Not even close. You can get a loan through a big name bank, a mortgage broker, or credit union. We prefer a mortgage broker because mortgages are all they do. Banks and credit unions offer mortgages as part of their service. We wrote extensively about choosing a lender in this blog post.
When considering the steps to buying a house, the pre-approval letter is an important first step. It outlines the most important part of searching for a home–the price you are comfortable paying. A pre-approval letter is a letter from the Buyer’s lender outlining their ability to obtain a mortgage. It should have the amount the buyer qualifies for, the type of loan (FHA, conventional, etc.), the amount of the down payment and whether or not seller concessions are required to close. A strong pre-approval will also state that the lender has reviewed the buyer’s credit, and verified they have sufficient funds to close.
I wrote extensively about how to hire an agent here. In hiring a good agent to represent you, you’ll be asked to sign a “Buyer Agency Agreement.” This is the document that contracts the agent to work in the best interests of you, the buyer. Make sure you interview well and choose the right agent before executing. You’ll be working exclusively with that agent for the purchase of your home.
Not to be overlooked when explaining the steps to buying a house is the fact that when a property is listed with an agent, you do not contact the seller yourself. That seller has hired an agent to represent them because they do not want to have conversations directly with potential buyers. Disregarding this and contacting them directly could cost you the house.
In the steps to buying a house, this is often an overlooked piece of information. Some buyers call the listing agent to show them the house and want to bring their agent in later. In our area, the agent who showed you the property is considered “procuring cause” of the sale and it could cause a problem when you want to bring in another agent.
The agent with whom you have a signed Buyer Agency Agreement is the only agent who is working in your best interest. The listing agent cannot represent the buyer’s best interests; their contract is with the seller.
You may look inside the refrigerator if the seller has included it in their sale. If they have not, the refrigerator is personal property, and touching the seller’s personal property is off limits. We wrote extensively about what you may and may not do during a showing in this blog post.
This is an important area to spotlight when focusing on the steps to buying a house, as this is where a great agent comes in. Some homes are over-priced. Some homes are priced to sell quickly. There’s no “normal” here. In hot markets, the offers are well over list price. Choose your Buyer’s Representative carefully. It’s not enough that they are licensed. Experience is king.
Multiple offer situations are of the most difficult in real estate. Everything runs high: the offer amount, the emotions, and the anxiety. Every situation is different, but a good agent will have different strategies to help make your offer the best offer, and that isn’t always just more money. There are other ways of positioning an offer for a win. Another reason to hire your agent carefully.
The earnest money deposit commonly referred to as “EMD,” is the amount of money the buyer deposits up front with the offer, guaranteeing they will not back out on their offer to purchase. If they do, they will forfeit the deposit.
Seller concessions is an amount of money the seller agrees to credit the buyer at closing toward the buyer’s closing costs and pre-paid items. It sounds like everyone should ask for them, but it’s tricky. It could cost you the house. We wrote extensively about it in this blog post.
Crucial in the steps to buying a house is having a strong purchase agreement. In the purchase agreement, there should be a contingency on the buyer’s satisfaction of “due diligence” within a specified period. Due diligence is the process of extensively researching the details and characteristics of a property that are important to you, the buyer. Some items typically included in the buyer’s due diligence are: Details of the homeowners association including bylaws, master deed and financial status, square footage, lot boundaries, school district, verification of property taxes, history of permits, your city’s master development plan, dog breed bans, potential zoning changes and anything else you can think of. Since each case is different, this is not an all-inclusive list.
Your agent has their role in the purchase, but the buyer should perform all the duties of due diligence themselves. You don’t want to rely on a third-party interpretation of any due diligence that is important to you. We wrote extensively about the buyer’s due diligence in this blog post.
Absolutely. Never waive it. Even if for some unimaginable reason you decide not to do one, reserve the right to inspect in your offer. There are many different inspections available. We wrote extensively about inspection in this blog post.
In the state of Michigan, there are no licensing requirements to become a home inspector. Some inspectors are more skilled than others. This is where recommendations from your agent, friends, and family are valuable.
An appraisal is an assessment of value by a licensed appraiser typically hired by the bank. The purpose is to make sure they are not lending more money on a home than it is worth and that the buyer will have equity equal to their down payment. The buyer pays for the appraisal and is typically included in their closing cost estimate provided by the lender.
First, we are talking about a mortgage “approval,” not “pre-approval.” The mortgage approval takes approximately 45 days. It can be shorter if there are no issues or PMI, or a few days longer, but typically 45 days is ample.
Here in Michigan, the date of possession is negotiable, and a key term in buying a house. It is negotiable because the seller is allowed to rent back from the buyer for a specific period agreed to previously in the offer to purchase. Consult your agent for the specific terms negotiated in your contract to purchase.
A Homeowners Association is an entity or group of people who enforce the deed restrictions and bylaws of the community in which you own. You want to make your offer to purchase contingent upon satisfactory review of the by-laws, restrictions, and financial condition of the Association. This review is part of your due diligence and usually, time sensitive.
Closing costs are the fees incurred by the buyer in obtaining and closing their mortgage loan. The amount is dependent on a lot of things; your lender of choice, not your agent, should calculate it.
Yes. Your lender will require it before closing. If you are paying cash, you will want it effective the day of closing to protect your investment. If you are buying a condo, the policy is a limited and less expensive because the association owns the exterior building; you only own the interior and contents. We wrote extensively about Homeowners Insurance in this blog post.
Maybe the most important in the steps to buying a house is the buyer’s active involvement. In the end, it is the buyer who will be occupying the home and making the payments. It is ultimately the buyer who is responsible for doing their due diligence on a property. Other than investigating the physical condition of the property during the inspection period, we recommend the following due-diligence research at a minimum:
Make a trip to the municipality to verify all of the listing information such as square footage, lot size, school district, city water or well, and sanitary sewer or septic system, sales history, permit history, ownership history, the zoning surrounding the area and the city’s master plan as it relates to this area. You don’t want to close only then to find a bar or cemetery going up right behind your home.
The agent is responsible for disclosing “known defects.” However, most of the information an agent has is information provided to them by the seller. Buyers beware. Do your own, hands-on, due diligence. You’re making a significant investment and you should know everything you can about your purchase.
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