Washington & Oregon First Time Home Buyers

If you are a First Time Home Buyer then you probably have a lot of questions on the whole process of buying a home. I'll take you through the process step by step so you will know what to expect.

Financing

This is the first and most important step, figuring out the financing. Any good Real Estate Agent will make sure you have the financing in line before taking you out and showing you homes. The reason being is because you will probably find a home quickly if you are a motivated buyer and if so will want to put in an offer on the home. The seller of that home or the Agent who is selling the home will want to see a letter from your Lender stating that you are pre-approved. Neither the Seller or the Sellers Agent is going to want to accept an offer from a buyer and then find out that the buyer does not even qualify for financing a couple of weeks later.

Pre-Approval vs. Approval

A pre-approval is when you meet with a Loan Officer and they pull a copy of your credit report and look over your pay stubs and make a determination if you qualify for a home loan or not.

An approval is when a fully completed Loan Application has been taken by the Loan Officer and submitted to underwriting. The Underwriter has reviewed your entire Loan Application and has signed off on a fully underwritten credit approval.

Beware of Pre-Approvals!

The biggest difference between a pre-approval and an approval is that the pre-approval is done by a Loan Officer and is not a formal approval for a home loan. Sometimes, a Loan Officer will tell you that you are pre-approved for a home loan when in fact you are not. They will do this because they are hoping to somehow get you approved in order to close the deal and they feel that if they can convince you that you are approved you won't go to another Lender.

The only time I will ever issue a pre-approval is when my clients credit and income is obviously acceptable. If I ever question that a persons credit or income may not be acceptable I immediately complete the full loan application and submit it to underwriting. I then wait for underwriting to be completed on the file, which takes two to four days, and then I let my client know if they qualify or not.

If I cannot get a client approved I immediately explain the reasons why to my client and then I develop a plan for them in order to qualify in the future. Every client I have had in the past who did not qualify and then followed my plan I developed for them has been able to purchase a home. The only clients who I have not been able to get into homes are those who do not follow the plan I create for them. Many times past clients I have created plans for will contact me at the end of their plan and I am not able to approve them. Come to find out they did not do anything in the plan except call me back at the end of the time we determined it take. Bottom line, if I can't get you a loan right now and I create a plan for you, you must follow it.

Down Payment

Most people buying a home for the first time need or want to buy their home with no money down. This is a very popular thing to do. Very seldom do people purchase a home for the first time with a sizeable down payment. The reason being is that for one, it's hard to save up $15,000. Another reason is that it doesn't save much on the monthly payment by putting down a great deal of money.

Did you know that putting down $10,000 will only decrease your monthly payment by approximately $70? When I explain to people buying a home for the first time they usually keep whatever money they have saved for the down payment and finance the whole price of the home. When I do work with people who are putting money down it is usually because they have sold a home and buying their 2nd, 3rd or even 4th home. By this time they have anywhere from $50,000 to $200,000 to put down. By putting this much money down makes a considerable difference in monthly payment. If you only have around $10,000 I always suggest to home buyers to keep the money or invest it elsewhere.

Click here for my detailed explanations of different types of financing.

Finding the Home

Location

Now that the financing is taken care of and you know you can buy a home it's time to find the home you want. To some people location is very important and to others it is not. If location is very important to you and you know that you want a particular area be prepared for your search to take a little longer. The reason why is because when you are restricted to one area the home you want may not yet be for sale. You will have to wait for it to come on the market. If you are open to a more broader area you will have more homes on the market to choose from.

Search Engines

Many people do a great deal of research on their own before contacting a Real Estate Agent. The internet has made this very easy. The only drawback with searching for home on your own with the internet is that a large majority of the homes you will see do not have addresses or sometimes even prices. This is simply because the seller of the home wants you to contact a Realtor. This brings me to my next subject, Realtor.

Roles of a Realtor/Real Estate Agent

A Listing Agent is the Real Estate Agent who is representing the Seller of a home or property. The Selling Agent is the Real Estate Agent who is representing you the buyer. Any Real Estate Agent can be one or the other. Some Agents prefer to only do one or the other. There is nothing that says they can't do both.

By having your own Selling Agent when you are looking for a home they are able to answer all questions thoroughly about any property your are interested. They will also interview you in an effort to understand what you want in a home and find the properties for you that they know will spark your interest. When driving around and looking at homes you want to make sure you have your own Agent. You do now want to call the Agent who's name appears on the sign in the yard of a home for sale. The reason why is that Agent is listing the house for the seller and has promised the seller to get them the most money possible for their home. That Listing Agent cannot promise to get you the best deal because they have already promised the Seller to get them the best deal. A good analogy is that I wouldn't use your Attorney if you were suing me, I would get my own.

Having your own Agent provides you with another good option. They have access to RMLS and you don't. RMLS is a internet search engine that only Real Estate Agents have access too. If you are not a licensed Realtor you cannot gain access to RMLS. The RMLS search engine provides all the information on every home for sale that you cannot find on the internet yourself.

Commissions for Realtors

When a Real Estate Agent puts a house on the market for a seller, the Agent and the Seller agree upon a commission to be paid by the seller. When a Selling Agent, the Agent who represents you the buyer, finds the home for you and you agree to purchase it, they split the commission that is being for by the Seller. You as the buyer do not pay your Agent anything. They only get paid by the seller when your purchase is completed. This is why your Agent will be very motivated to find you a home that you like. Because the sooner they find you the home you like the sooner it will close and they will get paid. If they don't find you a home, or if you end up not wanting to work with them for personal reasons, then they don't get paid.

Bottom line, you find the Agent you want to work with, they find out what you want in a home and then let them go to work finding it for you. A good Agent will find out all the details from you before beginning their work. Be sure to tell them everything you want. A good Agent will also be honest with you and let you know if all of your expectations in a home can be met with the amount you can or want to spend. If you are being shown homes that are more than what you can or want to spend you will want to seriously reconsider the Agent you are working with and possibly find another one. Buying a home is a a big step. The last thing you need is someone trying to pressure you into buying something you don't want.

You have found the home of your dreams!

Now that you have found the home of your dreams it is time to write up an offer. An offer must be in writing. Your Agent will put together the offer in the form of a Purchase and Sell Agreement and submit it to the Listing Agent. The Listing Agent will then present it to the seller and the seller will respond back in writing as well.

Part of the offer is Earnest Money which is put into an Escrow account, if the offer is accepted, and credited to you at closing towards the price of the home. How much Earnest Money is required? As much as you can come up with. The more Earnest Money you can put in the offer the more serious the seller will take you. I always tell my clients $2,000 if they can but never less than $1,000.

The seller will either accept your offer the way it is or they will present you with a counter-offer. You can either accept the counter-offer or decline it. You will be guided through this process by your Agent. Because every offer is different I could come up with numerous scenarios. Most are pretty simple though, you make an offer and the seller may counter back with something small but usually it's pretty easy to come to an agreement easily. The process of making the offer and coming to an agreement with the seller usually only takes a couple of days at most. If you find a home you really want, both you and seller will want to get the offer completed quickly.

The Home Inspection

Once you have an accepted offer the next step is to get a home inspection. A home inspection is not required by the Realtors, the Seller or even the Lender or Mortgage Company. A home inspection is not required by anyone! You will want to get one though regardless! In fact, a good Agent will be very persistent about you getting one.

A home inspection is just like a mechanical inspection you would get on a used car. No one requires that you get a mechanical inspection on a used car, it is your choice as a consumer. The same goes for a home inspection. No one requires it but as a consumer it is a smart thing to do. You will pay for the Home Inspection when it is completed. The cost around $300, maybe a little less or a little more depending on who you use. Just look in the yellow pages for one, they are everywhere. Most Realtors have one or two that they will refer to you but it is ultimately your choice.

At the time of the inspection the inspector shows up and goes over the entire house. He gets up on the roof and documents the condition of the shingles. He crawls in the attic and underneath the house checking all the plumbing and electrical wiring and the overall structure of the home. The process usually takes a couple of hours and when it's done a report will be created and the inspector will go over it with you.

One thing to remember is that a home inspector is being hired by you to find things wrong with the home and that is what they will do. They will find things wrong with the home, regardless as to how mediocre they may seem. The ultimate reason for getting a home inspection done is so that you don't end up purchasing a home that needs a $10,000 repair to the foundation that you don't find out about until a year later.

Once the inspection is completed you then have the choice of moving forward or not. If for some reason you don't like what showed up on the home inspection you can withdrawal from the transaction and the seller is required to give you your earnest money back. This must be done during the inspection period which is pre-determined in the original offer by you and the seller.

The Appraisal

Once the home inspection has been completed and you are satisfied with the condition of the home the appraisal is then ordered by the Lender. This process takes two to four days and is something that you will not need to be present. The appraiser is usually on site for only 10-15 minutes and the rest of the work is done at their office. Once the appraisal is completed it is then forwarded to the Lender.

After the Appraisal

Once the Appraisal is completed the Lender will be following up with you for things such as updated pay stubs, bank statements, etc. Don't be alarmed when you get phone calls a few days before closing requesting these things. It is normal and to be expected. Always remember, your Agent and Loan Officer are there to answer all of your questions and to make your life easy during this process. But also remember, if you use me as your Agent and Loan Officer it makes things even easier!

Once you have found the home and have an accepted offer it usually takes around three to four weeks before everything is done. The timeframe can change somewhat depending on the circumstances of your offer so nothing is written in stone. You will be kept informed along the way and if for some reason you feel you are not being informed, by all means say something! Everyone has different expectations and if yours are not being met during the process then don't feel out of line by saying something.