One of the first steps, in parallel with talking to an agent, in this process is speaking with a lender. Some will tell you to speak to an agent first, others the lender first. There's no "right"
answer to whom you should start with. Starting with the lender, though, will give you an idea of what price range you qualify for. They can also give you a timeline for qualifying for a home loan,
in the event you need some time do so. Here is a list of lenders you may consider starting with: robthompsonrealtor.com/lenders.
Here
is my mortgage calculator, too, to give you a starting point.
The next (or parallel) step is interviewing agents. An agent can give you a breakdown of the market, pricing and trends. You can absolutely start the process by talking to an agent first. The benefit of doing so is that doing that preliminary market research through an agent can help you determine if it's a market you want to buy in, ahead of talking to a lender. When interviewing agents, don't hesitate to ask them as many questions as you need to feel comfortable. A good agent should be able to speak with confidence and knowledge about their market and the purchase process. They should also have plenty of resources for you to continue researching the market!
Having made contact with and chosen a lender to work with, your next step is to get prequalifed or preapproved. What's the difference? In short, of it is that they are steps down the same process of qualifying for a mortgage. Prequalification means the lender has done some preliminary work on your qualification and based on the information you provided believes they can qualify you for a home loan. This prequalification is dependent on you providing the information they need to preapprove and approve your loan. Preapproval means they lender has done a lot of the validation required for the approval of your loan. A preapproval is stronger than a prequalification when making an offer.
Around the same time you are talking to the lender and getting prequalified, an agent should set you up with an "MLS feed" and start sending you homes that meet your needs. The MLS is the Multiple Listing System, the regional database agents in an area have listed. Here's a video rundown on what we mean when we talk about the MLS. This is the system that the majority of home sales are affected through.
This is the fun part for most folks! Once you are prequalified or preapproved, you can start the actual shopping process, or the viewing of homes in person!
Once you and your agent have found a home you want to buy, it's time to "make the offer!" This is the act of drafting, signing and submitting a formal offer via the "Contract to Buy and Sell Real Estate" (usually) or "CBS". I will be writing some thoughts here about strategy and such in writing offers but want to link to a video I did about "closing costs" (aka seller's concessions) before I went any further.
Earnest money is also known as "Good Faith Money" or "skin in the game". This is money a buyer tenders, usually within 72-96 hours of going under contract (you are "under contract" once a seller accepts your offer
by signing the same). There are a couple of things you should know about earnest money:
1) It's OFTEN but not ALWAYS returnable at closing. Please make sure you are talking to your lender about this and the "best use" of
the money (it may make more financial sense to buy down your interest rate, for example).
2) This money usually has to be sourced and seasoned. Sourced means your lender will need copies of the bank statements for the accounts it came from. Seasoned here means you can't take cash, deposit it in the
bank, then use it for earnest money unless it's been in the bank for at least 60 days.
I included this because while the loan portion of a transaction is outside the scope of an agent's purview, it's quite a critical part of the process. While the real estate transaction proceeds from offer through inspections and appraisal, your lender will be asking you for documents related to your finances. The more timely you are in getting these documents to the lender, the faster they can get your loan approved.
This is a critical phase of the deal. Here in Colorado, one of your protections is the inspection provision of the contract. Unless you have waived this protection, you as a buyer have the right to inspect and have inspected the home as part of the deal. During this phase and by the "inspection objection deadline", you have the right to submit a written request to the seller asking them to repair any conditions of the home you want them to. Here's the catch: the seller doesn't have to fix anything. But you don't have to buy the house. I often refer to this phase as a "dance", wherein the buyer, buyer's agent, seller's agent and seller attempt to come to terms on reasonable fixes. The seller IS obligated to fix any repairs they agree to in writing via the "Inspection Resolution." If they buyer and seller, via their agents, cannot come to terms on fixes, the buyer may withdraw the objection and continue with the sale, or the BUYER can terminate (the seller cannot terminate, contractually).
This is another critical phase of the purchase. Please check out my video on "value" and "equity" here. As with the inspection, this is a contractual protection for the buyer. Unlike
the inspection, this is also a protection for the seller (one of their only protections!). If the home you're buying is being financed via a loan, the lender will most likely require an independent assessment of value be
conducted by a certified appraiser. This appraiser will use market comparable sales along with market conditions indicators and determine an appraisal value for the home. If the home appraises at or above contract price with no conditions,
the sale proceeds on. However, if the appraiser determines there are conditions (repairs needing to be made before closing), they will make the value "subject to" these repairs. The seller then has the option to make those repairs to sell
the home, or terminate the sale.
The sale may also terminate if the appraiser determines the value is less than contract price. Please see this video about "What happens if the appraisal is low?"
The phrase "Colorado protections" here is meant to describe the number of protections a buyer has in Colorado in this process. The big ones are the: 1) inspection objection, 2) HOA objection, 3) property insurance objection, 4) appraisal objection, and the 5) loan objection. These protections exist for the buyer to object or terminate a sale for the reasons covered by the same, if used in good faith (i.e., you can't terminate on inspection if you really don't like your loan).
The loan objection is another of a buyer's protection and deserves it's own heading! This is one of the most important deadline is this process for a buyer, in my opinion. This is the last day for someone buying a home to object to the cost of their loan. I usually advise my folks by asking the following question: INCLUSIVE of taxes and insurance and HOA fees, are you okay with the payment the lender is quoting you? If not, today is your day to object (formally, in writing and good faith through your agent), to maximize your chance of getting your earnest money back.
This phase of the purchase deals with any repairs the seller agreed to make as part of the inspection part of the process AND/OR any appraisal required repairs. Your agent should be tracking the status of any such repairs (in coordination with the seller's agent) to make sure the repairs are done before (or by) closing.
Conditions here is meant to represent both the appraisal conditions and the loan conditions. Sometimes, an appraiser will "condition" a home or make it's sale "subject to" the repair of certain conditions. An example of this would be a broken window(s) and an FHA or VA loan. If the appraiser makes the home value subject to any conditions, a seller usually must repair those conditions to sell the home to the buyer whose loan / purchase was just conditioned.
These are the magic words that everyone in the sale is waiting to hear! Hearing these words means your loan is fully approved and you are ready to close on the home, pending the arrival of the closing date and subject to the seller making any agreed upon repairs.
Generally, 24 to 48 hours before closing, your agent will schedule a walk through of the property with you. The primary purpose of this walkthrough is to ensure that the property is being conveyed in good condition and that all appliances, etc., are still in the home (or the agreed upon ones anyway).
Welcome home! It's closing day!