Steps to Buying a House
Steps to Buying a House
Buying a house can be an exciting but sometimes overwhelming process. There are many questions you may have initially such as "What Credit Score Do I Need?", "How Long Does it Take?", "What is the Best Time of Year?", "What Types of Loans are Available?" and "What Monthly Payment Can I Afford?". Oftentimes, your Realtor is the key figure to making the process run smoothly by educating you and helping answer some of these questions.
As part of the education process, we provide this streamlined path of the basic steps to buying a house to help you understand what lies ahead. We also provide you a lot of detailed "Dig a Little Deeper" articles that will give you the information you need to understand the details of the process.
Knowing a few things about loans, mortgages and insurance can go a long way in the prequalification process. Prequalification is the beginning of the formal loan application process. At this stage, we establish how much you can and want to spend on your new home. Additionally, an experienced lender will look at your long and short term financial goals and present you with the appropriate loan programs. If you do not already have a selected lender, let us know because we have several that we can recommend.
Here are the top 2 questions we are asked by home buyers at this stage of the process.
What is Private Mortgage Insurance (PMI?)
What is an FHA Loan?
We will sit down with you and discuss what your requirements are for a home. It is important that we have a clear idea of what your priorities are as they pertain to your day to day life. We will discuss:
- Finances & budget
- Desired neighborhoods
- School requirements
- Commute time
- Style of home
- Size requirements, etc.
- Your expectations how long does it take to buy a house
Once we have a thorough understanding of your priorities, we get in the car and drive through those areas that most likely suit your needs. The idea is to eliminate those areas that just won't work while fine tuning and showing you the Colorado Springs neighborhoods that fit your requirements.
Colorado Springs can be split into 4 general sections and are referred to by the names used in the MLS.
North Colorado Springs
The MLS areas in the North have larger lots, a shorter commute to Denver, heavier snowfall in winter and more expensive price per square footage. These North neighborhoods include Black Forest, TriLakes / Monument, Peyton and Northgate.
South Colorado Springs
In the Southern part of Colorado Springs there are neighborhoods that are convenient to military bases, close to Colorado Springs Airport, less snowfall in winter and a variety of prices and sizes. These neighborhoods include Southwest (Broadmoor), Southeast and Fountain.
West Colorado Springs
West of I25 has some of the prettiest scenery in Colorado Springs. The western neighborhoods have convenience to the mountains, great hiking and rock formations, and some urban, mountain and bohemian culture and vibe. These neighborhoods include Woodland Park, Ute Pass, West, Manitou Springs, Northwest and Old Colorado City.
East Colorado Springs
The eastern part of Colorado Springs has some of the older more established areas and includes neighborhoods east of I25. Here you will find traditional neighborhoods, downtown living and culture, the convenience of shopping and restaurants and furthest east are neighborhoods with land for small ranches and urban farms. These neighborhoods include Downtown Colorado Springs, East, Northeast, Briargate, Falcon, Falcon North, Powers, and Marksheffel.
Here are some of our favorite neighborhoods.
Once we have determined your favorite areas we start to view homes in those areas. We generally preview before we take a buyer. The purpose of previewing is to eliminate those homes that have some kind of resale issue or major problem. By previewing we are able to eliminate the number of homes you will have to look at before you actually get in the car.
LOCATE THE HOME
When we find the home you are interested in purchasing, the first thing we need to do is establish the value, in other words, how much is the property really worth? The tool we use to establish value is called a Comparative Market Analysis.
Once we have established value, we determine how much we would like to offer. This decision is based on a combination of actual market value, your perceived value of the property, property condition as it relates to the amount of inspection items we think we might have to ask for.
Once we have the property under contract the due diligence period begins. Our goal during this period is to systematically remove all contingencies. These contingencies are short periods of time to get the financing in order (loan conditions), verify that the property condition is acceptable (inspection objection) and to make sure the title is clear and merchantable (title objection).
FULL LOAN APPLICATION
Once we have an accepted offer we are officially “Under Contract”, we send a copy of the agreement (contract) to the lender. The lender in turn starts to process the entire loan application. The loan goes into underwriting. Loan Underwriting by definition is "The analysis of risk and the decision whether to make a loan to a potential Homebuyer based on credit, employment, assets, and other factors".
The inspection is our time in the house with a trained professional, time to discover the true condition of the property you are about to buy. This is why the choice of an Inspector is an important one.
NEGOTIATE INSPECTION ITEMS
This is a process of putting together a list, if the inspection yields any unsatisfactory conditions. We present this list to the Sellers agent who in turn reviews it with the Sellers. They have two choices, to agree to all conditions of our requests or to propose an alternative resolution. If they propose an alternative resolution, the buyer has the opportunity to either accept the resolution or walk away from the deal with earnest money intact.
The seller must be able to provide, via the Title Company, a clear and merchantable title to the purchaser. The title company includes all parties in their research, so as a result, you will receive extensive paperwork throughout the transaction period. The Title Company provides a current “status” on the title. This is usually where a flag will appear for any potential problems by notifying all parties what liens and/or judgments need to be paid at closing. The Title Company also provides a proposed commitment for your new title policy. This is where your lender will be listed as a lien holder. Title companies must also provide covenants and Home Owners Association documents. We review these documents for any potential problems prior to the title deadlines set forth in the contract.
Prior to attending the closing, we walk through the property one more time to make sure any contractual inclusions are still at the property. Additionally, we make sure the property condition is acceptable, prior to the Seller receiving funds.