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How to Buy a Home in Today’s Market

Getting Started!

Step 1

Ask yourself why you want to buy a home. To stop paying rent? To start building equity? To have a place of your own? To move up to a bigger home or downsize to a smaller home? Next, list what kind of home you’d like and where you would like it to be. Be specific. Separate the “must haves” from the “want to haves”. Consider area, community, schools, neighborhoods, community services, and commute time to and from work.

Think about home styles (single level, 2 story, townhouse, etc.). How much space do you need now and in the foreseeable future (# of bedrooms, baths, kitchen size, living/family rooms, etc.). Do you want a newer or older home to fix up? Knowing exactly what you think you want makes house hunting and later decisions easier when you get into the nitty-gritty aspects of buying. This is especially true when deciding on “the house” during negotiations.

Step 2

Get Pre-Qualified! There are so many loan programs out there, you need to make an informed decision on what is right for you. There are many factors on which to base your decision, such as:

  • Do I have money for a down payment?
  • Are the first time home buyer programs the best course for me?
  • How long am I planning on living in my new home?
  • Is my income or family size going to significantly change in the near future?
  • Should I use conventional or government backed financing?

Step 3

Select a real estate agent and be represented! By having a Buyer’s agent, you will have someone representing YOU and not the Seller. Have your Buyer’s agent help you set up a plan of action through an analysis of your needs and finances, the current housing market, homes available in your price range, and lenders’ mortgage options. It is absolutely critical to know your finance options, what you can qualify for and determine the monthly payment you will feel comfortable with for the time period you will be living in the home. Your Buyer’s agent will also help you when determining a price to offer and put you in the best negotiating position.

House Hunting

Step 4

Searching for homes. The next step is touring neighborhoods and picking the home that best meets your needs. Take your time and think carefully about each house you see. Ask yourself the following questions:

  • Is there enough room for both the present and the future?
  • Are there enough bedrooms and bathrooms?
  • Is the house structurally sound?
  • Do the mechanical systems and appliances work?
  • Is the yard big enough?
  • Do you like the floor plan?
  • Will your furniture fit in the space?
  • Does anything need to be repaired or replaced?
  • Will the Seller repair or replace the items?
  • Imagine the house in good weather and bad, and in each season. Will you be happy year ‘round?

Now the fun begins!

Step 5

Putting in an offer. Once you have found the “perfect home” it is time to put in an offer. All real estate offers must be in writing. The current purchase and sale agreement realtors use in the state of Idaho is a six page contract that covers the entire process of the sale. The first step is to determine the price and terms you want to offer. You will need to put down earnest money at this time. Earnest money will be placed in a trust account with either the selling or listing broker and then credited to you at closing. Your offer will be contingent upon several factors, such as securing acceptable financing, a satisfactory home inspection, clear title to the property, and an appraisal that is at least equal to the purchase price.

Step 6

Seller Responds to Your Offer. The Seller can do one of three things to your offer. They can accept it as is, they can reject it, or they can respond with a counter offer changing any of the terms of the offer. Then the ball is in your court and you have the same three options. Price is only one of the many terms that may be negotiated. Often times closing date, repairs, change of possession date or items included in the sale are contested by Buyers and Sellers.

Escrow

Step 7 Congratulations, your offer has been accepted!

Opening Escrow. Now is the time we open escrow with the closing agency, usually in this area it is a title company. The escrow officer is in charge of the closing and is defined as a neutral third party. They will be responsible for the recording of the deed and deed of trust, following all closing instructions agreed in the Purchase and Sale Agreement and disbursement of all funds. Normally, the escrow time period is approximately 30 days but can be as short as a few days or as long as a few months, depending on the needs of the Buyer and Seller. Simultaneously, as escrow is opened, all time frames for removing the contingencies of the contract begin.

Step 8

Have a Professional Home Inspection. As mentioned above, the offer can be made subject to your approval of the home’s condition. It is highly recommended all Buyers have a professional inspector look over every major part of a home and write a report that judges the home’s quality and condition. Based on this report, you can ask the Seller to make specific repairs. If the Seller refuses, you may rescind your offer and have your earnest money returned to you. Generally, the inspector checks the electrical system, plumbing and waste disposal, the water heater, insulation and ventilation, potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Be sure to hire a home inspector that is qualified and experienced.

Step 9

Removal of all Contingencies. Within the time frames indicated on the contract, all contingencies such as the inspection, financing and title report shall be removed by the Buyer. Additionally, the lender will order the appraisal. Assuming the appraised value is at least the purchase price and there are no conditions of the appraisal, you are ready to close!

Step 10

Final Walk-Through. The final walk-through is normally done a couple of days before closing to verify the home is in the same condition at closing as it was when you made the offer, all required repairs have been completed and all conditions of the sale have been met by the Seller.

Step 11

Closing. Prior to signing, you will be able to review the closing statement which will designate all the costs paid by the Buyer to include, but are not limited to, escrow closing fees, property taxes, interest (from the day of closing to the end of the month), loan origination fee, recording fees, title insurance, prepaid escrow fees, one year homeowner’s insurance and any document preparation fees. Your lender will give you a Good Faith Estimate of all closing and prepaid costs required when you fill out a loan application.

Once you understand all the documentation, you’ll sign the mortgage, agreeing that if you don’t make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. You will sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed. The deed and mortgage will then be recorded in the state Registry of Deeds, and you will be a homeowner!

Step 12 Congratulations! You are a homeowner!

Once all the required documents are recorded, you will receive the keys to your new home. You will be able to reap the rewards of homeownership!

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