Purchasing a home is an exciting time. I’ve put together a step by step guide to help you better understand the process.
- Talk to a Lender. The very first step is to talk to a lender and see how much you prequalify to purchase. If you don’t have a lender, I will provide a list of preferred lenders to contact/interview. Based on the information you provide the mortgage broker a purchase price and estimated monthly payment will be given to you. It’s important to remember that this number may vary due to interest rates, property taxes , etc. Be sure to let your lender know what monthly payment you are comfortable with – considering your finances.
- Begin Home Search. Once a purchase price has been established, it is time to start hunting. I will begin sending you listings as they come on market based on your criteria. Once you have selected homes of interest, I will check availability and showing instructions and get you in to see them. This can be done one at a time or by touring multiple homes.
- Make an Offer. Once you have found a home you would like to offer on, I will write a Residential Sales Agreement to present to the seller outlining, among other things – price, contingency periods, type of loan you will procure, home inspections to be made and a closing date. At this time you will sign a promissory note that states upon mutual acceptance of the offer you will provide a predetermined amount of money to be put towards down payment. This “earnest money” shows the seller you are serious in your attempt to purchase the home. It is usually 1 – 3% of the purchase price and is refundable if you decide not to purchase the house based on inspection results, seller’s disclosure, or house not appraising at value. These contingency periods are stated in the offer and I will ensure you know about them and that we act within these timeframes and deadlines.
- Open Escrow. The title “escrow” company is a neutral third party that acts only on mutually agreed upon written instructions. They will research the title of the home you are purchasing to know if there are any judgments or liens against the property or the seller. The title company will also request your social security number to find if there are any outstanding liens or judgments against you that would prevent the sale to go through. Once the title is cleared, title insurance will be issued, which insures what was discovered. The seller pays for the title insurance policy and you in return purchase one for your mortgage lender. This is is covered in your “closing costs”.
- Review Seller’s Disclosures. The seller will provide written disclosures of known facts about the property usually consisting of a Property Disclosure and a Lead Based Paint Disclosure. You will have five days to terminate the agreement if something is revealed which is unsatisfactory. These disclosures by no means should replace a professional home inspection.
- Inspections. I highly recommend my clients have home inspections performed by a profession home inspector. The buyer is solely responsible for the cost of these inspections and they are non-refundable. This is a crucial time where you are able to learn about the house. The inspector will assess the house from the roof to to foundation, test appliances, check for dry rot, mold & pest infestations, and examine the plumbing, electrical & other aspects of the property. RECOMMENDED INSPECTIONS (expect to spend $800 to $1,000) Whole Home Inspection – Provides you with overview of interior and exterior condition of the home. I would encourage you to be there when the inspection takes place (typically 3 hours) or at least for the wrap up, I will be there as well. This also gives you time to spend in the house, take measurements, etc. You will receive a lengthy report with photos via email usually the next morning. If there are particular concerns, the report will recommend you have other subcontractors out to give estimates for repairs (eg. roof, plumbing, electrical, mold, etc.) Sewer Scope. A digital camera is sent down the sewer line to observe and record its condition all the way to the city main. Radon. Radon is an odorless, tasteless and invisible gas produced by the decay of uranium in soil and water. Radon is the second leading cause of lung cancer in the United States and 1 of 7 homes in Portland have high levels of radon. A radon detection monitor will be set in home for a 48 hour period that will yield immediate results. Oil Tank Search/Soil Samples. Homes built before 1965 most likely were heated by oil. It was common for the oil storage tank to be buried in the ground adjacent to the house. If the tank has been decommissioned (by removal or in-ground) there should be certification provided by the seller. If not, a oil tank search is necessary. If oil from an underground storage tank is still used, soil samples will have to be conducted to ensure there has not been a leak.
- Negotiation of Repairs. After inspections are completed, you will have the opportunity to ask the seller to address some of the defects that were found. You can request the seller to make repairs or for a reduction in sales price. Every situation will be a little difference since this step is indeed a negotiation.
- Appraisal. Once the home contingency period is over and you decide to proceed with purchasing the home, I will contact your lender to order an appraisal. Your lender will send an appraiser out to ensure the home is in its represented condition and that the price is in line with comparable properties. This is done to reduce their risk in lending you money to purchase the home.
- Homeowner’s Insurance and Utilities. After appraisal and once you are fairly certain the purchase will go through, you will want to purchase homeowner’s insurance. Your lender will make insurance a requirement of the sale. Furthermore, I will give you a list of local utility companies to contact to transfer services into your name as of the day of close.
- Close. “Closing” is when title is transferred from the seller’s name to yours. There are three steps to closing: signing, funding and recording. Usually a few days before the scheduled closing date you will go to the escrow office and sign the loan documents. You will also bring your license or passport and a cashiers made payable to the escrow company for the balance of the down payment. Alternatively you can have the down payment wired to escrow. After you have signed the loan documents the packet will be sent back to the lender, they will review, and release funds to escrow. Once the county records your closing and provides a closing number, you officially own the property!
- Possession. Possession is the date and time agreed upon in the residential sales contract for you to receive the keys (from me) to your new property! Closing date and possession may not be the same day. For example, the sellers may have negotiated a “rent back” period.
Voila, here you have the steps of purchasing a home. It may seem like a lot to take in, but remember I will be there every step of the way!