Here is a summary of the steps
that you will take from your home search to closing. If you are a
first-time home buyer, don't be overwhelmed by the number of items
listed or their complexity. Your real estate agent, attorney, and loan
officer will guide you through this process. Many of the tasks are
handled directly by these three parties. They will instruct you as to
exactly what you must do and will answer any questions that you might
have. Don't forget, they've gone through these procedures many times
The most important thing to have during this process is patience and
trust in your real estate agent. Bill will try, to his utmost ability,
to see that the entire process goes as smooth and enjoyable as possible
for you. "One very important question you need
to ask yourself: When looking at homes with Bill or any REALTOR®,
if you find the perfect home during your search, DO YOU FEEL READY TO
MOVE FORWARD OR WOULD YOU RATHER WAIT UNTIL A BETTER TIME?"
Perhaps by reading the rest of this report,
it will help you answer that question.
dollar figures listed in this section are estimates only and will
vary due to many factors including which region of the country you live
1) Using the loan and pre-qualification functions in the software,
determine the price range of the home that you can afford. Discuss this
with your real estate agent. Ask Bill to show you houses in this range
in the communities that you would like to live in. Bill is a good source
for inside information on the benefits of the communities in those
areas. For the most part, you should count on spending 1 to 2 weeks
looking at homes with your real estate agent. This will give you enough
time to look at plenty of homes and make your decision. If you take
longer than this, you risk the chance of loosing a home that you would
have liked to make an offer on, and you'll have to start the process
During this time period, it is also a good idea to get "pre-approved**"
for a loan. This is different than a pre-qualification. The bank or
mortgage company actually does a credit check for a pre-approval. Having
a pre-approved loan gives you an advantage when making an offer in step
2. Ask Bill to recommend a loan officer if you don't already have one.
**"There are two reasons why I encourage buyers
to apply for a loan and get pre-approved early, the first is peace of
mind. It's nice to know exactly what you can afford to buy before you
begin shopping, but second and more important is the fact that in
today's multiple offer environment, many sellers won't even consider
your offer unless they know you are pre-approved for a loan. After
getting pre-approved for a loan, you should feel ready and comfortable
about moving forward with your home-buying process."
2) When you find a home that you want to purchase, the next thing you do
is make a bid through your real estate agent. Bill will provide you with
a standard residential sales contract. He may also be able to recommend
a good real estate attorney. An attorney may or may not be necessary at
this point, (most sales contracts are fairly standard) but may be
required later in the process. However, you may decide that you want an
attorney to review the contract.
The sales contract will most likely contain some contingencies on riders
attached to the contract. Examples of some contingencies are: your
obtaining financing for a specified rate and term, selling your current
home, obtaining a satisfactory (to you) home inspection. Your real
estate agent or attorney may include other items.
This offer to purchase a home will be accompanied by earnest money of
$1,000 or more, depending on the price of the home. This indicates to
the seller that you are making a serious offer. The earnest money is
normally in the form of a check made out to the broker (not the seller).
It is deposited in an escrow account and will be applied to your down
payment. If the sale is not finalized for a reason beyond your control
(i.e.: due to one of the contingencies), the earnest money will be
returned to you.
Subsequent offers and counter offers may take place until all terms are
agreed upon by both parties.
3) Have the home inspected by a professional, bonded inspector. (NOTE:
The buyer normally pays for the home inspection - it will run somewhere
in the area of $300 - $500.) The home inspection usually takes place
within 5 days after signing the contract. If there are any major flaws
in the home, they can be dealt with before you apply for the mortgage.
If these issues can not be dealt with to the satisfaction of the buyer,
your contract should allow you to back out at this time.
4) Apply for a mortgage. NOTE: Check the loan/mortgage and mortgage
pre-qualification functions provided in the software. You will probably
have to pay a loan application fee of $100 to $300 or more. Some lenders
also charge you prepaid points. (One point refers to 1% of the loan
amount. Points are paid to the lender or mortgage company to cover their
cost for the up front processing of the loan.) You may decide to "lock
in" the rate at this time, or the lender may allow you to do it at a
later point in time. (If you have been pre-approved for a loan, some of
the steps in this process will have already been completed.)
When you apply for a mortgage, what are some of the items that are
needed? (These may vary depending on the lender.)
- Social Security cards & drivers licenses
- Residence addresses for the past 2 - 5 years
- Your landlord's name and address
- Names and addresses of each employer (past 2 - 5 years)
- Your most recent pay stubs
- Two years signed tax returns & W2's
- Names, addresses, account numbers, and balances of all checking,
savings, credit cards, and installment loans
- Two most recent bank statements on all accounts
- Information on any stocks or bonds you own
- Details of all real estate owned
- Copy of fully executed sales contract, riders, and listing sheet for
your current home (if applicable)
- Divorce decree & child support agreements
- Application fee
5) You will receive a "good faith" estimate of the closing costs from
the lender. This is called a "RESPA Statement". It includes the costs
for: points, appraisal, title search, title insurance, survey, recording
of deeds and the bank's attorney fees. Some of these items may be
included in the points that they charge.
6) At this time, there are several other items that may need to be done
before the lender gives final approval to the mortgage:
Title Search - This is usually required by the lender. It should be
stated in the sales contract that the seller provide you with clear
title (one without any liens against it). This may cost you about $200.
Check with your real estate agent for the standard charges in your area.
Title Insurance - The lender will also require this for their own
protection. It's an insurance policy that covers any problems with the
title even though the title company stated it was clear.
Buyer's Title Insurance - This covers you, the buyer, in the event that
the title is not clear. This is usually optional, but recommended.
Private Mortgage Insurance - Again, this is something that most lenders
require if your down payment is less than 20% of the purchase price. It
is a protection for the lender in case you default on the loan.
Homeowner's Insurance - This is an insurance policy that covers the cost
of repairing or rebuilding your home in the event of a natural disaster.
Obviously, this is beneficial to both you and the lender. This is
something that you will shop around for on your own. You can start with
your auto insurance company. Most companies will offer a discount if you
insure both, your home and auto, with them. Your realtor may also have
With the exception of the homeowner's insurance, all of the above costs
plus any additional ones such as the appraisal, survey, recording of
deeds and the bank's attorney fees will be included in the RESPA
provided by the lender. The entire cost to you, the buyer, will usually
be in the range of $1,000 to $1,800 excluding points. (The actual amount
may be higher or lower than these limits.) The amount of points that you
will have to pay depends on the lender's policies, the amount of your
down payment, the term and the amount of the mortgage.
This means that you should count on having this much cash available
besides the amount of your down payment and the amount of points paid to
the lender. The down payment is usually a minimum of 5% to 10% of the
selling price. (Some lenders may include the down payment in the loan
So, how much will this cost? Let's take an example of a $150,000 home
(The median price of an existing home in Las Vegas is over $250,000).
Suppose your lender allows you to put a 5% down payment on the house,
and your closing costs will be between $1,000 and $1,800, and the amount
of points paid is 1.5% (of the loan). This would come to:
Down payment $7,500
Closing costs $1,000 to $ 1,800
Points (1.5%) $2,138
Total $10,638 to $11,438
7) If your mortgage is approved, the lender will send you a letter of
commitment. If the following information is not provided, you will
request an exact accounting of the closing or settlement costs and the
required documents that you will need to bring to the closing.
8) All of the parties will agree on a closing date. For the closing,
here is a list of some of the items that the three parties are
responsible to bring.
The lender: RESPA, Truth in Lending Disclosure Statement, the mortgage,
the mortgage note, application for any escrow accounts required for the
buyer, and the check for the seller.
The seller: property deed, final utility bills, final tax bills, any
documents required to clear the title, and keys to the house.
The buyer: cashier's check for the remainder of the down payment plus
the balance due for any other payments (you will be informed of the
amount), any documents required by the lender, you may need your check
book for small dollar amounts, and you should have your lawyer present.
Bill will also be with you at the closing.
9) You will select a walkthrough date. This is your opportunity to
inspect the home one last time before closing. It is usually scheduled a
day or two before the closing date.
10) CONGRATULATIONS!!!!! Closing day has arrived. After signing numerous
documents and taking care of final payments, you will become the proud
owners of your own home.
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