First Time Buyers

How much money can you spend? How much money do you want to spend? What will your monthly payments be? What will your down payment be and how much will you need in closing costs?

Now that you know how much you would prefer to spend, does your wish list match the amount of money you have? Sometimes buyers have unrealistic expectations of what they can afford. Just know: your dreams are not unattainable, but everything you are desiring in a home, might not be in the house you are currently buying. This house may just be a stepping stone until you can afford what you truly want.

Always go with your Realtor so that you have representation and protection.

When you have found the home that you would like to purchase, ask your Realtor to pull up comparables and determine if this house is priced accordingly. Make a fair offer and don’t ask for too much. Sellers are more likely to respond to an offer that is fair for them and you. The seller will typically be willing to pay for the new title insurance policy for the buyer at closing. The title company ensures that there is a clear chain of title, so that the home they are purchasing does not have a claim on it from someone else. The insurance protects the buyer by covering the cost of resolving any title issues that arise in the future.

When you are making your offer you will need to write out two checks and hand them to your Realtor. One will be made out to the title company for 1% or more of the price you are offering. The other will be for $100 or $200 for a 10-day option period. This is when you will decide the closing date. The seller may negotiate a different date, but it’s usually within a few days of your suggested date.

The first check is what is called earnest money. It is a show of good faith that you are serious about purchasing the home. In Texas the typical earnest money check is for 1% of the offer amount.  If you have an attorney, you are welcome to have your attorney review the sales contract prior to signing.

The option fee is money paid to the seller at the signing of the contract. Typically your Realtor will ask for a 10-day option period. These 10 days allow you to do home inspections, read through the restrictions and find out anything else about the property and surrounding area. If you find something that is a deal-breaker, the option period allows you to break the contract. The seller will keep the option fee money and you will get your earnest money returned to you.

After the offer is made, it is up to your Realtor to negotiate on your behalf. Please listen to the advice of your Realtor. Some deals fall apart over $5,000, which is $30 in monthly payments with a new mortgage. It’s really not worth it, if you are committed to purchasing a home.

Once you come to an agreement with the seller you will schedule the home inspection, the termite inspection and any other inspections or estimates that you would like. You also need to stay in close contact with your loan officer to be sure that you are giving them all of the necessary documentation to keep the loan process rolling.

Another period of negotiation between the buyer and the seller comes after the inspections are complete. If there are items that need to be repaired or replaced, both parties will have to agree on who will be paying for or repairing the items. If there are too many items to repair, this is when the buyer will cancel the transaction and look for another home. (At this point, the buyer can get their earnest money back, but they will not get a refund of their option fee or inspection fees.)

After the option period is up and the buyer is satisfied with the home, the appraisal will be ordered by the lender. The buyer will have to pay for the appraisal when it is ordered. It usually takes two weeks to receive an appraisal and the home must appraise at the price the buyer has offered to pay, or the buyer will have to renegotiate with the seller.

If the appraisal is satisfactory, the lender will require the buyer to meet any additional conditions and the title company will ensure that they have a clear title commitment. You will also receive a settlement statement or closing disclosure a couple of days before closing to review all of the amounts involved in the closing and where they will be disbursed.

The day before or the day of closing, before you sign documents as a buyer, you will schedule a final walk-through with your Realtor. This gives you one last look at the home before you sign the documents, pay your down payment and take possession of the house. This will show you that the seller has kept the home in the same condition and moved their personal items out of the house. You can also verify that they have completed any repairs that were agreed to during the option period. If any items have not been finished, the buyer can let the seller know that these items need to be completed before closing. Sellers are usually good at getting these items done, so that they can close on the house and get paid.

Buyers will need to bring their driver’s license and a cashier’s check for the amount of their total due at closing, which will be found on the statement they receive two days before closing. The cashier’s check will include their down payment and closing costs. At the closing table buyers will receive the keys and the house is theirs. Buyers who are getting a new loan should expect to sign a large stack of documents that could take an hour to sign. If paying cash, the documents are much fewer. The seller typically only has a small number of documents to sign at any closing.  In our area, it is common for listing agents to attend the closing with their clients and buyers agents to attend with their buyers. Depending on the title company and the amicability between buyers and sellers during the transaction, they may decide to sign together at the same time, or they may choose to sign separately at different times.

If you have another place to live, even after closing, you can choose to make cosmetic changes to your home and move in slowly when you’re ready.  If you have a move-out date in your current residence and you must leave, you will want to have everything prepared for the big move. Pack all but your necessities so that you will be ready to move on closing day. If the closing ends up getting extended, due to your loan, you could end up in a situation where you need to move before closing. The seller can agree to sign a temporary residential lease which allows you to move in and live as a tenant, until the house closes a few days later. You can agree to pay the seller a fair amount of money for this privilege in the temporary lease.