Steps to buying New Jersey Homes
Deciding To Buy
A home purchase is the biggest financial decision that most of us make in our lives. First-time home buyers and experienced buyers alike, need to make their home purchase decision carefully.
What Do You Want To Buy?
Over paying rent? Put your money toward your own mortgage instead of your landlord’s. Need a larger home? Are you an empty nester looking to downsize? Is this purchase for a land investment or a rental property? Have a clear idea of what you’re hoping to accomplish with your purchase.
Has Your Income Grown?
Buying a home can be a terrific investment; whether it is for your personal use, to be used as a rental property as an expansion of your investment portfolio.
Before searching for homes, you need to be prepared.
Build Your House Files
A file with all your important financial documents is important to keep. These items will be requested by your loan officer in order to secure your financing.
- Bank statements
- Recent financial statements
- Credit cards and balances
- Auto loans and balance
- Recent pay stubs
- Two years of tax returns
- Copies of any leases on your investment properties
- 401K statement(s), mutual accounts, life insurance, stocks, and bonds
List Your Home Needs You Want
You might make two lists, with the first including your required items (i.e., number of bedrooms, a one story home if accessibility is a factor, preferred location, schools, etc.), and the second list including things that you would like to have (finished basement, in-ground pool, etc.) but you could live without.
Since your credit score has a huge impact on your home purchase, it is strongly advised to check your credit rating with a lender. The lender will check your credit ratings on all three credit reporting agencies. Be sure to look over your reports carefully to make sure there are no errors.
When searching for mortgage options, be sure to check with more than one lender, and make sure each knows your shopping, This will help you receive more competitive pricing as each lender will be trying to offer their most attractive options to entice you with. We are happy to recommend mortgage providers to you, and honestly, often our lenders will be your best option. Knowing we provide their names to our clients makes each more aggressive in their efforts to take care of you, as not doing so could mean the loss of substantial future business.
Getting prequalified is key, not only because sellers will negotiate more freely with a buyer that they know has been prequalified, but by knowing how much you can afford makes your home search much more enjoyable. The stress of wondering whether if you find a great home you’ll actually be able to purchase it can ruin the fun of searching for a property. Do yourself a double favor and get prequalified before you start looking at homes.
Be Careful With Your Finances
Because big changes in your career or your debt can have such a huge impact on your qualification to purchase a home, this is not the time to change your career or make any large purchases. A change of employer while retaining your same career is not an issue. It is a complete change of career into something new for you that would be a problem.
Choosing Your Realtor®
Purchasing a home is a very important move with complex considerations and substantial paperwork. Most folks only purchase a few homes in their entire lives, while an experienced Realtor can be assisting with several home purchases every month. Having an experienced professional guiding you through all the complicated steps to assure you make no serious and potentially costly mistakes is in your best interest.
When searching for your real estate professional, consider these important things:
- Work with a full-time agent, who is highly experienced with transactions similar to yours.
- Select an agent that is familiar with the area that you’re interested in.
- Inquire if the agent will be available evenings and weekends for you.
- Ask about continuing education that your agent has completed.
- Use an agent that is tech savvy, to assure you’re getting information quickly and accurately.
- Make sure your agent answers their phone consistently, so you can get your questions answered promptly.
- Ask for references.
- Lastly, select an agent that you can tell is paying attention to you and your needs and whom you feel comfortable with.
Time To Go Shopping
Completing the above, you’re ready to start looking at homes.
Take A Drive
If you are local, take the time to drive around the communities, neighborhoods, and subdivisions you’re interested in. This will help you know you’re making the right decision when you find a home you’re interested in. If you’re not local and do not have the luxury of extra time to drive around, stop locals that may be walking their dog, playing on the tennis courts, etc. and ask them what they like and don’t like about the area.
Narrow The Search
When looking through listings, select the properties that interest you most. You’re not going to learn anything visiting properties that you know you would not be interested in. Staying focused on your top picks will help you keep better track of what features were special or missing from the different homes you’ve seen. Also, speak to your real estate agent about anything that may make selling the property difficult when it’s time to move on. You do not want to consider too lightly issues that you can deal with but many others would find objectionable.
Time To Buy
Once you have found the property you’d like to purchase, your real estate agent will help you put together an offer that the seller might consider positively. Often the very best homes are the newest on the market, so putting together an offer that can be negotiated quickly can help you beat a multiple offer situation that will drive the final price of the property up. A listing that has been on the market for some time may be worth an offer that includes a more significant reduction of price or the inclusion of other considerations you find beneficial (more closing costs paid by the seller, annual associate fees paid in advance, etc.).
Earnest Money (Escrow), Inspection and Appraisal
The Contract and Earnest Money
A fully executed contract (one signed by all parties with no changes) is legal and binding agreement between you the buyer and the seller. The buyer’s earnest money is deposited into a secured account.
Here are some tips to help keep organized:
- Put everything in writing. To assure there are no misunderstanding, all verbal agreements should be put into writing, including all counter-offers and addendum. We will assist you in understanding and completing all the paperwork and make sure you have copies of everything.
- Follow the contract schedule. As soon as an offer is agreed to and signed off by all parties, the clock starts ticking. There are many responsibilities that you, the seller, and your respective agents need to accomplish in a timely manner. Not paying attention to this can put your contract in jeopardy and possibly lose you money or even the purchase of the home. Listen to your agent and pay attention to each step to make sure they are completed on time.
The Closing Agent
The Closing attorney, though paid for in your closing costs, actually works for the lender to make sure the contract is executed exactly as it has been drawn up. Your agent will be reaching out to the closing attorney periodically during the pre-closing time to assure that attorney’s office has all the documentation it needs to complete your transaction.
Appraisal and Lending
Stay in close touch with your loan officer/mortgage broker. There are many documents they will need from you to process your loan, and delays in providing that information can delay your closing. The lender will also need the funds to pay for an appraisal (paid for in advance, but reflected in your costs at closing).
The appraiser will verify the value of the property meets or exceeds the price on the contract. This is necessary as the lender will only provide funds for a property worth at minimum the contract price (unless you will be paying the difference out of your own fund).
Whether your paying for a home in cash or taking out a loan, you want a home owner’s hazard insurance policy. With a loan, that insurance is required.
Home Warranties are available and can protect you from unexpected issues in your home after closing. These warranties are not required, but are often pre-negotiated within your contract that the seller will pay for the warranty for you. If the owner is not paying for the warranty, you can purchase one on your own.
Home Services and Utilities
Time is often required to transfer utilities, so after you have completed your home inspection and have fully negotiated any repairs need, this would be a good time to begin selecting and lining up connection of your home services and utilities. The seller is responsible for the day of closing, so schedule your utilities to start the next day. Verifying this schedule with the seller is always a good practice to make sure everyone is in sync.
The final inspection is often just a formality, but there have been issues found during the final walk-through that would have been the buyer’s responsibility had they not been spotted prior to closing. Upon closing, you have little to no legal recourse against the seller for issues found.
Because there are so many things going on simultaneously from contract to close, don’t be surprised if unexpected issues pop up that need addressed. Stay calm, we’ve dealt with complications for years and have the experience needed to properly address problems and get them smoothed out.
The closing attorney will oversee the exchange of funds and ownership and will provide all parties involved a settlement statement called the HUD. The HUD summarizes all the financials and will be the main document you take from closing, along with copies of all your loan papers, etc. After the attorney goes over the HUD with you and the seller you will both sign it to verify your acceptance.
After the HUD is signed off and all copies of documents have been given to you, the transaction is complete and you are a home owner.