Steps to Home Ownership

Step 1 – Decide to Buy
Before you start your search for a home, decide what features are most important to you. How many bedrooms and baths you need? Do you need a home office? Do you prefer a 3 car garage? How many acres do you need? Do you need a barn? Maybe you prefer wood or tile floors over carpet or a split bedroom plan where the Master is away from the secondary bedrooms.

These are the things to think about before starting your search. If you tell Levi exactly what you’re looking for ahead of time, he can search for the perfect home for you.

Before you start your search process it’s a good idea to consult a mortgage broker or banker. They will tell you exactly what you can afford to purchase and what loan programs best fit your needs. Not sure who to call, Levi has developed close working relationships with several loans officers and can make recommendations.

Step 2 – Seek Professional Guidance
It’s been said, “If you think its expensive hiring an expert, try hiring an amateur.” This holds double true in buying real estate. As a buyer you do not pay the real estate agent’s fee. The seller pays for the agent’s fee.

It won’t cost you any extra to get Levi’s expert advice and professional assistance. Because of his level of experience your risk are greatly reduced. A win – win for you.

Step 3 – Begin Looking for Just the Right Home
Today, most people start their home search on the internet. If you’re reading this, you’re probably one of them. This website is dedicated exclusively to homes with acreage and raw acreage. Levi’s site takes the confusion out of searching for equestrian property, country estates, homes on acreage and raw acreage.

Levi has another option available. He can set up a computer report that will automatically email properties that match your requirements. Levi’s past buyers have found this is very helpful. They no longer have to screen hundreds of houses on poorly organized websites. If you would like to have reports sent to you, please contact Levi. Once he has your wish list, he’ll set up your personalized report to be emailed to you.

Step 4 – Know the Market
You’ll find Levi’s knowledge of the local area extremely helpful. He will ensure that you know as much about the properties for sale in you target market area as possible. This helps you to understand what constitutes value and what doesn’t. He will provide all of the recent sales history for the area in which you are interested. This helps you negotiate more effectively.

Step 5 – Find Your Dream Home
When Levi finds exactly the right home for you, he’ll put together an offer custom tailored for your needs. The offer will include appropriate contingencies on important things such as obtaining financing, favorable home inspection, clear title, and so on. Levi has helped over 600 families purchase and he knows where the pitfalls lie. He’s happy to assist you in avoiding them.

The contract offer is normally accompanied with a cash deposit called “earnest or good faith money.” A title company will hold this deposit in an escrow account until you close on the sale. Then the amount is applied to your closing costs. If the seller signs the offer, you will then have a contract for sale and purchase. Closings are usually held in 30 to 45 days from the effective contract date. This is mainly dependent on the time it takes your lender to approve the mortgage.

Step 6 – Negotiating Your Purchase
As your buyer’s agent, Levi will provide you with a list of comparable properties to help determine the best price and terms to offer for the property.

Levi will help you consider items in the house that you want to convey with the sale. For example, refrigerator, range, window treatments, light fixtures, and out buildings, fencing, watering systems and spas.
Levi makes sure your offer is contingent on a satisfactory home inspection. It’s in your best interest to hire a professional home inspector to evaluate the home and advise you of any defects or potential negative aspects of the home.

Examples of additional contingencies are: inspections, financing, the sale of a house, satisfactory appraisal, reviewing and deed restrictions, etc.
Determine the date you would like to close. Keep in mind that the nearer the closing date is to the end of the month, the less interest you will have to pay at the time of closing. This can sometimes reduce the amount of your closing costs.

A standard sale and purchase contract allows you to specify how long the seller may take to respond to your offer. Unless the contract is signed by the seller and delivered to the buyer by the date and time you specify, the offer will expire and your escrow deposit can then be refunded. This prevents the seller from keeping you in suspense while waiting for a better offer.

In most cases, you will be expected to provide a deposit or earnest money payment with the offer. Levi will make sure that you will get the money back if the sale is not completed because of problems with the seller of because of contingencies that Levi has added to the contract for your protection. If you decide to back our out of the contract at the last minute, you may have to forfeit your deposit to the seller.

Once you have completed the contract, it is presented to the seller. If the seller accepts everything and signs the contract, the offer becomes binding for both the buyer and seller (subject to the contingencies). If the seller wishes to negotiate, a counteroffer may be made. You then receive the revised contract and can either sign it, if acceptable, or reject it and make a second offer. We sometimes find that negotiations go through several rounds of offer and counter-offer. Don’t let this discourage you. Levi has done this many, many times and he’ll discuss the counter offer and help you decide whether to accept it, submit a counter to their counter offer, or reject the seller’s counter offer and move on to another property. You can depend on Levi to provide you with advice based on our experience in hundreds upon hundreds of contract negotiations.

Market conditions will play a role in how Levi negotiates the contract. He is familiar with all of the winning strategies for all market conditions and you’ll find that Levi will provide you with his best guidance and advice. However, the actual steps Levi takes will be your decision. He gives you the benefit of his advice and then he will follow your informed instructions.

Step 7 – Inspections and Appraisal
The standard sale and purchase contract allows ten days from the effective date for the home inspection to be completed. This time frame may be changed depending upon the buyer and seller.

You should employ the services of a Professional Licensed Home Inspector to identify any hidden or possible future problems with the home. The cost of a home inspection normally runs around $350 to $500 for a typical home (homes with larger square footage, pools, spas, etc. may cost more) and this has to be paid to inspector at the time of service. Inspection of barns, stables, free standing garage is an additional cost.

A home inspection usually takes two to three hours or longer, depending on the home’s age and square footage. Levi recommends that you be present at your home inspection so that you can ask you inspector any questions and to look at any areas needing maintenance or repair.

The inspector’s job is to give an in-depth and impartial evaluation of the home’s systems as they appear at the time of the inspection. The inspector should also be fully trained in the proper operation of all commonly found home systems. You can expect the inspector to evaluate the physical condition including the structure, construction and mechanical systems, identifying items that should be repaired of replaced, and estimate the remaining useful life of the major systems such as electrical, plumbing, heating, air conditioning, equipment, structure and finishes.

Items commonly inspected during a home inspection are foundations, floors and walls, siding, windows, decks, garage doors, roofing coverings, flashings, chimneys, piping, plumbing fixtures, faucets, water heating and fuel storage systems, electrical wiring, main service panels, conductors, switches, receptacles, heating equipment, safety controls, distribution systems, air conditioning and heat pumps, cooling and air-handling equipment, controls and ducts, railings, doors and windows, insulation and ventilation, attics, foundations, kitchen and bathrooms, pools and pool equipment, and many other items.
Once completed, the inspector should provide you with a detailed home inspection report. You can expect to receive this report in two days.

The Termite Inspection is a separate inspection. This is another expense to the buyer costing from $125 to $250. This is usually paid at the time of the inspection.

If you are financing a home, the lender will usually require a termite inspection. This assures the lender that the home is free of termites and other wood destroying insects.

If a home is infested with wood destroying organisms, it could compromise the integrity of the structure. The pest inspector will look for infestation by wood-boring insects such as termites and carpenter ants, as well as evidence of dry rot and other fungal conditions.

If the pest report mentions damage from an active or previous infestation, the lender may ask the buyer to hire someone to verify the structural integrity of the home.

An Appraisal is an un-biased estimate of the value of a property. The purpose of the appraisal is to determine the market value of the home. This ensures that you are not purchasing the home for more than it is actual worth. The outcome of the appraisal determines the maximum amount a lender will loan to purchase that particular property. The buyer pays for the appraisal up front but the lender must order the appraisal.

An appraiser arrives at a final opinion of value by the evaluating the property and the neighborhood in which it is located. The appraiser also obtains land values from county sources and recent sales information about nearby properties. They prepare a written report outlining methods by which a fair-market value was estimated. Usually, the buyer’s lender will receive the final report within 3-5 days.

Step 8 – Shopping for a Loan
Unless you are paying cash for your purchase, you will have to arrange for a mortgage loan. Levi can not do this for you, but he can assist by providing you with contacts with lenders and then by working closely with the lender you select.

Before your search for the perfect property begins, you must determine how much you can afford. There are several factors that determine how much you can afford.

Your income is a major factor in determining how much you can afford. For conventional loans, the lender typically allows 28% of your monthly income for your complete mortgage payment including principal, interest, taxes and insurance (PITI).

The better your credit score, the better your interest rate you can get. Lower interest rates allow you to buy more home for the same monthly payment.

A larger down payment may help you buy a larger home. You may qualify for a home loan with a lower down payment if your credit score is good.

Monthly expenses such as such as your car payment, minimum credit card payments, personal loans, child support payments and any other monthly obligations will reduce the loan amount of which you qualify.

By going to the county tax appraiser’s website, you can estimate what your taxes would be for a particular home you may be interested in purchasing.

Since homeowners insurance is part of the escrow payment on your loan, you must factor this into your total monthly mortgage payment.

There are different types of lending institutions: commercial banks, mortgage companies and credit unions. A buyer has the option of dealing directly with the above type lenders or with a mortgage broker who will check with many different lending institutions to find the best loan for you.

Here are a few things to keep in mind while shopping:
Is the interest rate fixed or adjustable?
Are there any points involved? These are fees paid to the lender or the broker for the loan and are often linked to the interest rate; usually the more points you pay, the lower the interest rate.
Ask what additional fees are involved. Some examples include: Loan origination fees, underwriting fees, broker fees, application fee, and appraisal fee. There may be others depending on the lending institution or mortgage brokerage.
Compare what the required down payment is per individual lender.
A lender may require you to pay Private Mortgage Insurance (PMI). Not all lenders require it, so ask. PMI protects the lender against a loss if a borrower defaults on the loan. It is usually required for loans where the down payment is less than 20% of the sales price or when the amount financed is greater than 80% of the appraised value.
How long does the loan last – 15 20, 30 or more years? When comparing programs offered by the different lending institutions pay close attention to the term of the loan and make sure you are comparing the same terms.
Does the loan have a pre-payment penalty? If so, how much is it and how long does the penalty period last?
Once you are satisfied with the loan terms, you may want to obtain a written lock-in from the mortgage broker or lender. The lock-in should include that rate, the period the lock-in lasts, and the number of points to be paid. By locking in you are protected from any rate increases while you are looking for a home, while you are negotiating and while the loan is being processed any you are waiting to close.

Step 9 – Home Insurance Shopping
The main purpose of homeowners insurance is to provide financial protection against disasters to your home and other structures like a sheds, barns, out buildings or detached garage. Homeowners insurance covers both damage to your property and your legal responsibility for any injuries and property damage to others while on your property. When purchasing a home, the lender always requires the buyer to obtain and show proof of homeowners insurance before finalizing the loan.

The homeowner’s insurance policy includes four different types of coverage:
1. Structure of the home: Pays to repair or rebuild your home if damaged or destroyed by fire, lightening, wind storm, hail, explosions, vandalism, vehicles, smoke and other disasters listed in the policy. Basic homeowner’s insurance policies do not cover against flood, earthquake and sinkhole damage. One may consider adding these endorsements to their policy. Although, if the home you decide to purchase is located in a flood zone, the lender will require you to add flood insurance to your policy.
2. Personal Belongings: Electronics, furniture, clothes, jewelry and any other personal items are covered if they are stolen or destroyed by insured disasters.
3. Liability: Covers you against lawsuits for bodily injury or property damage to others while on your property.
4. Additional Living Expenses: Pays the cost of living away from the home if repairs or replacement is needed. It typically covers hotel bills, restaurant expenses, and other living expenses while the home is being repaired or rebuilt.

The insurance companies use one of two ways to determine reimbursement to a homeowner for their losses.
1. Replacement Cost: Cost of replacing damaged property with no deduction for depreciation.
2. Actual Cash Value: Cost of replacing damaged property minus depreciation.
Keep in mind, before a homeowner is reimbursed for any claim they must pay their deductible first.

Step 10 – Close the Contract and Move In!
Before heading to the closing table, you’ll want to do a final walk through the property you’ll be purchasing. The final walk through is to confirm that the property is in the same condition as when you previously viewed it, all items are in working order, and all necessary repairs have been completed.
To keep the mystery out of the actual closing process, here is an explanation of what will happen and what you’ll need on closing day.

Closing is when the real estate deed is transferred from the seller to the buyer. It’s also when the buyer signs all mortgage documents, makes the remaining down payment, and settles all closing cost. Any form of payment to the title company on the day of closing must be certified funds. Cash or personal checks are not usually accepted.

It takes about an hour for you to read and sign all necessary documents. The closing is held at a title company usually selected by the seller.

You will need a valid form of photo identification such as a driver’s license. You’ll also need any and all funds needed to close in the form of a certified check.

Levi will be there to review all mortgage paperwork and title documents, you’ll give a certified check to the title company representative for your down payment and your share of the closing cost.

Levi will go over your closing statement HUD-1 form provided by the closing agency for accuracy and to make sure you are not being charged too much. Levi will be present while you sign all of the required documents.

Once the documents are signed, you’ve turned over your down payment to the title company officer, and been handed the keys, you own your new home!

Levi won’t disappear at that point. Instead, he’s available to you as a resource for as long as you need. Levi often finds that buyers calls with questions years after their closing. Of course, if you need to sell your house in the future, Levi is pleased to consult with you about your requirements.

Levi’s goal is for you to be so satisfied with his services that you don’t hesitate to recommend him to other people you may know or meet who need to buy or sell real estate!