Being pre-qualified means a lender, such as a mortgage company, ensures you can secure a loan in a particular amount. For example, you could be pre-qualified for 250 thousand dollars, meaning you could buy a house for that amount plus the amount of money you are able to put as a down payment. If you are able to put down 50 thousand dollars, then you could pre-qualify for a 300 thousand dollar house. When you are pre-qualified, you are given a letter from the Mortgage Company stating how much they will pre-qualify you for.

This is the first step in successful home buying. Go to a mortgage company and see how much money you can qualify for your new house. Experts warn that sometimes mortgage companies will qualify you for more than you can comfortably afford. Make sure you sit down and evaluate your budget and determine how much you can devote to monthly payments.

Is pre-qualification necessary? In simple terms, “no,” but having a piece of paper that says you are “good for the money” is an easy way to get your offer accepted. Also, it’s good to be pre-qualified so you know what you can afford up-front. Imagine finding the perfect home, placing an offer on it, only later to find you cannot be approved for the loan amount.

During your pre-qualification meeting, your mortgage company can also outline some different loan options and see which ones you could qualify for.

See some of the most common loans, in side bar at right -->

The next step to buying a house is deciding whether or not to use a realtor. A realtor’s job is to help locate homes, write up the offer, negotiate and help handle closing. When buying a house, you do not pay for the realtor. The seller pays all the realtor fees. If you’re in the buying position, why not take advantage of this free service?

When you hire any professional, like a doctor, lawyer or a realtor, you need to find one you can trust. Slick ads may promise the best service, but usually word of mouth is the best way to find a trusted realtor. Ask members of your ward, neighbors or co-workers. If you cannot find a referral, call the city’s Board of Realtors and asked which firm sold more houses in the previous year. This might be a good indicator of a firm that means business. Be careful, though, once you select a realtor, it’s not good practice to change. It’s against the unwritten code to switch realtors halfway through the process unless, of course, you are rendered bad service. Usually most realtors won’t take you on as a client if he/she knows you are working with someone else.

Many people put a lot of faith in their realtor. They trust and confide in him/her and freely divulge information. Generally realtors are upstanding professionals who help tremendously with the process, but it’s wise to remember realtors are sales people. Just as you wouldn’t disclose all your cards to the sales person at a used car lot, it’s wise to not share everything with your realtor. The end goal, of course is to make a sale. Most realtors want to help you out and find a property that is best for you, but some might be more interested in selling you the highest priced house you can afford. Be sure to analyze the info your realtor gives you.

(Note: Mormonchic is not advocating realtors cannot be trusted. On the contrary. We are simply stating the need to be savvy with your realtor, as you would with any sales professional.)

For example, if a car sales person tells you his dealership’s car is the best in the country, you wouldn’t take his word for it. You would do the research and see how it checks out in safety, performance, comfort, etc. The same is true in real estate. If your agent tells you a house you are looking at is in a neighborhood with good schools, be sure to check with the local school district to see how they rank in the state and city.

Looking for houses is the next step after finding a realtor. Your realtor will visit with you and ask you about what you are looking for in a house and neighborhood. He/she will provide a lists of houses to walk through. One thing not many buyers realize, though, is that a good realtor can do a lot of the legwork for you. Ask your realtor to preview the homes on the list and see which ones are really worth your time. That way, you don’t waste your time walking through houses you would not even consider.

For example, you might see a listing for a house that seems to meet all of your specifications inside and out. When you walk through it, however, the house smells of dogs and smoke, even though the sellers say they just installed new carpet. If your realtor had spoken with you about how strong pet odors and smoke was a deal-breaker for you, and your realtor had previewed the home for you, they would have eliminated the house from the list and not wasted your time.

Also, even though your realtor will be looking for houses, you, too, can do your own searches. Check real estate websites like Realtor.com to help you find listings you would like to see.

Before looking for specific houses, determine exactly what you’re looking for in a house. Maybe you’re particular about the square footage and number of bedrooms, but you’re flexible about the house’s style or age. Maybe you want to be in a particular school district or at a particular school within that district. Make three lists (1) The Must-Haves (2) The Would-Likes (3) The Deal-Breakers.

The Must-Haves
The Must-Haves is the list of features the house must have. For example, if you have three kids and they all need their own bedrooms, then one of your must-haves would be a home with four bedrooms, or the potentional to have four bedrooms.

The Would-Likes
The Would-Likes is the list of features that would be nice to have in your ideal home, but are not 100 percent necessary. For example, maybe one of your would-likes would be a triple-car garage. If you only own two cars, than maybe a triple-car garage is not necessary, but it would be nice to have a third space for kids bikes and toys. Put your would-likes in order of preference.

The Deal-Breakers
The Deal-Breakers are the things or circumstances around which you would not buy a property. For example, as listed above, if you consider strong pet smells are smoke unbearable, then maybe they would be deal-breakers for you. It could be the perfect home with a pool, in a nice neighborhood, with the right number of bedrooms, but if it reeked of strong pet odors after replacing the carpet and scrubbing, then maybe it’s not the home for you.

Defining your goals will help you stay focused and not get emotionally involved with a house that does not fit your specifications.

It’s a good idea to take a long a pencil and paper to write down info about each house as you tour them. A good place to do this is on the back of the listing sheet for the house, but you can also use a more detailed list such as the one we have created:

> Walk-Through Worksheet

In our Walk-Through Worksheet, you can easily make notes about the house because we’ve divided the worksheet into rooms. Make notes about condition and materials used in each room.

Once you have decided on a house, it’s time to make an offer. An offer is a pending contract stating your intention to buy the property, provided the seller agrees to your terms.

Generally, there will be some negotiating back and forth from the original offer. Before making an offer, you’ll want to take another walk through the house. Be sure to pay attention to as many details as you can, so you know exactly what you are getting. If the roof looks old, for example, you could negotiate the price of the house down to accommodate the purchase a new roof in the near future. Major things to look out for are:

1. Condition of the exterior paint
2. Condition of the roof. (Be sure to ask how old the roof is and how many additional layers it has on it, if any)
3. Condition of major appliances such as the air condition, water heater, etc. If the air conditioner looks old and corroded, then you might have some bargaining power.
4. Condition of the carpet and how old it is
5. Condition of the ceilings, walls and floors, for cracks
6. As you take some additional walk-throughs of the house, be sure to ask your realtor specific questions such as, “Is there hardwood under the carpet?” Follow up with your realtor so you can know before you make your offer.

Your realtor will help you draw up an offer. They can usually pull up examples of other comparable houses, or comps, in the area so you know the value of similar houses.

Probably the most important thing about the offer is the amount of money you are offering for the house. A lot of sellers will want to negotiate the asking price. Only in very competitive markets do buyers actually pay the asking price or more. In most markets, buyers can expect a little flexibility in the price.

When coming up with an actual number amount, it’s usually best to bid with some wiggle room. That means you want to bid low enough that your seller can bring a counter offer to the table. In some cases, you will go back a forth a bit before reaching a price. Don’t make your starting bid too high, or you’ll end up paying more than you want to. If you start the bidding too low, you run the risk of insulting the seller and causing them to not want to even work with you. It’s best to know your highest price before starting the bidding.

As you write up the offer, your realtor will go over the items step-by-step and offer recommendations. If you are not using a realtor, be sure to take the contract to a licensed attorney who specializes in real estate. He/she can help you understand any unfamiliar terms. In the offer, be sure to include any repairs you would like the seller to make or personal property you’re hoping the sellers will leave. For example, in your walk-through, maybe you noticed the paint was chipping off a window in the great room. You could include a line in the contract stating the trim needs to be re-painted. If the seller has a deep freeze in the basement you’d like to keep, include a line about it in the contract. The seller might be relieved to not have to move it back up the basement stairs. (Note, a first-time home buyer might be tempted to ask the sellers to leave the refrigerator, since it is not usually left with a house. Even though you wouldn’t have to pay for a new fridge upfront, you take a gamble on the condition of the appliance.)

Another part of the offer is specifying which inspections you would like completed. Some of the basic ones are these:

1. Total House Inspection – This is an optional inspection. It is done by a home inspector who thoroughly goes through the house and checks just about everything. Depending on the size of the home, this inspection can last two-four hours. It can be good to get a total home inspection so there are no surprises after you buy the house. Some of the things the inspector will check: the roof, air conditioner or heater (depending on the outside temperature), water pressure, windows, electrical outlets, etc. Even if you are buying a new house, you still might want to have a home inspection to ensure the builders did everything properly and to code. If you opt for this inspection, utilize your time wisely. Ask your inspector if you can walk with them through the process. Bring a notebook and take notes, although most good inspectors will print up a report for you in the end with detailed notes of what they found.

2. Termite and Pest Inspection – This inspection is generally required by the lender for the loan to go through. It is a simple test that only last a few minutes.

3. Chimney Inspection – If the house has a chimney and it looks like it hasn’t been maintained properly or if you have questions about its structural soundness, a chimney inspection is what you’ll need.

4. Pool Inspection – If buying a house with an inground pool or spa, it’s a good idea to have an inspector check it out for the condition of the pool’s plaster or vinyl coding and the pump.

5. Structural Inspection - If you’re buying an older house, you might even have a structural inspection done to ensure it’s sound. It could be invaluable to know how sturdy the structure is before purchase.

Usually offers include a clause that says if an inspection should find severe problems, you can get out of the contract.

After inspections are completed, you’ll want to negotiate with your seller to see which items need to be repaired and replaced and who will pay for them.

An offer also specifies a closing and move-in dates. This gives your seller an idea of the timeline you are hoping for.

An offer is usually accompanied with a promise check. Depending on your state’s laws, a seller can keep the promise check if the buyer cancels the contract.

After the offer is accepted, it becomes a binding contract. There are several things that will happen now, but most of them have to do with the title company. The title company.is the party who prepares all of the paperwork and ensures everything is ready for closing, they usually handle the closing date as well. Title Company's are an invaluable resource and the workhorse of the whole home-buying process.

Some of the things the title company does include:

1. Ensures an Appraisal has been conducted – The lender normally requires an appraisal to ensure its value is the same as the asking price. Problems arise when the house is being sold for more than it is worth. In these cases, the sellers generally must lower the price to sell the home.

2. Conduct a Title Search – This is done to ensure no one else holds a title or deed to the house. You are also given Title Insurance to ensure no one can sue you for the rights to ownership.

3. Conduct a Lien Search – This is done to ensure there are no liens or back taxes on the property. A lien is the amount of money owed on the property. For example, maybe a pool was installed in the backyard by the previous owner, but the owner did not pay the balance for the improvements. A lien will show up on the records stating money is still owed.

The title company will also ensure all the paperwork was completed by the mortgage company, insurance was issued by the buyer and all other information pertaining to the sale of the house was collected. At the closing date, you will meet at the title company to sign all the paperwork and pay closing costs and the down payment. The closing costs include fees from the mortgage company, the title company and realtors (for the sellers). A few days before closing, your realtor or the title company should call you with the amount of money to bring to the closing. If you have not been notified, be sure to call and check. Generally, the only type of payment accepted is a registered check. If you are closing on a previous property, you can also see if the title company will accept the check from the proceeds, signed over to them.

Buying a house is not a simple process. All of the details can be overwhelming, even for pros likes the Yeates.

“Since this is our third house, you would think we would have the process down,” Polly said. “Buying a house is quite the process. I’m glad we have a trusted realtor to help out.”

Polly and her family were able to buy a new split-level house with relatively little searching. Although they were hoping for a different floor plan and a finished basement, they are happy to be settled again.

“We’re glad we found this house. It’s not perfect, but it has a lot of bonuses. It’s nice to have a new place to call home.”

Basic Types of Loans

Fixed Loans – Loans in which the interest rate is locked in or fixed for the entirety of the loan

Adjustable Loans – Loans in which the interest rate is not locked, but can be adjusted with the waves of change. Adjustable loans can be attractive because they offer a very small interest rate for the first few years.

80/20 – A type of loan that is really two loans. The smaller loan covers the necessary 20 percent down payment in order to avoid private mortgage insurance or PMI.

Basic
Home-Buying Terms:

Private Mortgage Insurance or PMI – A type of insurance that mortgage company charges you if you do not put 20 percent down on the house.

Pre-qualified – A certification from a lender, such as a mortgage company, that ensures you can secure a loan in a particular amount.

MLS Number – Multiple Listing Service is the service which allows properties to be listed in realtor’s searches or on real estate websites.

Walk-Through – A tour of a property

Offer – An offer is a pending contract stating your intention to buy the property, provided the seller agrees to your terms.

Down Payment – The portion of the property that is paid for at the time of closing.

Promise Check – A check to indicate your seriousness about a property. The check is given to the title company to hold on to and it s amount is subtracted from the total you owe at closing.

Title Company – The company that compiles all the information, records and deeds necessary to close on a house.

Closing – The day in which the sellers and buyers come to sign all paperwork and pay all outstanding fees.

Additional Resources

US Department of Housing and Urban Development

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