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Buying a home can represent one of the largest investments you will ever make. At Realty Access, your Realtor® will guide you through the process.
Overview of the Process and Terms Used
Start with obtaining a mortgage pre-approval to determine the price range for your new home. This will be based on your income, credit rating, current monthly expenses, down-payment, taxes and interest rate.
Meet with your Realtor® to define your home search parameters. This includes price, location, style, bedrooms, bathrooms, garages, etc. Your Realtor® will provide you with current listings and keep you up to date with all new listings.
Review the available homes. Drive past the homes that meet your criteria. Contact your Realtor® to set up appointments to tour the homes you have an interest in.
Once you find your perfect home, your Realtor® will review comparable home sales with you to help determine the amount of your offer. The next step is to put your offer in writing by meeting with your Realtor® and completing an agreement of sale. There will likely be some negotiating with the seller. Once the agreement of sale is accepted and signed by all parties, you can set up your inspections and apply for your mortgage.
Your Realtor® will guide you through the inspection and mortgage process. Once all contingencies have been met, your closing will be scheduled. Prior to closing you will do a final walk-through of the property to make sure that everything is in the condition agreed to in the agreement of sale.
The day of closing, your Realtor® will be there to represent you and answer any questions you may have.
Costs to Purchase a Home – That depends on a number of factors, including the cost of the house and the type of mortgage you get. In general, you need enough money to cover these costs:
- Good Faith Deposit – Buyers are almost always expected to make a “good faith” deposit (sometimes called “hand money” or “earnest money”) on the property. Deposits can be given in one large deposit or in two (or more) steps. When a buyer makes an offer, an initial deposit is usually given along with the Agreement, or shortly thereafter. Your deposit money will be placed into an escrow account and will be applied to your down payment or closing costs.
- Down Payment – A percentage of the cost of the home that you must pay depending on the type of financing you choose. Typically the down payment is 3.5% to 5% of the cost of the home. VA loans can be obtained without any down payment.
- Closing Costs – Closing costs are separated into what are called "non-recurring closing costs" and "pre-paid items." Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan such as the appraisal fee and transfer taxes. "Pre-paids" are items which recur over time, such as property taxes and homeowners insurance.
- PITI –This stands for principal, interest, taxes and insurance. Your monthly payment to the lender generally includes all of these and may include mortgage insurance as well.
Inspections – A home inspection gives the buyer more detailed information about the overall condition of the home prior to purchase. In a home inspection, a qualified inspector takes an in-depth, unbiased look at your potential new home to evaluate the physical condition: structure, construction, and mechanical systems. Identify items that need to be repaired or replaced; and estimate the remaining useful life of the major systems, equipment, structure, and finishes.
The home inspection must be performed by a full member in good standing of a national home inspection association, or a person supervised by a full member of a national home inspection association, in accordance with the ethical standards and code of conduct or practice of that association, or by a properly licensed or registered engineer or architect.
There are many other inspections a buyer may elect. For example: wood infestation, radon, environmental inspections, sewage and water systems.
Appraisal – The lender will order an appraisal to make sure the purchase price is in line with the property’s value. The appraised value of a home is an important factor in the loan underwriting process. The loan to value ratio is based on the appraised value and helps lenders determine how much money may be borrowed to purchase the property and under what terms.
Survey – A land survey will help protect your investment. A survey will reveal the property dimensions, and will also reveal possible encroachments such as a driveway, fence, wall or shed.
Title Search – A title search is where public records pertaining to the property are carefully searched for discrepancies and inconsistencies. Everything from court to bankruptcy filings, tax records, past deeds, wills and trusts, and divorce decrees can be tracked down in a public records search.
Title Insurance – Title insurance protects both the homebuyer and the lender from issues that could possibly prevent them from securing free and clear ownership of the property. It protects against hidden problems with your deed (and who owned your deed in the past).
There are two forms of title insurance. The first form is known as the lender's title insurance, it is normally written in the amount of the mortgage and protects the lending institution. The second form of title insurance is known as an owner's title policy. It usually is written for the amount of the purchase price of the home and protects the owner.
Pennsylvania title insurance rates are regulated by the PA Department of Insurance; therefore the title insurance premiums are the same with all title insurers.
Home Owners Insurance – A home owners insurance policy will protect you against certain losses and damage to your home and is generally required by lenders prior to closing. Some lenders will collect the money you owe for homeowners insurance as part of your monthly mortgage payment and place it in an escrow account, paying the insurer on your behalf when the payment is due.
Home Warranty – A home warranty is like an insurance policy that covers some or all of the costs to repair or replace certain appliances or systems of a home. In some transactions a seller might elect to purchase a warranty that would cover the home after it is sold. Other times a buyer might want to purchase the warranty on their own.
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