The "Home Buyer" Process
As I stated on the "welcome" page of my website, the buying process is full of emotions. I want to take a minute to really dive into what the process looks like. Most buyers think that step one is shopping for their forever home. I'm here to tell you otherwise. Step 1 really needs to start with getting "pre-approved" with a lender. What the heck does that mean? In a nutshell, you'll want to take recommendations from me, your REALTOR on getting pre-approved with a local lender. Essentially, you are applying for a mortgage loan. This step is truly the most important as your pre-approval letter makes it possible to shop for a home and make an offer. It's important to listen to your REALTOR, as part of my job is to know who has the lowest interest rates and cheapest closing costs which will help you save money. So lets look at the steps and talk about them, shall we? When you're finished, scroll down to the bottom of this page and read about all the DO NOTS of the process. The "don'ts" are equally important to remember when buying a home. For now, lets look at the steps to get you into a home!
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Fill out an application for a new mortgage with a local lender and get a PRE-APPROVAL LETTER. Takes about 20 minutes. My two favorite lenders: Noemi Molina with Exchange Bank and Hope Dent with Loan Depot. You can fill their application out by clicking the blue and/or red button below
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Lets go SHOPPING for your dream home! Quite frankly, this is the fun part
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We found the one! Now we MAKE AN OFFER. We shoot the seller a signed offer on what we're willing to pay for the house & wait
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Our offer got accepted! Now what? We deliver Earnest Money Deposit. Typically, $750-1000 will go on file with the title office. This deposit gets applied to your closing costs. If for any reason you cancel your contract legally, you get this money back!
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We enter into the world of inspections and due diligence - this last for 15 days, typically.
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Before our 15 days is up, we submit our request for repairs to the seller and negotiate until all parties reach an agreement
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Waiting for the appraisal? While were serving our inspections, your lender is ordering your appraisal which ensures the house is worth what you're buying it for. Depending on what loan program you use, your appraiser might determine compliance repairs are needed to pass appraisal. This happens more than you think, don't worry.
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Inspections are done, appraisal is in, and your lender has issued "clear to close" (those words are like music to my ears) - On to our last and final step - THE FINAL WALK THROUGH. Typically we will walk through the home 24 hours prior to signing your closing docs. The final walk through is to make sure the house is the same or better condition than when you made your offer.
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See you at the closing table and then we celebrate!!
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Things to remember! It is so important to have representation during this process in the form of a Buyers Agent. I promise the above sounds simple...but it's a stressful time. My job is to absolve you from any stress and carry you across the finish line...or in this case, the closing table!
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Loan Programs You Might Like
If you are a 1st time home buyer or a seasoned home buying vet, know what loan programs are right for you. Disclaimer: I am not a lender. However, I've been doing this long enough, to know how to help you. This is one big reason you need an experienced buyers agent working for you!
The VA Loan Program
In short, the VA loan is only for US active duty military with at least 2 years in a branch of service, reservists, retired veterans, or surviving spouses of a fallen hero. This loan program requires NO MONEY DOWN. However, you as a home buyer will still be responsible for closing costs which is estimated to be anywhere from $4000-$6000. If you do not have money in your savings account, then it is so important to have an experienced buyers agent, such as myself, negotiating on your behalf to have the seller pay your closing costs.
Things to remember when using your VA loan:
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The VA charges 2.3% of the purchase price that goes back into the VA loan program, which keeps the program open for future military members. You may be eligible to have your VA funding fee waived - Ask me how!
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Some states honor the Homestead Act and will waive your personal property taxes - Ask me how to utilize this benefit!
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The VA Loan program truly is the best program on the market and if you're eligible to take advantage of the benefits...you should!
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The VA loan is an assumable loan to other service members, which makes you as a seller more marketable when interest rates are high.
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The VA will require you as a buyer to have the property inspected for termites. If any signs of termites (live, past, a wing under a rock in the backyard) is found. The VA will require the house be treated. Typically, the seller will pay for this - ask me why!
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Must occupy the residence within 60 days of purchase and use as your primary residence
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You can buy up to a 4 plex - that's right...a small apartment complex - as long as you occupy a unit.
Conventional Loan
For an average American with money in their savings account, the Conventional Loan is where its at! Typically, interest rates are lower than other loan programs (excluding the VA loan), and the overall loan process is relatively easy. Some things you need to know when going conventional:
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You are required to put money down. Most small town/local lenders will allow you to put a minimum of 3-5% down. Most national lenders will require at least 10% down. The Standard is 20% down payment. You might be asking yourself why you'd put down anything more than 3%. Well, if you don't put at least 20% down then you will pay PMI. What is PMI? "Private mortgage insurance which is a type of mortgage insurance you might be required to pay for if you have a conventional loan. Like other kinds of mortgage insurance, PMI protects the lender—not you—if you stop making payments on your loan." Once your loan to value reaches 78%-80% then PMI will terminate and your payment will decrease.
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You as a buyer will still be responsible for your closing costs. So! money down (pick your percentage) + closing costs = you need to have money saved up to buy a house. Ask me how to get those costs down for you!
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Your percentage of money down is always based on the purchase price of the home. Ex: Purchase price is $200,000. You choose to put 10% down plus closing costs estimated at $5000. On the day of closing, you will need to bring a check or wire for $25,000 to purchase your $200k home...so save up and ask me how to reduce that!
FHA or USDA
An FHA loan is what I like to refer to as "the peoples loan."
"A Federal Housing Administration (FHA) loan is a home mortgage that is insured by the government and issued by a bank or other lender that is approved by the agency. FHA loans require a lower minimum down payment than many conventional loans, and applicants may have lower credit scores than is usually required."
If you are planning to live anywhere but Manhattan or Topeka, KS, then you may be eligible for a USDA loan. US Rural Development is a NO MONEY DOWN program open to any buyer wanting to live in a town with less than a certain number of people. Example: Manhattan does not qualify for a USDA loan as the city has to many residents. However, Junction city, St George, Alma, Wamego, etc all qualify as the towns are small and do not have as many residents. Things you need to know:
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Your credit score does not have to be flawless to use this program
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Total household income cannot exceed -I think its $85k but don't quote me as this number changes often
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Total Debt to Income (DTI) cannot be higher than 41-45%
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Must be a US citizen to utilize this program
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Must occupy the residence and use it as your primary residence.
What NOT to do when buying a home!
Do not open a new credit line. Don't go buy furniture or get a Menards card. WAIT until after closing on your home. Your lender is watching your credit report like a hawk. Using a credit card will add debt and upset your debt-to-income ratio. I know you want to furniture shop, but it is so important to wait until you close to open up ANY lines of credit. If you already have credit cards, DO NOT make purchases on them during this process. Your lender is watching!
Do NOT purchase a new vehicle while you're purchasing a home. Walk, take the bus, ask me for a ride, whatever. A vehicle loan in the midst of purchasing a home will ruin your chances of getting to the closing table. I promise! Vehicle loans have an obscene amount of interest and typically payments are very high. Do not risk having a place to live for the 2019 BMW you see on the lot
Now is not the time to start the divorce process. If you are legally married, I need to know about it. In the state of Kansas, your spouse is entitled to half of your estate. I assist people who are in the middle of a divorce all the time. However, if you will be paying child support or alimony, DO NOT try to hide this from me or your lender. Simply tell us, and we will tell you what to do to keep up moving forward.
If you pay child support or alimony, please report this to your lender. This is considered a debt and is taken into consideration by your lender when getting pre-approved for a mortgage loan. I absolutely promise that your lender will find out that you failed to report child support and/alimony and typically this is caught days prior to closing on your new home. Just be upfront and tell me and I will find you a house within your budget.