation. The first step of your journey is:
PREPARE
A. Financial Data
You should gather all of the financial documents you’ll need to secure financing for your home. Typically this includes:
- bank accounts
- investments
- credit cards, credit products
- automobile loans
- recent pay stubs
- tax returns for the past 2 years
B. Credit Rating
Your credit score will play a big role in what type of home you will be eligible to purchase, and will dictate your interest rate. A premium credit score may mean a lower interest rate on your mortgage. Check your credit rating with a credit reporting agency (Equifax, Experian or Trans Union)
C.Keep your Finances in Check
You want to approach home buying from a position of financial stability, so now is not a good time to make a sudden career change or a large purchase.
CHOOSE THE RIGHT REAL ESTATE AGENT
A. Buying a Home
This process requires making important financial decisions, understanding complex issues and completing a lot of paperwork. It helps to work with an expert when undertaking a large purchase. An agent will help guide you through the process and is able to get access to listings before they hit the general market.
B. Choose an Agent
Your agent should be:
- full-time, experienced in your type of real estate transaction
- familiar with your prospective area
- licensed and dedicate time to you and your search
- an attentive listener who is aware of your needs and concerns
- someone whom you feel comfortable working with
Ask about their education and credentials as well as referrals.
SHOP AROUND
A. Take a Drive
Become familiar with the neighborhoods you are interested in. Drive around to see what each neighborhood offers, what the amenities are and to see the available homes in the area. Also note the price range at which they are listed.
B. Make an Offer
Once you have selected the home you would like to purchase, your agent will help you make an appealing offer to the seller.
ESCROW, INSPECTIONS & APPRAISAL
A. Choose a Title Company & Escrow Holder
You will need to select a title company. A title company acts as a neutral third party and holds all of the tools necessary for the sale, including funds and deed. The title company reviews the complete recorded history of the property to insure the title is free and clear of encumbrances and that new encumbrances are properly added to the title.
B. Learn How to Hold the Title
You may wish to consult with an attorney or tax adviser on the best way to hold title. Different methods of holding title have different legal, estate and tax implications – especially when selling or upon death of the title holder.
C. Schedule Inspections
Once the seller accepts your offer, you will need to have certified inspectors evaluate the home and its systems. Your agent may recommend certain inspections (roof, chimney/fireplace, property boundary survey, well, septic, pool/spa, arborist or mold.)
D. Choose Appraisal & Lending
Your lender will contact you if additional documents are needed in order to approve your loan application and fund your loan. The lender will often send an appraiser to visit and appraise the property. Appraisers base a property’s value on the square footage of the property/building, building costs and recent sales of comparable properties. When you are within 2 weeks of your closing date, double-check with your lender to ensure your loan will be approved on time.
E. Complete the Final Inspection
A few days before you assume the property, one last inspection will be done to determine that everything is in working order.
CLOSING ESCROW
When your transaction is nearly complete, the title company will provide you with a “closing statement” listing all financial details of your home purchase. Your agent will review this with you to ensure its accuracy. At the final step, the title company will have you sign the final documents including the loan (deeds of trust). Once everything is complete, the title company will record the transaction for you at the County Assessor’s Office and you will officially become the new property owner.