Guide to Buying a Home

Congratulations, you have decided to buy a home!

No matter how well you can picture your dream house in your head or after sifting through thousands of pictures online, drive by’s and magazines, as then communicating your ideal home to a real-estate agent, the house you finally fall in love with and ultimately buy may have little resemblance to your original ideas.

Step 1:  What you Need, What you Want!

You have to start somewhere, so here is a detailed list to review when putting together your Must Have’s, your Hope For’s and your Not Necessaries.  We recommend you separate your list into MUST’s and HOPE’s from the menu below and put an “M” or an “H” in front of the corresponding item on your list:

  • Choosing a town:

    • Is it a bedroom community to New York City?
    • Or, do you prefer a more rural suburban location?
    • Does it provide a comfortable for you that works with the amount of time of commute, flexibility, frequency and style?
    • Are the schools what you would expect (even if you don’t have or plan to have kids, schools do affect home values)?
    • What are the various types of residents that live in this particular town and do you identify with them and this is truly about friendships and lifestyles?
    • Does the town offer the environmental, social, economic and recreational amenities you want in a town?
  • Once  you have chosen a town(s):

    • Safe, quiet neighborhood
    • Near close friends or family members
    • Close to downtown and public transportation
    • Neighborhood matches family personality, i.g. culturally, politically, socio-economically
    • Proximities to commercial districts, industrial sites
    • Preference for quiet cul de sac or side streets
    • Or, are you ok with wider and busier roads that get preferential treatment for snow removal and commutation purposes
    • Proximity to an airport:  ½ hr;  45 minutes;  1 hour;  not important
  • Home Specific Must Have’s, Hope for’s and Not Necessaries

    • Style of Home:  Colonial, Townhouse, Contemporary, Victorian, Split Level, Ranch, etc.
    • # of rooms, # of bedrooms, # of baths
    • Generously sized rooms; average size rooms
    • A space to entertain larger parties?
    • Room types:  formal dining, eat-in kitchen, breakfast room, great/family room, sun room
    • Finished Basement; or can you stand up in the basement which would allow you to eventually finish it off for an office, guest space, play room for kids or recreation/media room (play room for adults).
    • Finished Attic; or can you stand up in the attic and could you eventually finish it off for an office or guest space or even a new bedroom suite?
    • Size of Yard, Level, Fenced, Garden
    • Garage attached/detached; one or two car garage; parking for more than 2 cars
    • Ability to add on to the home; whether upward or possibly outward
    • Handy man special (you or a good friend can replace sinks, toilets, tile and then kitchen counters and cabinets)
    • As close to “move-in” as possible, you work and don’t have the time or ability to manage the renovation process
    • No major repairs needed: age of heating system, water heater, plumbing, electric
    • Lots of natural sun light, meaning lots of windows, large windows, sky lights, etc.
    • Visitor Parking in driveway or in front of home
    • Good investment with excellent resale potential
    • Affordable property taxes
    • Large Closets or Walk-in closet in master bedroom
    • Master Bath in addition to Full bath on bedroom floor
    • Powder on main floor for visiting guests
    • Size of Closets, # of closets, additional Storage space
    • Oil or Gas Heating
    • Gas or Electric stove
    • Back deck or patio
    • Close to schools, houses of worship
    • Finished basement or attic for office, guest room, playroom or rec room
    • Hardwood floors
    • French drain in basement/Sump Pump(s)

The likelihood is that there will have to be trade-offs, not just in how many of the above attributes fit your preferences but in how the homes are priced as a result and you may eventually change up some of your M’s with H’s or NN’s after you see what you can buy in the location of your choice.

Step 2: How much should I spend on a home?

Every market is different, but the first step to answering this question is finding out what your budget will allow you to pay on a monthly basis after you’ve made your down payment — 3.5%, 10%, 20% or more of the price of the house.

Meet with a loan officer of a lender or mortgage broker. The best way to learn what you can afford is to get pre-qualified, also commonly referred to as a mortgage pre-approval for a loan. Your real-estate agent may recommend someone, or you can ask a friend who has recently had a successful transaction for a referral; please don’t take this lightly as a good loan officer makes for a smooth transaction and a less experienced or successful loan officer could very easily make your experience more challenging then necessary when you are trying to close on a home, especially with the recent scrutiny in the mortgage industry and housing industry malaise.  Prequalifying won’t cost you anything, except a probable sales pitch, since the lender would like your business when you’re ready to apply for a loan. You’ll walk away with a good idea of how your income, assets and liabilities translate into what you can afford, and it can also help your chances of beating out the competition if you happen to be involved in a multiple bid scenario.  And, you are not obligated to use the loan officer that conducts your prequalification, so chose wisely when you are actually engaged in a transaction.  Furthermore, as mortgage interest and property taxes can often be used as write-offs for income tax purposes, you might want to corroborate your pre-qualification findings with an accountant so that you can confirm how your budget will work when you are a home owner.

Additional costs to close:  When you are about to buy a home your focus is on the price and the amount of money down.  However, you need to review the cash for closing costs (including points, fees, mortgage interest pre-pay and tax pre-pay), inspection and future expenses. All in all, these closing costs run between 2% to 7% of the selling price.

Step 3: Starting the house hunt

You have already begun the process of looking for a home online and are using our websites to help you navigate the weekly Open Houses in the town of your choice.  As soon as you have been pre-qualified, you can begin to drill down to a more finite range of homes and we recommend that you then choose your real-estate agent to help you achieve your goal.  A great agent can educate you about what to look for and avoid, provide reliable references for other experts you’ll need along the line — such as lenders, lawyers and inspectors — guide you through and shadow the inspection process, the appraisal process as well as represent you in negotiations, help to project-manage the time table for closing, including following up with your lender to make sure your commitment comes in on time as per the contract.  Additionally, should you consider choosing us, we are practitioners of Advanced Comparable Market Analysis which allows us to provide you with much more accurate financial guidance when looking to buy (or sell) a home as we use NJ State-Wide published factors when making adjustments in values for comparable sales (location, size of property, condition of the home, the number of rooms and most of the factors we listed earlier on when asking you to consider what you need and Must Have and Hope for in a home).

Now you’re ready for the fun stuff: pounding the pavement. Go to as many open houses as you can stand, even at times your broker isn’t available, and then go to another. Don’t be afraid to see homes that are not in your price range as you will be able to use this knowledge to better understand what you can buy for your money in each respective town (Just be sure to sign in under your broker’s name), see how the same size home can be listed for more or less based upon location and help to determine what best suites your overall needs.  Sometimes the difference of $10,000 can make a huge difference in what you can buy with your money.

Step 4: The Next Step, you’ve found your dream home and it’s time to make an offer:

If you are ready to make an offer, make sure you have selected a local real estate attorney—a local attorney can be quite helpful with localized issues that you may not be aware of if you are coming from a different region and a real estate attorney is best suited for the task of helping you buy a home as they should be most aware of how the laws and contracts are best written for the purposes of buying a home and protecting you during the course of this journey.

Step 5: You have an accepted offer–A* (attorney review in progress)–now what do I do:

The second you have come to a meeting of the minds, a.k.a an agreement—meaning you have an accepted offer on your dream home–your attorney needs to take the offer and begin the process of converting it into a contract.  At the same time, you and/or your real estate professional needs to make the arrangements to quickly have the home inspected, as soon as possible, by a licensed Home Inspector.  You should make sure that at least one of you attends the home inspection so that you are made aware any potential concerns and, equally important, get your first lesson in home ownership, maintenance and operation.  At the end of the inspection, you will receive a report that you should review with your agent and then with your attorney.  You will then have to decide if you now have new found issues that concern you enough to cancel your contract, or to continue onward, with or without any corrective actions or financial offsets for corrective actions.  Through this stage of the process, you can back out of the home purchase without any loss other than the home inspection fee and possibly some part of the attorney fee.  However, when you have finished the Home Inspection process and any related negotiations, you will move out of the A*–attorney review in progress to an Under Contract designation:  either “US” or “UC,” (if there is a contingency on the part of either party, the status could be “US” which means Under Contract but able to be shown), whereas “UC” means the home can no longer be shown to any other potential buyers.

Another key requirement of the home purchase is to make sure you and your attorney have engaged the services of a Title Insurance company to make sure a clear (no other liens pending) title can be transferred to register your ownership.  If you have done any reading lately, you are probably aware that the Aug/Sept 2010 foreclosure crises was first made known after Title Insurance companies found fault with some of the paperwork on pending foreclosure sales.  As your attorney can tell you, Title Insurance is all too critical to the process.  If you want to learn a little more about this all too important subject, you can Google (the verb) NY Times October 9, 2010 “After Foreclosure, a Focus on Title Insurance.”

Simultaneously, you will need to make sure you begin the process of securing your mortgage commitment.  This will require you to use one mortgage broker or banker—direct lender–(it could be someone other than the one who prepared your pre-qualification if you didn’t feel that comfortable with them or if you found someone else you feel more comfortable with)  and begin to fill out the copious amounts of paperwork required for the underwriters to review you financial position and make sure you can still buy the home you selected.  Please understand that a pre-qualification is performed as a cursory overview of your finances and credit this doesn’t always mean that the same loan officer will be able to secure the mortgage commitment for you; so, it’s best to make sure you are going with a professional, accomplished and hard working loan officer.

Once you have set the wheels in motion for the mortgage, an appraisal will have to be performed on the property.  This sometimes leads to another round of negotiations when the appraised value comes in for less than the mortgage amount needed to buy the property.  Once again, this is another reason for having a real estate attorney who can help you navigate through this very infrequent scenario.

At about “this” time, you should quickly determine which moving company you want to use for your move.  You may also want to begin the process of applying for any local parking permits, train parking passes, jitney passes, etc. so that the first day you plan to return to work after moving into your new home you are ready for a painless commute.  If you have children, you would want to contact the school district to make sure that you have all the required paperwork you need to enroll them in their new school system.  If you require daycare/childcare or pre-K schooling, you should similarly meet with them, chose one and begin the enrollment process.

Due to recent market conditions, you will sense a lot of pressure on the part of the Seller’s Agent to make sure that your mortgage commitment will come in and on time.  Therefore, as your agent, we will make sure we are in daily contact with your mortgage broker/banker so that everyone’s expectations are met.

Depending on the township, there are certain “permits” required by the buyer of a home.  Usually, this means securing a Certificate of (continuing) Use and Occupancy, which means contacting the local town government and securing the necessary forms and payment, often times accompanied with an inspection of the property; the same conditions may apply to a Fire Inspection, depending on the town.  As your agent, we will meet with the officials, schedule the appointments and inspections, be a witness to these same inspections and report back to you and your attorney so that you are in full compliance of your contract and will be able to close once you have your mortgage commitment.

When all of the above is done, your attorney needs to make sure that your mortgage funding is on schedule and a closing can then be executed.  When this is concluded and all the paperwork is signed, you will be handed your new keys and you officially become the rightful and legal owners of your new home!