Buying a House
Everyone will agree that buying a home is a big commitment. But, it’s also one of the most exciting purchases you’ll ever make! Are you a first time home buyer? NP! Follow these steps to buying a house and realize your dream of homeownership in Washington, DC or Maryland. (We’ve got you covered!)
Note: Do you have questions more specific to buying a condo? NP! Check out- The Ultimate Guide To Buying a Condo.
Step 1: Select a Realtor®
Your very first step with buying a house is to find a real estate agent. You need an agent that is skilled in more than just opening doors and pointing out the kitchen! Yes, you do.
You want an experienced agent (or broker) that you’re compatible with and who will represent you and your best interests through this entire process of buying a house – whether it goes smoothly or you encounter many challenges along the way. (Trust- there will be some challenges.)
It will be great if you and your agent review the steps to buying a house before you ever get started!
One word– GOOGLE. As you probably know, there are real estate agents everywhere! There are also many real estate agencies. Just look around and find a message that resonates with you. Then…
Make sure you have a connection with the agent you choose. There should have an obvious level of comfort and trust with this person. You should never feel kill just a number or pressured into working with an agent. Be cautious of anyone that makes a lot of grand promises – you are likely to be disappointed. Spend some time looking for a good match and trust your instincts.
Let us divert slightly from buying a house for a moment and talk a little about three terms that are used throughout this site: real estate agent, real estate broker, and REALTOR®. We will be using them pretty much interchangeably – for the sake of variety and readability, but there are important distinctions.
The term REALTOR® is a designation. This designation means that the real estate agent or real estate broker belongs to the National Association of Realtors® (NAR) and their state and local chapters. In the case of this brokerage, ASH MCGINTY– our real estate broker (Dana Ash-McGinty) and the brokerage firm are members of:
- District of Columbia Association of Realtors®
- Maryland Association of Realtors®
- Greater Capital Area Association of Realtors® (GCAAR)
The REALTOR® membership means a lot of other things, but perhaps most importantly to you – it means that the person subscribes to a Code of Ethics. When you employ a REALTOR®, know that they are bound by that code and, by law, they owe you – their client – what’s known as fiduciary duty. By definition, fiduciary duty means:
- Confidentiality – clients personal information is held in confidence
- Accounting – accurate accounting to all parties for all monies accepted by the REALTOR®
- Reasonable Skill and Care – your REALTOR® will perform duties professionally and competently
- Loyalty – your interest is above the REALTOR®’s interest
- Obedience – client instructions will be followed as long as they do not violate the law
- Disclosure – full disclosure to potential buyers of any material defect in the property
Now, let’s tackle real estate agent vs. real estate broker. Beyond being a real estate agent, in order to become a licensed real estate broker, you must satisfy additional educational requirements and a licensing exam. You are also to have a proven record of experience to be a real estate broker. Real estate agents work under the supervision of a real estate broker.
Step 2: Prepare your finances for buying a house, before leaving the gate
So, you have a good REALTOR®, hopefully you chose Dana Ash-McGinty, but either way – What’s the next step?
Most people buying a house will need a home loan aka mortgage. Assuming that you will need a loan and that you’re not going to be paying cash, we will have to assess your financial profile. Don’t stress! We will help you with this processs.
Don’t hit the open houses just yet. Make sure your finances are in order, so you know what you can realistically afford.
Use a mortgage calculator to estimate your budget given your income, debt, savings and other financial obligations. Check your credit score and compare your debt to income. The goal is to comfortably pay your full mortgage payment (including taxes and insurance) each and every month.
You will likely need some money up front for a down payment and closing costs. The good news is, most first-time homebuyers put down less than 20 percent. There are even some loans with as much as 100% financing.
Step 3: Choose a loan that’s right for you— and prequalify
Where do you want to live? Do you need additional down payment and closing costs funds? Do you qualify as a first time home buyer? Are there any grants or DPAs (down payment assistance) that you qualify for in that area? Does your profession (ie; first responder) or employer provide any funds for homeownership? Which lenders are approved for these programs? These are all the questions (and more) that we will answer together. Contact us for more assistance.
Now that you have a budget and a game plan, you’re in a better position to meet with a lender and discuss loan options, current interest rates and how much you can borrow.
Once you find a loan that fits your needs, get a pre-qualification letter, which estimates your borrowing power based on your financial information. Keep in mind pre-qualification is not a commitment to lend.
Submit additional information for review and approval for a stronger pre-approval letter. Having a pre-approval letter in hand when you make an offer shows sellers you are serious and gives you some negotiating leverage.
Within a day or two of submitting your application, your lender sends you a loan estimate, including your approximate interest rate, monthly payment and closing costs. Review this document carefully.
Keep in mind, it’s not about the maximum amount you can borrow based on your income; it’s about what you can comfortably afford.
Stage 4: Find a property and get your offer accepted
Now that you know what you qualify for, the fun of looking for homes with your real estate agent can begin! Save time and emotional energy by narrowing your search to homes that fit your financial criteria.
Preview properties online, and have your real estate agent show you only listings that are right for you. When you find a match, your agent will help you make an intelligent, informed offer. If it is accepted, you will submit earnest money (EM), also called earnest money deposit (EMD). This is a good faith deposit that’s placed in escrow to show your commitment to the purchase.
No worries– your earnest money deposit is applied to the money you are required to bring to closing- down payment and closing costs.
Stage 5: Continue the mortgage process for buying a house
Once the seller accepts your offer, you typically have 30 to 45 days to fulfill your purchase contract, so you need to move fast. To move forward, you need to verify your income and assets. Hopefully you submitted most of these documents in Stage 3. This requires extensive documentation, which is necessary for the lender to ensure you’ll be a successful homeowner who can handle loan payments over the long term.
Stage 6: Time For Inspections and Due Diligence
The offer you submitted would have a few contingencies. There are contingencies in almost every real estate contract.
A contingency is a clause in the real estate contract that states there are certain conditions that must be met by in order to continue to the next step in the contract.
One of the biggest contingencies will be the inspection contingency. This is when a home inspector will give you a clear-eyed assessment about the true condition of the property.
If the inspection report raises any serious issues, this would be used to reassess the deal.
Stage 7: Coast into your closing for buying a house
You’re almost home. Your mortgage is underwriting approved. At least three business days before you close, you will receive a closing disclosure. It lists the fees you must pay, which typically total 2 to 5 percent of the home price. (If you are using a down payment assistance loan (DPAL) and/or grant, many of these costs will be covered.
Read this closely and tell your lender if anything seems off. Know what to bring to your closing—such as your ID and any payments that are due. If you have a cosigner, that person needs to be there. Most of the time is taken up carefully signing forms. You then get handed the keys and the home is yours!
Buying a house? We’re here to help!
Questions about buying a house? Contact us!
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