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Guide to

Buying a

Home


Creating

HOME

Goals

BUYER TIPS

What is important to you in your home purchase? It is important to have goals before you begin looking. During our Buyer Goal Consultation, we will make a goal checklist of amenities that are essential and those you would like to have in your new home.

Most clients work with us because they know how much we care about meeting their goals! The list below may help you clarify your thinking on what is important to you when you are ready to purchase. 

What monthly payment are you comfortable with?

What neighborhood(s) or cities would you like to live in?

What price range do you have in mind

Are schools a factor?

What type of home interests you? (one-story, two-story, split-entry, townhouse, condo, duplex)

What style appeals to you? (Contemporary, traditional, no preference)

Do you need to be close to public transportation?

How many bedrooms and bathrooms do you need?

How many do you want?

What other interior features are important to you? (Separate family room, formal dining room, home office, etc.)

What about exterior features? Have you considered a garage, yard size, patio/deck, hot tub, view, or waterfront?

Are there any special features you are looking for in a home?


Buying a Home:

HOME

BUYER

Practical Considerations

TIPS

Buying a home is an important decision that can make an enormous difference in your lifestyle. It is also the biggest financial transaction you may make. There are some specific things to consider about a home to buy.

Be realistic: There are no perfect

homes. Decide what is important to you, and make sure you find a home that has the features you require. Be prepared to compromise on some of the items on your wish list. 

Decide on a price: Get pre-approved for a loan, not just prequalified. Consider not only the amount of the loan the lender will allow, but also what you feel comfortable spending every month. Take an honest look at your budget. We can provide you with a lender recommendation so you are sure to be working with the best in the business!

Choose carefully: Buying a home is much more permanent than renting. Purchase a home that you are prepared to keep for a while. Select a home that will be reasonable to maintain, in both utilities and/or repairs.

Think long-term: Are you looking for a starter house with the idea of moving up in a few years or do you hope to stay in this home longer? This decision may dictate what type of home you’ll buy as well as the type of mortgage terms that suit you best.


HOME

BUYER

Pre-Approval

TIPS

A buyer must be pre-approved to start looking at homes. This gives them a good idea of what they can afford, or more accurately, what loan amount they qualify for.

When you become pre-approved, you actually apply for a loan. The lender checks credit, verifies employment, and often verifies that you have sufficient funds to close. Then once you find your dream home, just about the only thing left is the appraisal.

The reason savvy buyers obtain loan approval before shopping for a home is that it strengthens their negotiating position when they make an offer. All sellers want to sell their home to a pre-approved buyer. Pre-approval can also cut days, even weeks, off the closing process. Pre-approval can really help you to determine your price range, which helps you narrow your choices of homes to buy. You will already know how much you can afford before you even start looking.


HOME

BUYER TIPS

Most lenders require you to pay a portion of your own funds--the down payment--toward the purchase of a home. Saving for a down payment can be one of the most challenging steps in buying a home.

Your down payment plus your pre-approved loan amount will determine how much home you can afford. A down payment can come from many places: savings, investments such as stocks and bonds, gifts from relatives, company bonuses, equity in other assets, and life insurance policies, to name a few. Then again, there may be home mortgage alternatives that do not require a down payment.

Consider Your Down Payment If you currently own a home, then you may want the equity you have built in that house to serve as the down payment on your next home. But how much is your current home worth? I would be happy to provide you with a Qualified Home Assessment so that you will know its current value.

Ask me for information about down payment assistance programs!


HOME

BUYER TIPS

When you apply for a loan, your lender will look at several things: • Down payment amount • How long you have been employed in your current position • Whether you have the funds on deposit for your down payment and closing costs • Your income-to-debt ratio and your credit report Lenders nowadays place much emphasis on the credit report. Credit bureaus compile a record of debts from credit card companies, banks, department stores, and other firms.

The Importance

of Your Credit Report

This information appears on your credit report, so it shows whether you pay your bills on time. Lenders develop credit ratings based on how well you manage this function. The higher your credit score, the more flexible lenders will be in loan approval and specific requirements. When you meet with lenders, ask how they decide if you are a good credit risk. It is likely to be from a credit report. Lenders can order the credit report for you and discuss your score. If your credit is less than sterling, they can usually offer suggestions on how to strengthen your credit position.


HOME

BUYER TIPS

When you are ready to purchase a home, I will negotiate on your behalf to help you get the best house your dollar can buy. I can act as a buffer to minimize the emotional elements so you can enjoy the process. When you make an offer on a house, the seller can accept it, reject it, or counter it. If the offer is too low, the seller may reject it outright. Or the seller may counter the offer, naming a price or other specifications that are more in line with his or her expectations. If a property is in strong demand, it may receive several offers. Then the seller may choose to accept the highest one or the one from the most qualified buyer.

Negotiating a Winning Offer Here are some tips to make sure your offer is accepted in any market: • Be pre-approved by a lender, not just prequalified. This strengthens your position. • Provide a substantial earnest money deposit. This is "good faith" money that shows the seller you are serious about the property. • Limit your contingencies to those most important to you, such as financing, Inspections.


HOME

BUYER TIPS

Here are the steps to close the sale once the purchase and sale agreement has been signed by both parties. Please know I will walk you through this step by step to make sure this is a smooth and enjoyable process.

Step 1 - Removing contingencies: The most common contingencies are financing and the inspection. These conditions must be removed or waived before the sale on your new home can close.

Step 2 - Appraising the property: Your lender requires a formal appraisal to confirm the value of the home you're buying, to be used as collateral to secure the loan.

Steps to a Successful Closing Step 3 - Preparing closing documents: Most often real estate attorneys prepare documents that confirm the transaction, pro-rate funds, and so on.

Step 4 - Signing closing documents. Step 5 - Recording the deed and disbursing funds. Step 6 - Enjoy your new home!


Minimizing

HOME

Stress

BUYER TIPS

Did you know that for most people, moving ranks near the top of the list of stressful events? Here are some things you can do to minimize stress when you are ready to make a move:

• Decide whether you want to move yourself or have professional movers handle the job. If you hire a moving company, be sure to book well in advance.

• Choose a real estate agent who communicates clearly and frequently,

• Think about cleaning services. After

keeping you up to speed on every

everything is packed and moved is a

step of the process.

great time to have someone come in and clean.

• Consider how long it will take from the time you make an offer on a property

• Arrange at least two weeks in advance

until the transaction closes. Once an

to have utilities and phone service

offer is received and accepted, it may

disconnected at your old house and

take from 30 to 45 days to obtain

reconnected in your new home on

financing.

move-in day.


HOME

BUYER TIPS

Moving is an adjustment, whether you are moving across town or relocating across the country. Moving across town or to a new neighborhood may mean learning new routes to work, selecting a new dentist, and finding a new grocery store. It may also mean a change in schools if you have young children. Moving across the country can be much more challenging. Relocation is rarely easy. But being prepared can help you make good decisions and ease the transition. Here are some of the most common concerns: • Spouse or significant other: Many relocating couples are concerned about finding work for the trailing spouse. Some companies offer career counseling and job placement.

Make Your Move a Happy One • Children: Often children resent a move. Researching activities and getting the kids involved in the new community will help them make the adjustment. Some experts recommend moving mid-school year rather than waiting until summer. This may enable children to make friends faster. • Costs: The cost of housing can be a shock to a transferee. Many companies have relocation packages that help with the closing costs and the cost of moving. This may be something to negotiate with your employer. • Community: When relocating to a new city, people often try to replace what they left behind. Communities may have many amenities, but they may not be the same as you were used to.


10 Tips for Home Buyers 1. Be selective, but not unrealistic. There is no “perfect” home, just the right home for you. 2. Do your homework before you start looking. Decide specifically what features you want in a home and which are most important to you. 3. Get your finances in order. Review your credit report and be sure you have enough money to cover your down payment and your closing costs. 4. Determine what you can afford. Talk to a lender and get preapproved for a mortgage before you start looking. 5. Trust in yourself. Limit the number of people you turn to for a second opinion; as it could make your decisions more difficult. 6. Decide when you could move. When is your lease up? Are you allowed to sublet? Do you have a home to sell? Is there an ideal transition time? 7. Think long-term. Are you looking for a starter house with the idea of moving up in a few years or do you hope to stay in this home longer? This decision may dictate what type of home you’ll buy as well as the type of mortgage terms that suit you best. 8. Think big picture. Consider other expenses, home maintenance and financial goals when determining what price range to purchase in. 9. Be informed. Hire a qualified home inspector and have the home subject to an acceptable home inspection. 10. Get help. Hire a professional realtor as your buyer’s representative. Unlike a listing agent, whose first duty is to the seller, a buyer’s representative is working only for you. Your realtor’s commission is paid for by the seller.


The Move‌a Checklist of Things To Do Stop services on present home and arrange services for new home ___Cable Television/Satellite (check to see if you have to turn in your receiver) ___Internet ___Electricity ___Garbage collection/recycling ___Gas/Fuel Oil ___Lawn Care/Snow Plowing services ___Newspaper ___Telephone ___Water/Sewer *NOTE: Review your check stubs for other services to be stopped/added

File change of address with ___Accountant ___Bank/Credit Union ___Clubs/Memberships ___Credit Card Companies ___Employer ___Friends/Relatives ___Financial Planner ___Insurance Companies (auto, fire, health, home, life) ___Lawyer ___Magazine/Newspaper Subscriptions ___Other Lending Institutions ___Post Office

Four weeks before the move ___Get estimates from van lines/truck rental companies ___Separate everything you plan to sell or give away ___Set aside appliance manuals & instruction booklets for your new buyers ___Start packing ___Contact your insurance agent to transfer/cancel your homeowner’s policy ___Contact your lender if your closing date is in the first half of the month to determine if you need to make a mortgage payment for that month ___Collect all lien waiver notices (or receipts of payment) from all contractors, who have supplied labor and/or materials to your home, prior to closing and forward those receipts to your title company


Four weeks before the move (continued) ___Finish all perishable and frozen foods ___Transfer all medical records for family members and pets ___Locate and enroll in new daycare and/or school district ___Notify daycare/school district you are leaving ___Obtain copies of your children’s school transcripts ___Open new bank accounts if moving to a new community ___Order checks with new home address ___Return library books and other borrowed items ___Collect items lent out to neighbors/relatives ___Dispose of all combustible items if using a moving company ___Advise your neighbors if your home will be vacant for an extended period of time prior to closing

One week before the move ___Pick up all dry cleaning ___Collect all garage door openers and extra keys given to neighbors/relatives to bring to closing ___Arrange for transportation or storage of house plants ___Make arrangements for children/pets on moving day ___Make arrangements for meals on moving day ___Pack clothing and other necessities for the moving day ___Pack a small box of tools for any last minute needs ___Defrost your refrigerator and freezer, if moving them ___Drain all gas/oil in lawn mower, weed whacker and snow blower ___Transfer bank account and empty safety deposit box (if leaving town) ___Set aside the items you will need immediately at your new home and mark the boxes “Open First”

Moving Day ___Make sure that your home is cleaned for the new home owners ___Make sure all your garbage has been removed ___Transport your jewelry and valuable documents yourself ___Take a final tour of the entire house (Double check all closets & cabinets) ___Ensure the mover has your correct, new address ___Give the driver telephones #’s where you can be reached during transit

After you arrive ___Register to vote in your new home’s district ___Register your car if moving to a new state ___Apply for new drivers and pet licenses ___Obtain emergency numbers for new home ___Locate new doctor and dentist


Who’s Who in Real Estate Transactions Sandy Erickson Team - Realtor/Real Estate Agent We are here to help you navigate the transaction and provide skillful guidance from beginning to end. We have aligned ourselves with other professionals in the field to ensure you get the best outcome and a successful closing of your transaction. Sandy Erickson Team - Client Care Coordinator She is responsible for the administrative duties. She facilitates document completion, executes systems, and communicates with all parties in the transaction to provide expert service and support. Cooperating Realtor/Real Estate Agent This is the realtor representing the other side of the transaction. We work with this realtor to negotiate a successful agreement to all parties and to facilitate a successful closing. Loan Officer The loan officer works with the buyer to prepare a lender pre-approval and secure a loan to buy a home. Though, as realtors, we can provide valuable information regarding financing, specific questions should be directed to the loan officer. Title Company Closer There are usually two closers involved in each transaction—one representing the buyer and one representing the seller. The closers work to clear title so it can be transferred to the new buyer at closing without issue. They also ensure funds are distributed appropriately. Home Inspector The inspector is hired by the buyer and is relied upon to look for issues or maintenance items in the home. They provide a report to the buyers and may serve for renegotiation with the seller. Appraiser The appraiser is hired by the buyer’s lender to determine a value of the home based on their personal assessment, set criteria, and comparable homes. If the loan is FHA, they also perform a mini-inspection of the home per FHA guidelines. If an appraisal comes in low, the transaction may fall apart.


GLOSSARY OF TERMS Abstract of Title: A short account of what appears in the public records affecting the title of a particular property. Addendums: Supplemental documents added to the purchase agreement that become part of the legal binding document. Adjustable Rate Mortgage (ARM): A loan in which the interest rate can fluctuate during the term, based on an index to which the interest rate is tied. Amendments: After final acceptance of purchase agreement, this form is used to make changes. Both parties must sign for the change to become binding. Appraisal: An estimate or an opinion of value for a property, as performed by a qualified appraiser on the lender’s behalf. This is paid for by the buyer once they have an accepted offer on a home. (Approx. $350-$475) Arbitration Agreement: A supplementary agreement the seller and buyer can execute to settle disputes out of court about the property. If both parties sign this document, they agree to have an independent arbitrator resolve any disputes. Assessments: Non-recurring specific charge against a property for a definite purpose, such as curbs and gutters. Pending assessments, typically paid by the seller, must be paid in full at closing for ownership to transfer to the buyer. Association Dues: The monthly payment that condominium and townhome owners must contribute towards the upkeep & management of shared property. Bill Of Sale: A document used to transfer title, ownership, or interest in personal property from the seller to the buyer. Bylaws: The rules and regulations that govern a subdivision or condominium association. Closing: The date on which ownership transfers from the seller to the buyer. This typically occurs 45-60 days after offer is accepted. Closing Costs & Prepaids (taxes & insurance): The cost a buyer pays when purchasing a home. These costs typically equal 3% of the loan amount.

Commitment Letter: The letter you receive from your lender stating that your loan is approved and describing the terms of the loan. Contingency: A clause that is added to a purchase agreement stating that certain conditions must be met within a specified period of time for the purchase agreement to be valid. Down Payment: The amount a buyer puts down at closing towards the purchase of their home. The amount usually depends on the type of loan; it is typically 3-25% of the loan amount. NOTE: Be sure that your down payment money is deposited in your bank account well in advance of the closing. Dual Agency: Representation of both parties to the transaction, such as one broker representing both the seller and the buyer. Earnest Money: “Good faith” money (typically 1% of the sale price) paid by the buyer at the time an offer is written on a home. Upon acceptance of the offer, the buyer’s check is cashed within 72 hours and placed in a trust account until closing where it is applied towards the buyer’s down payment. Equity: The portion of a home’s value that is owned, free and clear of any mortgage or lien. Escrows (pre-paids): Lenders often collect up to two months of homeowners insurance and four months of property taxes at closing; which are deposited in an account called an escrow account. Fixed Rate Loan: A loan with an interest rate that remains constant throughout the term specified in the loan. Good Faith Estimate: The disclosure form on which a lender estimates all of a buyer’s closing costs. The lender must give the buyer this form within three days after they apply for a loan. Home Inspection Contingency: Usually a complete home inspection is requested and paid for by the buyer and performed by a state-licensed qualified inspector within 3-5 business days from the acceptance of the offer. (Approx. $250-$350)

**Items highlighted in red refer to the costs that could be associated with the home-buying process.


GLOSSARY OF TERMS Homeowners Insurance (hazard insurance): This is an insurance home buyers must purchase to protect the investment they and their lender have in their home. Buyers must provide the lender an insurance binder with a one year paid receipt prior to closing.

Non-homestead Taxes: Property taxes paid by landlords who rent their property, or by owners who do not use their property as their primary residence.

Homestead Taxes: Property taxes paid by live-in property owners. The annual homesteading deadline is December 15th.

PITI: the monthly loan payment which includes the loan principal, interest, taxes, and insurance.

HUD-1 Form: A settlement statement listing all the buyer and seller’s closing costs. The U.S. Department of Housing and Urban Development requires that a closer make this document available to all parties at least one business day prior to closing.

Private Mortgage Insurance: Insurance the buyer pays when they take out a conventional loan with less than a 20 percent down payment. It protects the lender from losing money if a buyer defaults on their loan.

Loan Origination Fee: This is a fee that buyer’s pay a lender for handling their loan application. Loan Processing: The steps a lender must take to analyze a buyer’s ability to qualify for a loan. This analysis involves weighing a buyer’s income, credit report and financial records against the value of the home they want to buy. Lock-In Agreement: A document the buyer signs to guarantee the interest rate the lender quoted them for their loan. A buyer can lock in their rate when they apply for the loan or at any time prior to closing (or per purchase agreement). However, most lenders require a signed purchase agreement before they can lock in on a rate. Mortgage Discount Points: Prepaid interest on a loan, resulting in the buyer receiving a lower interest rate on their loan. Mortgage Insurance Premium (MIP): An insurance premium the buyer is required to pay for an FHA loan. The cost is typically 2-3% of the loan amount, depending on the term, plus ½ percent over the life of the loan. This premium is usually paid as part of the buyer’s monthly loan payment. Multiple Listing Service (MLS): A service that real estate agents subscribe to that lists homes for sale and homes that have sold by neighborhood, price and features.

Pre-approval Letter: The buyer obtains this from their lender. It is required when an offer is made on a home.

Purchase Agreement: The legally-binding document that lists all of the terms of a home sale including contingencies, between a buyer and seller. Re-issue Credit: A savings on the cost of title insurance, when the buyer uses the same title insurance binder that the previous owner used. Title Insurance (Owners Title Insurance): The optional one time insurance payment a buyer makes at closing to protect themselves against claims on the title of their property. Lender’s Title Insurance: The one time insurance payment a buyer must make at closing on the lender’s behalf, to protect the lender against claims on the title to a buyer’s property. Seller’s Property Disclosure: A required document to be completed by ALL sellers disclosing all conditions that may affect the buyer’s use and enjoyment of the property. Torrens System: a system for the registration of property in Minnesota to verify title without the necessity of a title search, unlike that of an abstract of title. Trust Account: a bank account in which a broker deposits trust funds, to keep them segregated from the broker’s own money. Truth-In-Housing Report: A report required by some cities that the sellers obtain from a licensed inspector to disclose the condition of their home.

**Items highlighted in red refer to the costs that could be associated with the home-buying process.


Guide to Buying a Home  

Your ultimate guide to buying a home! Whether you're a first time home buyer or a last-time home buyer, you're sure to learn something and f...

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