Congratulations, you have decided to buy a home!
No matter how well you can picture your dream house in your head or after sifting through thousands of pictures online, drive by’s and magazines, as then communicating your ideal home to a real-estate agent, the house you finally fall in love with and ultimately buy may have little resemblance to your original ideas.
Step 1: What you Need, What you Want!
You have to start somewhere, so here is a detailed list to review when putting together your Must Have’s, your Hope For and your Not Necessaries. We recommend you separate your list into MUST’s and HOPE’s from the menu below and put an “M” or an “H” in front of the corresponding item on your list:
Choosing a town:
- Is it a bedroom community to New York City?
- Or, do you prefer a more rural suburban location?
- Does it provide a comfortable for you that works with the amount of time of commute, flexibility, frequency and style?
- Are the schools what you would expect (even if you don’t have or plan to have kids, schools do affect home values)?
- What are the various types of residents that live in this particular town and do you identify with them and this is truly about friendships and lifestyles?
- Does the town offer the environmental, social, economic and recreational amenities you want in a town?
- Proximity to an airport: ½ hr; 45 minutes; 1 hour; not important
Once you have chosen a town(s):
- The type of neighborhood you want
- Near to close friends or family members
- Close to downtown and public transportation
- Neighborhood matches family personality, i.e. culturally, politically, socio-economically
- Proximities to commercial districts, industrial sites
- Preference for quiet cul de sac or side streets
- Or, are you ok with wider and busier roads that get preferential treatment for snow removal and commutation purposes
Home Specific Must Have’s, Hope for’s and Not Necessaries
- Style of Home: Colonial, Townhouse, Contemporary, Victorian, Split Level, Ranch, etc.
- # of rooms, # of bedrooms, # of baths
- Generously sized rooms; average size rooms
- A space to entertain larger parties? open floor plan?
- Room types: formal dining, eat-in kitchen, breakfast room, great/family room, sun room
- Finished Basement; or can you stand up in the basement which would allow you to eventually finish it off for an office, guest space, play room for kids or recreation/media room (play room for adults).
- Finished Attic; or can you stand up in the attic and could you eventually finish it off for an office or guest space or even a new bedroom suite?
- Size of Yard, Level, Fenced, Garden
- Garage attached/detached; one or two car garage; parking for more than 2 cars.
- Ability to add on to the home; whether upward or possibly outward
- Handy man special (you, a good friend or proven contractor can replace sinks, tile and then kitchen counters and cabinets, etc.)
- As close to “move-in” as possible, you work and don’t have the time or ability to manage a renovation process with noise and dirt, let alone someone to oversee the progress on a daily basis.
- No major repairs needed: age of heating system, water heater, plumbing, electric
- Lots of natural sun light, meaning lots of windows, large windows, sky lights, etc.
- Original single pane windows or thermal windows?
- Visitor Parking in driveway or in front of home
- Good investment with excellent resale potential
- Affordable property taxes or taxes that combined with mortgage are still affordable relative to commute and size/condition of home.
- Large Closets or Walk-in closet in master bedroom
- Master Bath in addition to Full bath on bedroom floor
- Powder on main floor for visiting guests
- Size of Closets, # of closets, additional Storage space
- Oil or Gas Heating
- Gas or Electric stove
- Back deck or patio
- Close to schools, houses of worship
- Finished basement or attic for office, guest room, playroom or rec room
- Hardwood floors
- French drain in basement/Sump Pump(s)
The likelihood is that there will have to be trade-offs, not just in how many of the above attributes fit your preferences but in how the homes are priced as a result and you may eventually change up some of your M’s with H’s or NN’s after you see what you can buy in the location of your choice.
2. How much should I spend on a home?
Every market is different, but the first step to answering this question is finding out what your budget will allow you to pay on a monthly basis after you’ve made your down payment — 3.5%, 10%, 20% or more of the price of the house.
Meet with a loan officer of a lender or mortgage broker. The best way to learn what you can afford is to get pre-approval mortgage/loan. You may have also heard the term “pre-qualified,” but you need to know that this is generally the term applied to quick review of your finances and is not as thorough as a pre-approval where tax returns and pay stubs are also required to provide you with the most accurate picture of what you can afford. Your real-estate agent may recommend someone, or you can ask a friend who has recently had a successful transaction for a referral; please don’t take this lightly as a good loan officer makes for a smooth transaction and a less experienced or successful loan officer could very easily make your experience more challenging than necessary when you are trying to close on a home, especially with the recent scrutiny in the mortgage industry and regulations. Pre-approval won’t cost you anything, except a probable sales pitch, since the lender would like your business when you’re ready to apply for a loan. You’ll walk away with a good idea of how your income, assets and liabilities translate into what you can afford, and it can also help your chances of beating out the competition if you happen to be involved in a multiple bid scenario. And, you are not obligated to use the loan officer that conducts your pre approval, so choose wisely when you are actually engaged in a transaction. I often recommend you check with a broker as well as a bank loan officer to get a better understanding of what products they can offer you. I can recommend a number of qualified lenders to you, if you so choose.
Furthermore, as mortgage interest and property taxes can often be used as write-offs for income tax purposes, you might want to corroborate your pre-approval findings with an accountant so that you can confirm how your budget will work when you are a home owner. Please keep this in mind: mortgage rates can fluctuate as often as every 14 seconds. When you are “interviewing prospective lenders,” I recommend asking their position on “working with you” if you happened to find a seemingly more attractive rate from another lender. They often have some wiggle room.
Price of Home versus Monthly Payment: When you are about to buy a home your focus is almost always on the price alone. However, taxes on homes that fit within your preferred price range could vary by as much as 50%. The fact that every $1,000 more in taxes translates into loss of $11,000 of purchase price means that it is actually smarter to try to work with a monthly budget number and allow us to do the research for you to find the best bang for your buck!
Additional Costs to Close: When you are buying a home your focus is generally on the cost of the home and the amount of money down. However, it’s just as important to review the cash required to pay for closing costs (including points, fees, mortgage interest pre-pay and tax pre-pay), inspection and future expenses. All in all, these closing costs run between 2.5% to 5% of the selling price. We can supply you an itemized list of the categories and general cost ranges for closing costs upon request.
3. Starting the house hunt
You have already begun the process of looking for a home online and are using our websites to help you navigate the weekly Open Houses in the town of your choice: www.njopenhouses.info . As soon as you have been pre-approved, you can begin to drill down to a more finite range of homes and we recommend that you then choose your real-estate agent to help you achieve your goal. A great agent can educate you about what to look for and avoid, provide reliable references for other experts you’ll need along the line — such as lenders, lawyers and inspectors — guide you through and shadow the inspection process, the appraisal process as well as represent you in negotiations, help to project-manage the time table for closing, including following up with your lender to make sure your commitment comes in on time as per the contract. Additionally, should you consider choosing us, we are practitioners of Advanced Comparable Market Analysis which allows us to provide you with much more accurate financial guidance when looking to buy (or sell) a home as we use NJ State-Wide published factors when making adjustments in values for comparable sales (location, size of property, condition of the home, the number of rooms and most of the factors we listed earlier on when asking you to consider what you need and Must Have and Hope for in a home). For more info about an ACMA: www.advancedcma.com
Now you’re ready for the fun stuff: pounding the pavement. Go to as many open houses as you can stand and make have your broker make appointments for other homes you want to see. Don’t be afraid to see homes that are not in your price range as you will be able to use this knowledge to better understand what you can buy for your money in each respective town (Just be sure to sign in under your broker’s name), see how the same size home can be listed for more or less based upon location and help to determine what best suites your overall needs. Sometimes the difference of $10,000-$25,000 can make a huge difference in what you can buy with your money.
4. The Next Step, you’ve found your dream home and it’s time to make an offer:
If you are ready to make an offer, make sure you have selected a local real estate attorney—a local attorney can be quite helpful with localized issues that you may not be aware of relative to your situation, especially if you are coming from a different region. A real estate attorney is best suited for the task of helping you buy a home as they should be most aware of how the laws and how contracts are best written for the purposes of buying a home and protecting you during the course of this journey. We’d be happy to recommend a few qualified attorneys with proven success and experience upon request.
5. You have an accepted offer--A* (attorney review in progress)—you are enroute to being Under Contract UC/US, now what do I do:
The second you have come to a meeting of the minds, a.k.a an agreement—meaning you have an accepted offer on your dream home--your attorney needs to take the offer and begin the process of converting it into a contract. Didn’t you just have a signed contract, you may be asking? Yes, you did, but the second attorney review is initiated, the contract is temporarily non-binding until such time as both parties agree to any changes in language, etc.
At the same time, you and/or your real estate professional needs to make the arrangements to quickly have the home inspected, as soon as possible, by a licensed Home Inspector. It is highly recommended you consult with your Realtor and your attorney to review potential inspectors with the right experience. You should make sure that at least one of you attends the home inspection so that you are made aware any potential concerns and, equally important, get your first lesson in home ownership, maintenance and operation. At the end of the inspection, you will receive a report that you should review with your agent and then with your attorney. You will then have to decide if you now have new found issues that concern you enough to cancel your contract, or to continue onward, with or without any corrective actions or financial offsets for corrective actions. Through this stage of the process, you can back out of the home purchase without any loss other than the home inspection fee and possibly some part of the attorney fee. However, when you have finished the Home Inspection process and any related negotiations, you will move out of the A*--attorney review in progress to an Under Contract designation: either “US” or “UC,” (if there is a contingency on the part of either party, the status could be “US” which means Under Contract but able to be shown), whereas “UC” means the home can no longer be shown to any other potential buyers and is also known as “sale pending” on some websites. When you are UC, you can breathe a sigh of relief as no other offers could be taken into consideration by the seller. I bring this up to help educate you on the fact that getting an accepted offer is great, but during the attorney review process the property in question is usually still active on the market, can be shown and offers can still be submitted to the seller.
Another key requirement of the home purchase is to make sure you and your attorney have engaged the services of a Title Insurance company to make sure a clear (no other liens pending) title can be transferred to register your ownership. As your attorney can tell you, Title Insurance is all too critical to the process. If you want to learn a little more about this all too important subject, you can Google (the verb) NY Times October 9, 2010 “After Foreclosure, a Focus on Title Insurance.”
Simultaneously, you will need to make sure you begin the process of securing your mortgage commitment. This will require you to officially select a lender and begin to fill out the copious amounts of paperwork required for the underwriters to review you financial position and make sure you can still buy the home you selected. You deserve to be working with a professional, accomplished and hard-working loan officer or mortgage broker. You should check online reputations and references before finalizing your choice. There are also some banks that are notoriously tougher and slower to work with and can cause untold aggravation. So, once again, your Realtor’s and attorney’s advice, can make the difference in successfully getting you to the closing table.
Once you have set the wheels in motion for the mortgage, an appraisal will have to be performed on the property. This sometimes leads to another round of negotiations when the appraised value comes in for less than the mortgage amount needed to buy the property. Once again, this is another reason for having a Realtor and real estate attorney who can help you navigate through this very infrequent scenario. Due to recent market conditions, you will sense a lot of pressure on the part of the Seller’s Agent to make sure that your mortgage commitment will come in and on time. Therefore, as your agent, we will make sure we are in daily contact with your mortgage broker/banker so that everyone’s expectations are met.
6. You are Ready to Make the Actual Move:
At about “this” time, you should quickly determine which moving company you want to use for your move. You may also want to begin the process of applying for any local parking permits, train parking passes, jitney passes, etc. so that the first day you plan to return to work after moving into your new home you are ready for a painless commute. If you have children, you would want to contact the school district to make sure that you have all the required paperwork you need to enroll them in their new school system. If you require daycare/childcare or pre-K schooling, you should similarly meet with them, chose one and begin the enrollment process.
Depending on the township, there are certain “permits” required by the buyer of a home. Usually, this means securing a Certificate of (continuing) Use and Occupancy, which means contacting the local town government and securing the necessary forms and payment, often times accompanied with an inspection of the property; the same conditions may apply to a Fire Inspection, depending on the town. As your agent, we will meet with the officials, schedule the appointments and inspections, be a witness to these same inspections and report back to you and your attorney so that you are in full compliance of your contract and will be able to close once you have your mortgage commitment. The next stage of the mortgage process is your Clear to Close. This means you have successfully received your final review and the bank is then on the verge of “funding” your loan and thus enabling you to consummate your purchase of your new Dream Home.
You are almost at the finish line, but there is another important step: The Walk Through. We want to schedule a final walk through to inspect the property after the seller has moved out. We will make sure that the home is still in its expected condition, we will confirm that repairs, if needed, were done and we will make sure that no damage to floors and walls was done when the sellers vacated the property. Should something have happened, we immediately contact your attorney and seek remediation. A good Realtor knows how to keep you protected during this final hurdle. When this is concluded, you head over to meet your attorney and execute all the closing documents; when all the paperwork is signed, you will be handed your new keys and you officially become the rightful and legal owners of your new home!
