STEP 1- FINDING THE RIGHT REALTOR
Finding the right Realtor is an important first step in your home search. Not only should your agent be knowledgeable about the area you are looking to purchase in, but you should also have a good relationship with them. You will be spending a lot of time with them, so getting along is important. They will be guiding you through one of the largest decisions and transactions of your life; therefore it is important to find someone you trust and connect with.
If you have a lender you are already working with providing your agent with your pre-approval letter, along with other search criteria will allow them to best serve you. Today a large portion of buyers use online search tools to help locate properties. Unfortunately, not all the information on public sites is accurate or up to date. Your agent has access to all properties listed in the MLS; some of which are not yet available to the public. They also hear about homes before they hit the market, so the more information you give them, the more they can help you.
STEP 2 – WHAT CAN YOU AFFORD?
If you have not started speaking with a lender, now is the time. This is your first step in the path to homeownership. Doing this at the start of your home buying journey will allow you to know your budget, and avoid any broken hearts or arguments if you fall in love with a home that is not affordable. If you do not have a lender in mind, your agent should be able to provide you a list of different lenders for you to speak to and consider.
Lenders are not only looking for income or tax returns when it comes to providing mortgage pricing on a home. Other things to consider include:
- What is your down payment amount?
- Will you be receiving any gift money?
- Will you require private mortgage insurance (PMI) – required if you are putting less than 20% down)
- Are you purchasing a Condominium (Condo) or a property with a Home Owners Association (HOA) that have additional separate fees?
- What are the property taxes?
Other fees that you need to consider as a buyer:
- Home Insurance
- Home Warranty
- Appraisal Fee
- Home Inspection Fee
- Termite Inspection
- Radon Testing
- Transfer & Redecoration Taxes
- Settlement/Closing Costs
- Lender Fees
- Title insurance
* Most online mortgage calculators do not include these extra fees. This can affect your monthly payment and cost thousands of extra dollars that you may be required to bring to settlement, so make sure you get an idea of fees up front.
STEP 3 – BEGINNING YOUR HOME SEARCH
The first thing to remember is no house will ever be perfect, you will always have to make a few compromises. It is important to make a list of your non-negotiable items such as school districts, number of bedrooms or style of home along with any other items you simply cannot live without.
When considering homes it always important not to judge a home by its photos! Going to see properties in person is the only way you will get a true feeling for the right property. If your agent suggests a home you are not sure of, make sure to listen; Sometimes you don’t know what you want until your standing in it.
STEP 4 – SUBMITTING AN OFFER
So you have found a home you love, now it is time to put in an offer. You and your agent have more to discuss than just the price.
1. Earnest Money Deposit (EMD) – This is the amount of money you will be submitting to the settlement company to hold in escrow once you have a ratified contract on a home. It shows the seller you are invested in the property and is a sign of good faith towards the deal. The amount can vary from county to county and on the price of the home, though as a rule the larger the EMD the more attractive your offer will appear to the seller.
* It is important to note that the title company will cash the check to hold in their escrow account, so any funds need to be liquid and available to make sure this deposit clears.
2. Sales Price – You and your agent should look at the comparable sold homes in the neighborhood and arrive at the price you feel financially and emotionally comfortable with.
3. Settlement Company & Date – It is up to you the buyer, to select a settlement company and date for closing. Your agent should check to see if the seller has a specific settlement date they would prefer. If you do not have a settlement company you prefer to work with, your agent should be able to provide you with a selection to choose from.
4. Financial Information – Along with your offer you will have to complete a financial information sheet showing your income, savings, and debts. You may also be asked to provide proof of funds showing you have the amount needed in your bank account for the EMD check and down payment. If the money is coming from another source such as a gift from a parent, you will more than likely need to provide proof of funds in those accounts also. If you are getting gift money it is crucial to inform your lender ASAP. They need to verify funds and make sure the money is being accounted for in the correct manner.
When you submit your offer you will also have to include any contingencies that you are asking for in the contract. These contingencies are here to protect you and your EMD money for their duration when under contract.
An example of some common contingencies you will have to consider include:
- Home Inspection – It is always in your best interest to conduct a home inspection on the property you wish to purchase. A licensed home inspector will go through the home and note any issues with the property. The price of an inspection varies greatly on the size of the home but on average costs $300-$500. Buyers pay the inspector on-site at the time of service.
- Radon – Radon is an odorless and colorless gas that can cause different types of cancer. Radon is easy to test for and not overly expensive to fix if found. Remediation usually costs between $800- $1500. The EPA recommends a radon level of 4.0 or lower to be safe, anything above they recommend a remediation system be installed. Due to the change in new legislation effective October 1st, 2016 some properties will now require a radon test to be conducted prior to settlement by the seller. The buyer can elect to put in a radon contingency if they prefer to perform the test themselves.
- Financing – Your financing contingency protects you if you are unable to qualify for the loan you have applied for.
- Appraisal – An appraisal is required by a lender for any property on which you are looking to get financing. An independent third party appraiser will come out and visit the property. They will look at the individual home, the sales price and the comparable sold homes in the area to determine their opinion of value. Should the house not appraise at the sales price or higher, it allows you options to negotiate.
STEP 5 – YOU ARE UNDER CONTRACT, NOW WHAT?
Loan & Insurance Application
Within 7 days of contract ratification, you must make sure to have formally applied for your loan and your home insurance. If this is not done you may be in default of the contract and your EMD could be lost.
Along with home insurance, you should also consider if you would like to purchase a home warranty to cover the appliances and systems in your new home. They typically cost around $500 a year for your standard warranty. Occasionally the seller offers this as part of the purchase, you also have the option to ask for it in your offer.
Title insurance is an important part of the home buying process, it protects you from title defects. Lenders will require title insurance on the amount they are lending to the borrower in order for the loan to be issued. Owners title insurance is optional; however, the cost of not purchasing it could be extremely expensive should an issue with title ever occur. The settlement company will provide you with information and options for your title insurance. It is a one time fee taken at settlement.
Per your contract, you will be going through the different inspections needed for the property. You will be expected to be present at the home inspection with your agent and your chosen inspector. Depending on the size of the home this can take anywhere from 2-3 hours for a smaller property, to 6+ for a larger home.
Condo/HOA Document Review
Once the seller has presented you with the Condo or HOA documents you will have a set time period to review. During this review period, you have the right to walk away from the contract without your EMD money being in jeopardy. The time periods vary in each state:
STEP 6 – FINAL WALK-THROUGH AND RENT BACK
Final Walk-Through – Your final walk-through will be conducted with your agent usually the morning of, or the day before settlement. At this time you will walk through the property and make sure it is broom clean, free of debris and in accordance with the terms of the contract. At this time your agent should present you with the final walk-through form which you will sign after the walk-through has been completed. Your agent will also confirm the final water meter reading for the property and present the form to the settlement company.
Rent Back – If you have agreed to it during the contract period the seller may have asked for a rent back of the property to allow them more time to move out of the home. Usually, if a rent back is to occur the seller will pay your principal, interest, taxes, and insurance on the property along with the utilities for the time period. The title company will work out all the exact numbers at settlement. Once the settlement has occurred you are the owner of the property and they are simply renting it back from you. It is normal to take a security deposit at the time of settlement to cover any damage that may be caused by the seller moving out of the home. After the seller has moved out you will do a post-occupancy walk through with your agent. If no issues are found then the security deposit will be returned to the seller. The settlement company will keep all security deposits in their escrow account.
Utility Transfer – Make sure you schedule the transfer of the utilities into your name for the day of settlement to avoid any interruption in service. If you have a rent back on the property you should schedule the utility transfer for the day the seller is moving out.
Set Up Settlement Payments or Wire Transfers – In today’s world, it is customary for any funds due from the buyer or seller at settlement to be provided to the settlement company via wire transfer. Make sure to collect the wiring instructions at least 1 week before settlement. The settlement company will provide you all the information needed for your bank. Wire transfers are the most secure and quickest way to ensure your funds arrive with the settlement company on time and without issue.
STEP 7 – CONGRATULATIONS YOU MADE IT TO SETTLEMENT!
The day has finally arrived, you are off to settlement. Make sure to bring with you your photo identification, any checks that might be required by the title company, along with any other information they have requested. You will be signing a lot of paperwork so come relaxed and be prepared to stay for a while. A usual settlement can run from 30 minutes to 2 hours, depending on the complexity of the transaction. Your agent should be at the settlement with you and usually, the seller and their agent will also be present (unless the seller has signed their portion of the paperwork ahead of time). When settlement is complete the title company will provide you a folder with all important information related to your transaction. Make sure to find a safe place to keep this in your new home!
IT IS IMPORTANT TO NOTE THERE ARE SOME AREAS THAT REAL ESTATE AGENTS ARE NOT PERMITTED TO PROVIDE INFORMATION ON TO THEIR BUYERS OR SELLERS. THESE FALL UNDER FAIR HOUSING AND EQUAL OPPORTUNITY LEGISLATION.
BELOW YOU WILL FIND USEFUL LINKS WHEN CONSIDERING THE NEIGHBORHOODS AND SCHOOLS THAT YOU MAY HAVE MORE QUESTIONS ABOUT. I HOPE THESE HELP IN YOUR RESEARCH AND NARROW DOWN THE AREAS YOU WISH TO TARGET.
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Family Watchdog is a free service to help locate registered sex offenders in your area. We encourage you to use our site to help educate your family on possible dangers in the areas they visit.
RENTAL LICENSES & LEAD BASED PAINT – MARYLAND
In order to rent out a property in Maryland, you must first obtain a Rental Housing License. See the link below for more information and application requirements:
If the property you plan to rent was built prior to 1978, Maryland’s Reduction of Lead Risk in Housing law requires owners of rental properties to register their units with Maryland Department of the Environment (MDE), distribute specific educational materials, and meet specific lead paint risk reduction standards at certain triggering events.
See the links below for more information and the application process:
* Disclaimer – All information and links provided last updated 2/8/18. This website and agent provides these links as a tool and in no way is affiliated or endorses these sites. They are provided for client informational purposes only.