How To Prepare for House-Hunting
Know that there’s no “right” time to buy.
If you find the perfect home now, don’t risk losing it because you’re trying to guess where the housing market and interest rates are going. Those factors usually don’t change fast enough to make a difference in an individual home’s price.
Don’t ask for too many opinions.
It’s natural to want reassurance for such a big decision, but too many ideas from too many people will make it much harder to make a decision. Focus on the wants and needs of the people who will actually be living in the home.
Accept that no house is ever perfect.
If it’s in the right location, the yard may be a bit smaller than you had hoped. The kitchen may be perfect, but the roof needs repair. Make a list of your top priorities and focus in on things that are most important to you. Let the minor ones go. Also, accept that a little buyer’s remorse is inevitable and will most likely pass.
Don’t try to be a killer negotiator.
Negotiation is definitely a part of the real estate process, but trying to “win” by getting an extra-low price or refusing to budge may cost you the home you love.
Remember your home doesn’t exist in a vacuum.
Don’t get so caught up in the physical aspects of the house itself that you forget about important issues such as noise level, access to amenities, and other aspects that also have a big impact on your quality of life.
Don’t wait until you’ve found a home to get approved for a mortgage, investigate insurance, or consider a moving schedule. Being prepared will make your bid more attractive to sellers.
Choose a home first because you love it; then think about appreciation.
A home is still considered a great investment, but its most important role is as a comfortable, safe place to live.
How to apply for a mortgage
Once you find a home that meets your preferences, needs and budget, and the seller accepts your offer, it’s time to apply for your loan.
You’ll need to select a lender and complete an application. Depending on the lender, you may be able to apply in person, by phone or online. All lenders require you to provide information about yourself and anyone else, such as a spouse or partner, who will be listed as a co-borrower on the mortgage.
What you’ll need
You and your co-borrower, if you have one, will need to provide your lender with documentation to verify your employment history, creditworthiness and overall financial situation. The following documents will be required:
- W-2s (for the last 2 years)
- Recent pay stubs (two most recent consecutive)
- Bank statements for all financial accounts, including investments (for the last 2 months, all pages)
- Signed personal and business tax returns (all pages and relevant schedules)
- If self-employed, a copy of most recent quarterly or year-to-date profit/loss statement
- A copy of the signed Purchase and Sales Agreement
Your lender may require more documents, depending on your circumstances and the type of mortgage for which you’re applying. You can expect your lender to ask you details about your employment and financial history. With your permission, your lender will also run your credit report as part of the process.
Be sure to take your time and carefully fill out the application as completely and accurately as possible. Not disclosing credit problems up-front or holding back requested documents will only delay the process and potentially prevent approval of the mortgage, so it’s to your benefit to fully disclose everything about your finances.
Locking in your interest rate
Since interest rates fluctuate frequently, things can change between the day you apply for your loan and the day you close. If you want to protect yourself against rising interest rates and ensure that the loan terms you used to build your budget are locked, you might consider locking in your rate with your lender when you fill out your loan application.
A rate lock, also known as a “rate commitment,” is your lender’s assurance that the interest rate and discount points are guaranteed until the rate lock expiration date. The lender will provide the terms of the rate lock to you in writing, including the agreed-upon interest rate, the length of the lock, and any discount points you choose to pay.
Of course, if you believe that interest rates will decrease in the near future, waiting to lock your rate may make sense to you. In the end, it’s a personal choice when to lock your rate. The rate must be locked prior to the lender preparing your closing documents. Talk to your lender about the choice that best suits your needs and your preferences.
The Escrow Process
The Basic Steps of Closing
Starting the process
A sales contract is signed by the buyer and seller, and delivered to the closing agent, usually with a deposit check. The escrow is accepted by the escrow agent, often by written notation on the contract. The escrow agent starts the closing process by opening a title order. The file begins to be processed. Tax information, loan payoffs, survey (if necessary), homeowner/maintenance fees, inspections/reports, and hazard and other insurances as well as legal papers are ordered. A title search is ordered.
Title search and examination
This is a search made of the public records. Records searched include deeds, mortgages, paving assessments, liens, wills, divorce settlements and other documents affecting title to the property. Title examination is the examination of the documents found during the title search that affect the title to the property. This is when verification of the legal owner is made and the debts owed against the property are determined. Upon completion of the search and examination, a title commitment/preliminary report is prepared, and reviewed and sent out to interested parties.
Document preparation and/or request to produce
The closing agent reviews the new lender’s instructions and requirements, reviews instructions from other parties to the transaction, reviews legal and loan documents, assembles charges, prepares closing statements, and schedules the closing.
Settlement or closing the transaction
The escrow or settlement agent oversees closing of the transaction. The seller signs the deed and closing affidavit. Buyer signs the new note and mortgage. The old loan is paid off. Seller, real estate agents, attorneys and other parties present at the closing of the transaction are paid.
After the signing has been completed, the escrow or settlement agent will forward payment to any prior lender, and pay all parties who performed services in connection with your closing (if they have not been paid). The transaction documents are recorded in the county in which the property is located. Title insurance policies are prepared and sent to the new lender and to you. This all happens without any further actions by the buyer or seller.
What is Title Insurance?
What is a title?
Simply stated, the title to a piece of property is the evidence that the owner is in lawful possession of that property.
What is title insurance?
Title insurance protects real estate owners and lenders against any property loss or damage they might experience because of liens, encumbrances or defects in the title to the property. Each title insurance policy is subject to specific terms, conditions and exclusions.
How does title insurance differ from other insurance?
Insurance such as car, life, health, etc., protects against potential future events and is paid for with monthly or annual premiums. A title insurance policy insures against events that occurred in the past of the real estate property and the people who owned it, for a one-time premium paid at the close of the escrow.
What does it cover?
Title insurance protects against claims from defects. Defects are things such as another person claiming an ownership interest, improperly recorded documents, fraud, forgery, liens, encroachments, easements and other items that are specified in the insurance policy.
Who needs it?
Purchasers and lenders need title insurance in order to be insured against various possible title defects. The buyer, seller and lender all benefit from issuance of title insurance.
How is a title insurance policy created?
After the escrow officer or lender opens the title order, the title agent or attorney begins a title search. A Preliminary Report is issued to the customer for review and approval. All closing documents are recorded upon escrow’s instruction. When recording has been confirmed, demands are paid, funds are disbursed, and the actual title insurance policy is created.
What is escrow?
Escrow refers to the process in which the funds of a transaction (such as the sale of a house) are held by a third party, often the title company or an attorney in the case of real estate, pending the fulfillment of the transaction.
What are the title insurance policy types?
The Owner’s Policy insures the new owner/home buyer, and a lender’s policy insures the priority of the lender’s security interest.
What to Know About the Home Inspection
Some items should always be examined.
The home’s “skeleton” should be able to stand up to weather, gravity, and the earth that surrounds it. Structural components include items such as the foundation and the framing.
The inspector should look at sidewalks, driveways, steps, windows, doors, siding, trim, and surface drainage. They should also examine any attached porches, decks, and balconies.
A good inspector will provide very important information about your roof, including its age, roof draining systems, buckled shingles, and loose gutters and downspouts. They should also inform you of the condition of any skylights and chimneys as well as the potential for pooling water.
They should thoroughly examine the water supply and drainage systems, water heating equipment, and fuel storage systems. Drainage pumps and sump pumps also fall under this category. Poor water pressure, banging pipes, rust spots, or corrosion can indicate larger problems.
You should be informed of the condition of service entrance wires, service panels, breakers and fuses, and disconnects. Also take note of the number of outlets in each room.
Heating and air conditioning
The home’s vents, flues, and chimneys should be inspected. The inspector should be able to tell you the water heater’s age, its energy rating, and whether the size is adequate for the house. They should also describe and inspect all the central air and through-wall cooling equipment.
Your inspector should take a close look at walls, ceilings and floors; steps, stairways, and railings; countertops and cabinets; and garage systems. These areas can reveal leaks, insect damage, rot, construction defects, and more.
Inspectors should check for adequate insulation and ventilation in the attic and in unfinished areas such as crawl spaces. Insulation should be appropriate for the climate. Without proper ventilation, excess moisture can lead to mold and water damage.
They’re charming, but fireplaces can be dangerous if they’re not properly installed. Inspectors should examine the vent and flue, and describe solid fuel-burning appliances.
Home Warranty FAQ’s
What is a home warranty?
The standard home warranty is a one-year service contract that protects a resale home buyer or current homeowner against the cost of unexpected repairs or replacement of major systems and appliances that break down due to normal usage. Coverage is also available to home sellers during the listing and escrow period to help them keep unforeseen breakdowns from potentially delaying the close of sale.
Checklist: Prepare for Your Move
Update your mailing address at usps.com or fill out a change-of-address form at your local post office.
Change your address with important service providers, such as your bank(s), credit companies, magazine subscriptions, and others.
Create a list of people who will need your new address. Whether you plan on sending formal change-of-address notices in the mail or just e-mailing the family members, friends, and colleagues who should be informed, a list will ensure no one gets left out.
Contact utility companies. Make sure they’re aware of your move date, and arrange for service at your new home if the service provider will remain the same.
Check insurance coverage. The insurance your moving company provides will generally only cover the items they transport for you. Ensure you have coverage for any items you’ll be moving yourself.
Unplug, disassemble, and clean out appliances. This will make them easier to pack, move, and plug in at your new place.
Check with the condo board or HOA about any restrictions on using the elevator or particular exits or entrances for moving, if applicable
Pack an “Open First” box. Include items you’ll need most, such as toilet paper, soap, trash bags, chargers, box cutters, scissors, hammer, screwdriver, pens and paper, cups and plates, water, snacks, towels, and basic toiletries.
If you’re moving a long distance:
Obtain copies of important records from your doctor, dentist, pharmacy, veterinarian, and children’s schools.
E-mail a copy of your driving route to a family member or friend.
The Final Walk-Through
Closing time is hectic, but you should always make time for a final walk-through to make sure
that your home is in the same condition you expected it would be. Here’s a detailed list of
what to check for on your final walk-through.
- Basement, attic, and every room, closet, and crawl space have been checked.
- Requested repairs have been made.
- Copies of paid bills and warranties are in hand.
- No major, unexpected changes have been made to the property since last viewed.
- All items included in the sale price—draperies, lighting fixtures, etc.—are still on site.
- Screens and storm windows are in place or stored onsite.
- All appliances are operating (dishwasher, washer/dryer, oven, etc.).
- Intercom, doorbell, and alarm are operational.
- Hot water heater is working.
- Heating and air conditioning systems are working.
- No plants or shrubs have been removed from the yard.
- Garage door opener and other remotes are available.
- Instruction books and warranties on appliances and fixtures are available.
- All debris and personal items of the sellers have been removed.