Step-byStep Buying Guide

Home Buying Guide

Turn blue-sky thinking into Reality !

We all have dreams, and for many people, owning a home is one of their biggest. But the home buying process can be stressful - especially if you don't know what to expect. However, you have come to the right place to learn about buying a home, and what to expect when you begin shopping. Let's start by looking at the basic steps involved in the home buying process:

1. Speak with a member of our finance team.

The easiest way to eliminate some of the stress of buying a new home is to have a clear understanding of your buying power - or how much home you can comfortably afford. When you know what you can afford, you can focus on looking for homes that are right for you - and within your budget.

A home loan is the starting point, and there are two key factors in qualifying for a home loan: (A) Your ability to repay the loan; and (B) Your willingness to repay the loan. Your ability to repay a loan starts by verifying your current employment and total income. Generally, it's best if you have been employed at the same place for at least two years, or have at least been in the same line of work for a few years. Your willingness to repay a loan is determined by examining several factors. How you will use the property is one of them. For instance, you will be asked if you plan on living there, or if you want it as a rental unit. Obviously, if you will be living in the property, you will be more willing to repay the loan than you would if it were just an investment property. After all, nobody wants to lose the home they live in!

Your willingness to repay a loan is also indicated by your previous financial commitments, and how you've handled them. This information is revealed in one way by looking at your credit report. There are other factors too, and we will look at all of your circumstances before making a decision so your stronger points can outweigh your weaker ones. Remember that we want to assist as many buyers as possible, so we'll do our best to review all situations before making any decisions.

Once you have an idea of what you can afford, you're ready to begin looking for a home. Remember, you should NEVER wait until you find the right home to apply for a loan. In fact, you ABSOLUTELY must apply before you ever begin shopping. If you're pre-qualified for a home loan before you start looking, you'll have a better idea of which areas you can afford, and as a pre-qualified shopper, sellers will know you're serious about buying. You will have the advantage over other buyers who are not pre-qualified. If there are two or more buyers wanting the same home, the seller will generally always go with one who is pre-qualified. Finally, no top-quality Realtors will work with any buyer who has not been pre-qualified.

During the meeting with a member of our mortgage team, you'll discuss the potential loan, and also have the opportunity to ask questions about any financial aspects of the home buying process. You'll need to bring the following to your initial meeting:

Checking and savings account statements for the last two - three months
Pay stubs for each borrower and co-borrower(s) - reflecting earnings for the last 30 days, and year-to-date earnings (these must be computer-generated or typed originals that identify the employer and the employee's name)
Last year's W2 (and 1099 if applicable) for each borrower and co-borrower, plus federal tax returns for the last two years (or other proof of income and employment verification)
Divorce settlement papers, if applicable
Credit card bills for the last few billing periods, and cancelled checks for rent or utility bill payments
Information about other debts such as car loans, furniture loans, student loans, and retail credit cards
A gift letter if you are using a gift from a parent, relative, or organization to help with your down payment and/or closing costs.

Bringing the documents listed above with you to the meeting can process your application much faster. After the initial meeting, you'll have a good idea whether you qualify for the type and amount of loan you want. Within a few days, we will let you know the loan amount you are approved for. If your loan application is denied for any reason, we will explain why, and discuss any alternative lending options with you.

2. Determine what financing option to utilize

After processing the information from your application, a member of our mortgage team will explain the various loan programs for which you qualify. There are literally hundreds available, including no-money-down, interest only, programs with down payment assistance, grants, below market interest plans, and many others. After you've discussed and determined your loan program, our mortgage team will provide you with several disclosure documents, including: Good Faith Estimate, which details your closing costs and your monthly payment (principal and interest), Truth in Lending Statement, which details the cost of finance charges and the total amount you'll pay for credit. You may also receive additional disclosures, required by law and your specific loan program.

3. Decide whether or not to lock in your interest rate

Depending on market conditions, you may prefer to "lock in" your interest rate immediately while you shop for a home, or wait until you're almost ready to close on your loan. Be sure to ask how far in advance you can lock a guaranteed rate -- a longer lock period may affect your costs. As always, if you have any questions, contact us, and we will be happy to help you with this and all other stages of the home buying process.

4. Find a home

There are literally thousands of homes available in our area, in all price ranges. The Stop Renting Wisconsin Organization has access to every home available for sale. We can show you ANY home, no matter what company may have actually listed it on the MLS. We can also show you For-Sale-By-Owner (FSBO) homes, foreclosures, bank REO's, and distressed properties, and help you negotiate the best price on any of them.

We have licensed professionals who will save you time and money by providing you with a list of homes having the features you want, so you can concentrate on looking only at the homes meeting your needs. Determining such a list is definitely something we need to sit down together and determine, but feel free to visit the "Search MLS Listings" tab on our website as a starting point.

5. Make an offer and have us negotiate for you

When you're ready to make an offer, we will prepare it for you and go over it line-by-line to make sure it accurately portrays your intentions, and protects you from the many pitfalls possible. Most homes are sold for less than the asking price, although some "hot" properties may have several interested buyers who may actually bid the price up to more than the seller was originally asking. The professionals on the team will do a market analysis, and help you determine the lowest possible price at which you could successfully purchase the property you want.

Once we are all satisfied with the offer, we will then present it to the seller. If some of the items and terms you wanted in your offer are unacceptable to the seller, or the offer includes contingencies the seller wants to change, then negotiations must be entered into. These negotiations will continue until the offer can be changed into a form meeting both your requirements, and those of the seller. Depending on the market, the seller might be willing to negotiate with you on price, items you want included such as window coverings, washer and dryer, and contingencies. Some of the contingencies that will help protect your interests, and which you will probably need to include in your offer, include the following:Home inspection contingency: If the home inspection reveals faults in the home, you'd have the right to rescind the offer (at your option) if the owner cannot, or will not, make repairs. If you have given the seller the option to make repairs, and they are done in an unacceptable manner, you would also be able to rescind the offer to purchase. Financing contingency: If something were to happen to your credit, or you were not approved for the final home loan, you would be able to cancel the offer. In addition, you would be able to recover your earnest money. Earnest money is basically a deposit, which lets the seller know you are a serious buyer. The earnest money is held by a third party (generally the listing company) in their trust account. This money will later be applied towards the purchase price of your home at the closing.

Many buyers mistakenly believe if the sales contract fails to close, they will receive their earnest money back. Unfortunately, unless the offer has been carefully worded by a professional, this is often not the case. The laws and procedures governing the return of earnest money are somewhat cryptic and technical, and there are many possible pitfalls to fall into. The professionals at the Rent Revolt Team will ensure this does not happen to you.

A little more on negotiating… Your ability to negotiate with the seller will depend on several factors:

Condition of the home: If the home requires repairs, you might want to use the estimated cost of those repairs to lower the asking price, or request the seller to make the repairs before you close. (Repairs may be mandatory, depending on your loan's features.)

Current market: Depending on the current market, buyers or sellers may benefit. For example, in a buyer's market, more homes are available than people who are looking to buy, so you are more likely to succeed in negotiating a lower offer. On the other hand, a seller's market means there are more people looking for homes, than there are homes for sale. In this situation, you'll likely have to make an offer that is close to the seller's asking price, especially if several people submit offers to the seller.

Seller's motivation: If the seller needs to relocate quickly, or buy a larger house for a growing family, he or she may be willing to accept a lower offer.

Seller's equity in the home: Sellers who have little equity in their homes may be less willing to accept low offers because they don't want to lose money in selling at lower prices.

6. Close the deal

After you and the seller have agreed to everything, a closing will be scheduled. The "closing" will be handled by a closing officer, at a title insurance company. There, all documents will be signed, and funds and closing costs will be allocated to both you and the seller. Some of the closing costs, which, on average, are about 3 - 6% of the house's sale price, are:

Origination fee

Points

Prepaid homeowner's insurance premiums

Appraisal fee

Underwriting fee

Processing fee

Tax service fee

Recording fee

Title search and insurance

Flood certificate fee

Credit report fee

Recording fee

Tax adjustments

Agent commissions

Private mortgage insurance premiums (PMI), generally required if your down payment is less than 20% of the home's price.

If things are not handled properly, all these closing costs may result in your having to pay a rather large sum of money immediately to the seller at the closing. For example, these costs could be anywhere from $3,000 to $6,000 for EACH $100,000 of the purchase price of your home. If the purchase price of your home is $200,000 you would be required to write a check out at the closing for $6,000 to $12,000. Most likely, you would not be a happy camper if this were to happen, and the Stop Renting Wisconsin Organization has ways to avoid this. In fact, in virtually every transaction we do for our buyers, NO MONEY must be paid at the closing. We will help you do this too!

7. Move into your new home

Congratulations! You are a home owner and it’s time to move all your things in. Here's where it may get a little tough. Because the professionals at the Stop Renting Wisconsin Organization handle things so smoothly, virtually all of our buyers tell us the only stressful thing in the entire process was actually physically moving their things in to the new place. Many buyers make the mistake of underestimating the amount of work and time involved in moving. Don’t make this mistake too! If you can convince a large number of your friends to move your things in exchange for a nice dinner, have at it. However, if it’s only going to be you and a couple others, some of the best money you could ever spend might be to hire some movers to do some, or all of the work for you.

:: Read before searching :: Search MLS Listings :: Automatic MLS updates :: Imperfect Credit? :: Important for First Time Buyers :: Step-byStep Buying Guide :: Dream House Finder :: Free Buyer Reports :: Buyer's Resources :: Loan Programs :: Calculators :: School Info :: Real Estate Law :: Newsletter :: Market Analysis :: 7 Costly Selling Mistakes :: Free Seller Reports :: Seller's Resources :: Contact :: Personal Info :: Privacy Policy ::

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NAMB - National Association of Mortgage Brokers