For Buyers

UNDERSTANDING THE HOME BUYING PROCESS
Buying a home is a big step in your life, especially if you have never owned a home before.  Your decision to buy a new home is not only very important, but also a very personal decision. Each buyer’s circumstances will be different. 
 

Know Your Credit History
 
The best first step is to order copies of your credit report directly from all three of the major companies, Equifax, TransUnion and Esperian. Take time to review not only your credit score, but also the detailed history of your credit. If you identify errors in the credit reporting, now is a good time to dispute those items and, hopefully, remove them from the report. Reviewing your credit history in detail also allows you to prepare your response to any questions a potential lender may ask about the report.
 

Meet With a Lender or Two
 
The best next step is to meet with a lender or mortgage broker to get a good sense of how much financing will be available to you. These preliminary meetings put you under no obligation to use that particular lender, but they do help provide you with a good sense of how much you can borrow. The decision of a lender on whether or not to provide the necessary financing is typically based upon uniform criteria. 
 

Work History
 
First is your work history. Lenders are looking for a relatively steady income and employment history for at least the past two years. If there are recent gaps in your employment history, the lender will want to know why. Copies of the last two years tax returns, W-2’s and recent pay stubs will help the lender document calculate your earning history.
 

Credit History
 
In addition to your earning history, lenders will also pay close attention to your credit scores and credit history. They are interested in how much debt you have, whether or not you generally pay your bills on time, whether you carry large credit card balances. In addition, they will want to know whether or not you have ever defaulted on a loan, declared bankruptcy or had a bank foreclose on your property.
 

Savings Available
 
Although the lender may agree to loan you a substantial portion of the money needed to buy your new home, it will also expect you to put some of your own money towards the purchase. In addition to this down payment, you will also need to have sufficient funds to pay all of the lender fees, title company charges and other closing costs, including any amounts you may be required to pay into escrow for the future payment of real estate taxes and insurance.
 
Good Faith Estimate of Your Costs To Purchase
 
Part of the conversations with the lender will be making a good faith estimate of the closing costs and the amount you will need to complete the purchase. If you have not yet spoken with a lender, a trained real estate professional should be able to help you estimate the cash needed to close.
 

Downpayment
 
Typically, a lender will require the purchaser to put at least 5-10% of the purchase price of the home you want to buy. So, the amount you have saved is an important factor in the equation. If you are not a first time buyer, the equity in the home you are selling will also be taken into account. There are federal loan programs that require less money to be paid by the buyer and a good agent should be able to assist you in determining whether or not you qualify.
 

Lending Guidelines
 
Lenders have legal limits on how much money they can lend you, so you need to have a good understanding of where your dream home fits within those limits.  The amount a lender can lend for a mortgage depends on how much you earn and how much you spend each month. 
 
Lenders look at the total amount you pay for housing each month, add costs like property tax, insurance premiums, and any homeowners’ association fee and compare it to your monthly gross income.  They generally try to keep the amount of the loan low enough so your monthly housing costs do not exceed 28 percent of your monthly gross income.
 
Lenders also look at your other long-term debts, such as your car loan, student loans, credit-card debt and the like to see what other monthly payments you have to make.  They add these monthly costs to your monthly housing cost, and compare the total against your gross monthly income.  These two kinds of costs taken together should not exceed 36 percent of your gross monthly income.
 
If your gross monthly income and your debts exceed these two guidelines, you’ll need to adjust your expectations.  You will need to decide whether to wait until your cash flow improves and your savings are larger, or whether you should set your sights on a lower-priced house. 

Loan Prequalification
 
A smart buyer starts shopping for a loan before he or she starts looking for a house, and certainly before making any offers!  Being pre-qualified means that a lender has looked at your finances and credit history and has decided that you can get a loan, and how much you can borrow. More and more, completing the pre-qualification process with a lender is a prerequisite to making an offer on a home. Sellers won’t seriously consider your offer unless they have some comfort that you will be able to finance the transaction. This comfort comes in the form of a letter from a lender indicating that it is prepared to loan you the necessary funds.
 
In addition, going through the process of being pre-qualified by a lender also allows you to speed your search for your home because you will be able to focus on homes in your price range.
 
Now that you know what you can afford, it is time to begin your search for a new home.

The Home Search

As much as I would like to help you from the beginning, I actually think that it is a good idea to start the home search process on your own. Start by spending a week or two perusing the newspapers, surfing the Internet and going to a few open houses. This will begin to give you a flavor for the local market and, perhaps introduce you to some new areas that you hadn’t yet considered.

After you have had a chance to survey the territory, I can work with you to personalize your “home profile.” We will begin to prioritize you dream home wish lists and create categories for home features and amenities that you must have, home features that aren’t critical, but would be nice to have and home features that must be avoided at all costs. From these discussions, we will create a profile and checklist that we can use when searching and visiting new homes.

This exercise not only helps you focus on your priorities, it also helps me focus my energies so that together we can have a very efficient and productive home search.
In these unusual economic times, a breadth and depth of experience can prove to be very important and helpful in successfully navigating a rapidly changing real estate market.

I am a seasoned real estate professional with over 23 years of experience in a wide array of residential and commercial real estate transactions. In addition to being a licensed real estate broker in both the States of Michigan and Illinois, I am also a graduate of The University of Michigan Law School and a licensed attorney in Michigan and Illinois.

“I pride myself on being a good listener, on being organized and responsive. Nothing gives me greater satisfaction than being able to draw upon my background and experience to help my clients achieve their goals. I believe that as with any job, the ingredients for being a successful realtor are relatively simple, honesty, hard work and accountability.”

Over my career as a realtor, I have participated in hundreds of residential and commercial transactions. It has been said that experience is a hard teacher because she gives the test first, the lesson afterward. Having been in real estate since 1985, I have the benefit of having participated in a number of market cycles. The lessons learned from these experiences give me a unique perspective into, and understanding of the complexity and volatility of the current real estate market.

I look forward to utilizing my knowledge and experience as a real estate broker, real estate investor and licensed attorney to provide you with the highest level of personal and professional service.

Making An Offer and Negotiating a Contract

Once we find the right property, we will write a purchase agreement. I will explain each provision so that you are comfortable with the terms and provisions of the agreement.

I will do a thorough market analysis and explain the results to you so that you are comfortable with the current market sales data and the amount of money you will offer for the property. We will carefully consider the most recent sales data for homes that a most comparable to the one you are considering.

In addition to deciding on the offer amount, we will also make sure that the agreement contains important provisions regarding the date of closing and the conditions and contingencies to your obligations to complete the transaction, such as mortgage financing and property inspections.

We will also carefully examine the seller’s disclosure documents regarding the condition of the property and the presence, if any, of various deficiencies. We will also review and discuss the seller’s lead-based paint disclosure. Assuming that there are no serious concerns resulting from the seller’s disclosure documents, we can proceed with the offer.

Your offer will include an earnest money check, which is a demonstration to the seller of your serious intent to purchase the home. If the offer is not accepted, or your contingencies have not been satisfied, the earnest money will be returned to you. If the offer is accepted and your contingencies are satisfied, the earnest money will be credited against the purchase price at the time of closing.

Inspections and Contingencies

The offer you make may contain a number of contingencies, conditions precedent to your obligation to purchase the home. In our market, standard contingencies include, financing, a professional home inspection, environmental inspections, such as radon, water quality and septic (if a private system), and other inspections, such as pest, and attorney review and approval of the contract, title and conveyance documents.

During the professional home inspection, a licensed and well-qualified home inspection contractor will look at every aspect of the home you are interested in purchasing, including structural elements, electrical, plumbing, heating and cooling systems and appliances. We will also make sure that environmental conditions are also inspected and tested. Following the inspection, the inspector(s) will deliver to you a full report listing any and all deficiencies discovered during the inspection. Once we have the final report, I will go over each line item with you and assist you in deciding the best manner in which to proceed with the transaction.

Further Negotiation

Following the various inspections, issues may arise that will require further discussion.  Sometimes issues arise that require negotiation. I will assist you in negotiating amendments to the purchase agreement that satisfy your needs and protect your investment.

Closing

Once all the contingencies to your obligation to purchase the home have been satisfied, we will move toward the finish line, the closing of your new home. In cooperation with the title company, your attorney and lender, I will guide you through the final phase of the home buying process.

Just prior to the closing I will assist you in conducting a final walk-through of the home to make sure it is in the same condition as it was at the time of the original home inspection. In addition, if the seller was required to make any repairs to the home as a contingency to the closing, we will make sure they were made to your reasonable satisfaction.

Prior to the closing you will be provided with a closing statement that itemizes all of your expenses and the amount of money you will need to bring to the closing.

Most likely, the closing will take place at a title company who will act as the escrow agent for the seller, buyer and lender. The title company will hold all funds and documents and will release them to the appropriate party once it has confirmed that all of the conditions to closing have been met. At the closing I will assist you as the title company representative explains each financing and conveyance document.  At the closing, you will bring a cashier’s check for the balance of the purchase price (the purchase price less your earnest money deposit and the amount of the loan), your driver’s license and evidence that you have purchased homeowner’s insurance for the new home.

At the closing, the seller will deliver a deed to the title company. The deed transfers ownership of real estate and is the legal document that when recorded will create your legal ownership of the property. There are a variety of deeds, but the one used most often in residential transactions is the warranty deed. The warranty deed transfers ownership from the seller to the buyer and explicitly represents that the seller has good title to the property.

If the property is a newly constructed home there will be a variety of additional documents and warranties that may be provided at the time of closing.

Shortly after the closing, the title company will send you the original recorded deed and an owner’s policy of title insurance which insures your good title to the property free and clear of any third party liens (other than your new mortgage).