For most homeowners, their residence is their largest asset. With 20% or more equity invested in your home, your home is a major investment. As you live in and make improvements to your home, and gradually pay down the principal on your mortgage, you are building equity
- Choose a Realtor® carefully as this person will be the most important advisor in your search. You will spend a considerable amount of time with this person so, in addition to knowledge and experience, trust and fit are key qualities you should seek.
- Before you begin searching for your property, get pre-approved for a mortgage with a bank and/or mortgage broker so you have a clear understanding of your budget.
- Educate yourself on the market by speaking with your Realtor® about property values in different neighborhoods and the differences between condos and single family homes. Take advantage of publicly available information to research recent sales of comparable properties, and visit open houses in addition to those properties introduced by your Realtor® to help get up to speed on the current market.
- Once you find a home you are interested in be sure to do your due diligence. Your Realtor® will help you obtain information about the building's financial condition as well as renovation or major repairs that may have been done to the property itself and the building. Building policies on financing and subletting can vary and can affect property values.
- Build out your team wisely. Illinois is an attorney state, so you will beed to hire a IL real estate attorney to represent you in the purchase. Your Realtor® will provide recommendations of competent, experienced attorneys from which you can choose.
LIKE MOST BIG PURCHASES, BUYING A HOME IS A PROCESS
CONSULT WITH A MORTGAGE LENDER
Before you begin looking, you need to determine your budget. If you are going to finance the purchase, then you must know the loan size for which you qualify based on your personal finances. That in turn will dictate your purchase price which is key for you and your Realtor® as you embark the search of your new home.
GET PRE-APPROVED FOR A MORTGAGE
Having a good mortgage lender is a crucial part of ensuring a smooth transaction. Once you have determined your budget, you should obtain a pre-approval letter from a bank or mortgage lender. Your Realtor® will need this letter to submit with any purchase offer to demonstrate your credibility as a buyer. I recommend comparing at least 2 lenders to see who will give you the best terms and rates.
FIND A HOME
The timeframe for finding your home will vary depending on availability, and can range from one week to many months. It is best to give yourself plenty of time, two to three months if possible. Come up with your top three criteria for your ideal home, neighborhood, amenities, view or school district, and make sure to communicate these to your Realtor®. If you have pets or require specific services, be sure to let your Realtor® know that too.
Once you have identified the property you want to purchase, your Realtor® will guide you through the negotiation. While price is paramount, there are other important terms to consider including timing for close and contingencies for financing and board approval. Be prepared to negotiate all these terms and use them to your advantage.
Once you have accepted the offer and before you sign the purchase agreement, you will most likely have a home inspection done on the property. This process involves the buyer hiring an inspector to inspect the exterior and interior structures and systems of the property. The appointment will be coordinated by your Realtor®. You will need to block out 2-4 hours from your work day to attend the inspection.
Once you have agreed to the terms with the seller, your attorney will negotiate the terms of the contract with the seller's attorney, who prepares the contract of sale. At the same time, your attorney will conduct due diligence on the building in which the property is located, specifically reviewing the financial condition of the building, by-laws, and minutes of the board meetings. When your attorney has completed these steps and advised that the deal is sound, you will sign the contract and return it to the sellers attorney with a down-payment (anywhere from 5%-10% of the purchase price). The seller will then countersign whereupon you have a binding contract. Until both parties have signed the contract, neither part is bound to the transaction so it is important that all parties act quickly and in good faith toward contract execution.
APPLY FOR A MORTGAGE
If you are financing, you will need to finalize your loan application in order to obtain a loan commitment. Your lender will initiate the mortgage application process. This will require submission of substantial paperwork including proof of income and assets: bank statements for all accounts; two to three years of tax returns; and the loan commitment as well as other bank documents related to mortgage financing. The lender at this time will also order an appraisal to be done on the property to determine the value of the home and is worth the amount of money needed to purchase the property.
Once your financing is secure, your Realtor® and attorney will take the required steps to schedule closing. There are often many parties involved in the closing so it typically takes one to two weeks following approval for closing. In total, the process from accepted offer to close can take between 30-90 days. Speak with your Realtor® and attorney to establish the budget for closing costs. Prior to closing your lender will ask you to buy homeowners insurance for your new home.