7 Easy Steps for Buying a House
The most common question I get from first-time homebuyers is, "what do I need to do to buy a house?" Perhaps your rental rates are going up; you don't have the stability of owning your own home. It is hard to know where to start and can be a difficult task if you get the wrong people involved from the start. Buying your first house can be summarized in seven simple steps. We have successfully navigated this process over 150 times in the last 12 months.
#1 Pre-Qualification: If you're not paying cash for a house, it's essential to sit down and talk to a licensed mortgage expert in your state. They are going to help evaluate your current financial situation. They will pull your credit history, and you should have your pay stubs and bank statements for the last two months with you when you do this, although they are not required for a first meeting. Even with what you perceive as bad or low credit, creative options are often available. Loan products are available for as little as $500 out of pocket, depending on income and credit score.
#2 Write an Offer: Obviously, you need to find the right house first. Once you find the right home, you'll want to put together a written offer. If it doesn't, if it's not in writing, it never happened. Your broker will put your formal offer on a legal document called a purchase agreement. Purchase Agreements outline your terms; purchase price, downpayment, financing type, and the specific conditions in which you are willing to purchase the house.
#3 Under Contract: Congratulations, you are under contract! You've submitted an offer in writing, and the sellers have accepted, and now you are moving forward. Once you are under contract, your due diligence process starts. We will move forward in good faith towards a closing date.
#4 Inspections: Inspections are critical in buying a house. Sellers in New Mexico are legally required to disclose any material defects they have actual knowledge of. It's been three years since I've been in the attic of my own house, and I go into the crawlspace every Christmas to drag the decorations out. For all I know, there could be a leak, a squirrel, or a goblin up there because life gets busy. If I sell my house, I must disclose any material defects. If a leak in my attic weren't coming through to my top floor, I wouldn't know about it; therefore, it wouldn't be on that disclosure. When you buy a house, it's vital to hire a licensed inspector in New Mexico; we can give you a list of licensees that live right here in San Juan County who are willing to do inspections.
#5 Objections: After your inspections, you can make objections to the house's condition. Perhaps a leaky roof needs to be fixed, the sewer line needs to be replaced by a plumber, and smoke detectors aren't present. Whatever it is, those are your objections, and typically, we try to keep our objections to safety-related items or issues that could cause imminent damage to the dwelling. We then submit our objections to the seller, and they have an opportunity to evaluate your list and counter it if they want. I've had these go back and forth a few times, and typically we can find a mutually acceptable solution.
#6 Appraisal: I've heard it said that if a buyer offers a price and the seller is willing to accept that price, that should be the price regardless of an appraisal. An appraisal has two purposes: it protects the consumer and covers the bank. A bank doesn't want to loan $150,000 on a house that's worth $100,000. If you stop paying your payments, the bank will come to get your home; they want to ensure the collateral will cover the lien against it. An appraisal protects both you and the bank.
#7 Closing: This is the most exciting part of the whole thing! We show up at the closing table and sign all of our final documents. Once your transaction records are at the county assessor's office, the deal is complete, and you start building your life in your new home! In New Mexico, we record upon funding, so it does take a couple of hours after closing to get your keys.
Those are seven simple steps. The reality is that it can be complicated to navigate the purchase or the sale of a home. We've successfully navigated over 500 closed transactions. We do this every single day. So we make a complicated, arduous process incredibly simple for our clients. We'd love to help you with the purchase of your next house!