Monday, December 31, 2012

How to buy a house

When we came to our first home-buying experience, we realized we had NO idea how to do it, or any idea of all the 'hidden costs'. Here is a simple breakdown of the steps involved in buying a house.
  1. Pre-Approval. Before even looking for a home, you need to know how you are going to buy it. Either get pre-approved for a mortgage, or have other financing in place. To get pre-approved, go to a bank or a mortgage broker. 
  2. Find the house! This is fun part. You get to find and pick your favorite house within your pre-approval price range.
  3. Make an Offer. If you have a Real Estate Agent, they will prepare the contract for you. If you don't, you need to find your state or province's basic contract to use to make the offer.
    1. Fill out the legal property information.
    2. Initial all pages of the contract.
    3. Insert your conditions, such as 'subject to Home Inspection'.
    4. Choose your condition removal date, and closing date.
    5. Have part of your down payment ready to put in Escrow/Trust with your lawyer. This lets the seller know you are serious.
  4. Negotiate. The Seller will often come back with a counter offer after you submit your original offer. Be ready to negotiate the terms before finalizing the offer with the seller. You will still be able to negotiate price after the offer is accepted, depending on what you find wrong with the property during the Home Inspection.
  5. Inspection Period. See our post about this step.
    1. Set up all financing. (This can include a surprising amount of paperwork to prove to your lender that you are qualified to buy the house and pay the mortgage payments.)
    2. Get a Home Inspection. ($200-$600.)
    3. Re-negotiate the Price if there are things wrong with the property.
    4. Set up Home Owners Insurance.
    5. Set up Life Insurance. Most mortgage lenders require you to have life insurance.
    6. Set up utilities to come under your name upon closing.
    7. Understand your mortgage terms: points, interest rate, amortization period, mortgage insurance, early payments, etc.
  6. Closing
    1. Deposit your down payment in trust with your lawyer before the closing date so it is clear to be transferred on the closing date.
    2. Meet with your lawyer to sign all the documents. He will provide you with the deed and title. He will give you a closing estimate price, which you will pay him. If the estimate was high after everything clears, he will refund you the proper amount when he sends you all your official documents. (Mortgage documents, Land Title and Deed.)
    3. After you meet with your lawyer to sign closing documents, he will notify you as soon as money and title have transferred, and give you the keys to your new home!
  7. Closing Costs. There are lots of potential closing costs, and no great way to figure out how much they will be without some research. Some potential closing costs include: lawyer fees, title search and title insurance, government recording fees, adjustment for property taxes, credit check, and survey/appraiser fees. Some of these will be paid to your lawyer, others to the mortgage lender. A good article I found on closing costs can be found here.

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