Buying a home can be an exhausting but exciting venture.
1. Start by setting a budget for the total amount you want to pay each month for your “house payment.” This will include your mortgage payment (principle and interest), property taxes, homeowners insurance, and HOA dues if applicable.
2. Meet with your lender who will review your financial information and give you a preapproval letter indicating the purchase amount you are qualified for. Keep in mind this purchase amount may result in a higher payment than your budget so share this with your lender and your agent. It is important to have the preapproval letter ready to submit with an offer.
3. Create a list of the most important features your new home must have. This is the first step in finding the perfect property. Keep it general in the beginning and then you can refine it as you look at the available homes. Property attributes and features help create a picture of how you want to live and your perfect home. Here are some to consider:
A) Location — This will include community features, proximity to shopping, school district, distance to freeways or the airport, in a development, country property setting.
B) Size of Home — Number of bedrooms and baths and overall size of the home.
C) Size of Lot — Big yard, small yard with little care, acreage for roaming around or for horses and animals.
D) Other important items — Might be a home office, formal dining room, bedroom and bath on the main level, swimming pool or no pool, privacy, views, etc.
E) Age of Home and Condition — It is important to have in mind how much work you are willing to do to make the home your own. Many homes will need paint and new carpet or flooring, others new appliances, and others even more work to bring it up to the condition you want for your home.
F) Utilities and road — If you are considering country property, think about septic systems and well versus public sewer and water, and how important paved roads will be for your daily lifestyle.
4. Look at the available homes that best match your list of important features. This process can be fun and exciting and tiring. Depending on the number of homes for sale and your list of important features, you may be looking at a lot of homes or just a few. Rarely will you find the perfect home, meaning it has every item on your list. Most of the time, each home will have some aspects you really like and other aspects you are not as excited about. As you look at homes you be able to refine what is most important to you. Depending on your timeframe, one way to view home hunting is a process of elimination.
So, your offer has been accepted, what happens next?
Once your contract has been accepted there are a series of events that need to take place. Each of the dates used below are the “standard default dates” in the contract. These dates can be negotiated in your offer so may change but for this explanation, I am using the default.
1. Escrow will be opened with an escrow/title company almost immediately. In Placer County area, the escrow and title company are combined. Other parts of the state, they are 2 separate companies. These title companies are an important part of your purchase process because the title company acts as a 3rd party and collects the money, processes the closing documents, reviews the chain of title, removes liens, and will issue you a title policy showing you have clear title at the time of recording (when the property transfers to your name).
2. Deliver your initial deposit to this escrow company, typically within 3 business days. You can hand deliver your deposit, wire the money, or mail the check.
3. You will need to work closely with your lender and respond to all requests from your lender as soon as possible. Your lender will order the appraisal and the length of time to obtain your loan is most often what dictates how long it will take to complete your purchase.
4. The seller has 7 days to deliver seller specific disclosures in which the seller identifies what he knows about the property.
You will have 17 days to do your due diligence. What does this encompass?
A) Inspections: It is best to get inspections by professional inspectors. At the bare minimum consider a pest inspection and a home inspection.
i. Pest Inspection: A pest inspector will inspect the home for wood infection (dry rot) or infestation (wood boring beatles or termites). The pest inspection report will be divided into 2 sections. Section 1 is active infection or infestation. It is not uncommon for a home to have some dry rot, soft wood up under the roof eves for example. Section 2 are items that need attention or it can lead to infection or infestation. An example of Section 2 is debris under the home.
ii. Home inspection: A home inspector will or should be inspecting all the major systems in the home: electrical at the panel and outlets, plumbing at each plumbing fixture, HVAC – heating and air at the furnace and compressor and each vent, roof condition, windows and doors, health and safety items, etc. The home inspection report is an overall review of the home. If the home inspector sees something of concern, he will note it and suggest further inspection by a professional for that system. It is best to keep in mind the home inspection helps you determine if the home is in the condition you are comfortable with. Major items can be negotiated with the seller; the minor items will be your new honey-do-list.
iii. More specific inspections depending on the home may include pool inspection, septic inspection, well inspection and it is important to review the Buyer’s Inspection Advisory and the Statewide Buyer and Seller Advisory. These advisories identify the types of things you may want to inspect.
B) Preliminary Title Report: The title company will send you the preliminary title report. This report will show what is recorded on the property. It is important to review each of the items on the report, like easements, CCRs, taxes, liens, utilities.
C) Home Owner Association (HOA) Documents: Some properties have a HOA and if you will be paying dues it is important to review their financials, notes from their meetings, etc. The HOA will be the entity to enforce the CCRs.
D) CCRs: Many properties have CCRS (Covenants, Conditions, and Restrictions) recorded on the property. Some are very old, recorded when the property was first subdivided. Think of them as the rules for the development.
E) Natural Hazard Report: This is typically a report provided by a 3rd party company that will tell you all of the natural hazards that do and do not impact the property; thinks like flood hazard zone, fire hazard zone, earthquake fault zone, if there are protected species, etc.
F) Taxes: The taxes assessed on the property will be identified in the Natural Hazard Report but it is very important to review these taxes as some properties include high additional taxes.