Defining Your Needs
Start with the end in mind. Ask yourself questions like: Where do I want to live? How much commute distance to work am I willing to accept?
Some of these questions may be different for a first time buyer vs. move-up buyers but we basically like to start by doing a visualization exercise. Close your eyes and picture your new home. How much living space do you see? How many bedrooms and bathrooms do you need? What does the street and neighborhood look like? What style is the home — modern or traditional, one or two levels, attached townhome or detached single home? Can you see an outdoor yard space or patio or deck? Will you have children attending public schools? These questions help determine what are the highest priorities for your new home.
Realize tradeoffs — you can get anything you want, but you cannot get everything you want. Maybe some things you really want will need to wait until your next home, after all, most Californians move every 7 years.
There are several benefits to getting a pre-approval before you begin your home search. First of all, you will know exactly how much real estate you can afford and you can avoid any "payment shock" by knowing up front how much you will be spending each month toward your mortgage and property taxes. Second, when you do find a property you want to buy, you will be able to move quickly to write an offer and be better positioned than someone less prepared. Finally, being pre-approved is more efficient in that it reduces the amount of time it will take your lender to fund your loan because your loan application has already begun.
Be prepared to meet a loan agent and provide comprehensive documentation, which the lender may independently verify, including but not limited to:
- Job and career status
- Monthly debt payments
- Cash available
- Total assets and debts
Sometimes the biggest issue with getting pre-approved is not about pushing the limit to get the most you can afford, it's more about finding what payment you feel comfortable paying each month.
From our experience, the initial payment shock lasts about 18 months. After which time your income tax withholding has adjusted to the new payment and your lifestyle has normalized to home ownership.
Finding the right home for you is a process of elimination, not a process of selection. When we begin a home search with a new client, we start by saying — of the homes on the market right now there may be 3 or 4 that fit your needs well, there will never be 24. You do not need, nor should you want, to see every home on the market.
Based on the pre-approved price boundary and the needs analysis guideline from the first step above, it's time to begin your search. Get to know the neighborhoods, complexes, or subdivisions that interest you. Drive around to get a feel for what it would be like to own a home in the area and start getting a sense of the homes available in those areas. Maybe ride a bike or walk through the area so you can see how people live; maybe go there on mornings, afternoons, and evenings as well as both weekends and weekdays to get sense of traffic and habits.
Select a few homes that interest you the most and have your real estate agent make appointments to visit them. Keep detailed notes about what you like and dislike about each home so you can fine-tune your needs and trade-offs.
It happened. You have been visiting homes and keeping notes until you walked into the home where you say — this is the one. After reviewing the available inspections, reports, and disclosures given by the sellers you are ready to draft an intelligent offer.
Your agent should coach you on writing an offer most likely to be accepted by the seller. Terms and conditions are just as important to the seller as the overall price. How many days is the escrow time before closing — shorter time means the seller saves money on their mortgage, maybe the sellers need a rent-back from you so they can find their new home. How much earnest money initial deposit are you putting down and how much time have you asked to do your inspections all show how serious you are about buying their home.
If there are multiple offers, you need to consider each aspect that makes your offer stronger than any other who comes to the table.
Your offer is accepted and now begins your time of "due diligence". As outlined in the purchase agreement, you will have time to perform your own inspections of the property. It is wise to have professionals in specific areas like termite/pest inspectors, roof inspectors, chimney, etc go over the home and send you a report to make sure you know the condition of the home you are buying.
Depending on what is discovered by these inspectors you have several options:
- If a major issue is discovered, you may go back to the seller and ask they make repairs or credit you the cost of making these repairs
- You may break out of the purchase agreement and walk away from the home
- Or you accept what is found and continue to move forward knowing that you will need to pay for the needed repairs
Another important report that will be ordered comes from the Lender — the appraisal. The lender will make sure that they are making a sensible loan so to protect you and them, they order a report to confirm the value of the property.
Close & Move-In
The "Closing" is just a term used for the time when all paperwork has been completed by both the Buyer and Seller, the escrow company has received all funds from the buyer and the lender, and the new owners are recorded with the county.
The final walk-through inspection takes place a couple days before the closing. You visit the property to verify that all is in working order and in the same condition as when you decided to buy it (like making sure the movers didn't damage the walls or something).
You will need to transfer the utilities and services like cable, trash, etc so we will provide a list of useful phone numbers needed to get you started.
Finally, the seller will arrange to have all property keys, garage door remotes, and any other important information delivered to you when the escrow officer calls to confirm the new title is recorded with county.