Michigan Buyers Road Map
Buying a property in Michigan can come with much apprehension. It may be the single biggest purchase you will make during your lifetime. Therefore, being informed and making your decision carefully is very important.
Reasons to Buy
Tired of paying your landlord’s mortgage? Need a bigger place? Want to start building equity? Would you like to live closer to your work? Knowing what you want in your potential property will help you to decide on the right one for you.
Deciding to Buy
It has been said that knowledge opens doors and this is especially true when it comes to purchasing property. Because a home is most likely the largest financial transaction you will ever make, the decision may feel overwhelming. Whether purchasing your first property or your tenth, it is wise to navigate the process carefully with an attainable goal in mind along with a solid plan for achieving your goal.
Though it may feel backwards, it is wise to shop for a mortgage before shopping for a house. There are several reasons for doing so. You will be able to determine how much you can borrow, and in turn, how much house you can buy. The amount of money you qualify for will depend on several factors including your down payment, credit history and your length of employment. Based on information you provide, your lender can estimate how much money you can borrow before applying for a loan. This non-binding process is called “pre-qualifying”.
Your lender can also determine your credit worthiness by pulling your credit reports and verifying your credit score. With this information the lender can commit to lending you a specific amount of money, pending property details. The lender will then provide you with a letter stating how much mortgage you qualify for. This process is called “pre-approval”. With a pre-approval letter, you can shop for a home with the confidence of knowing exactly how much you can afford. The pre-approval letter also confirms to sellers that you have the financial ability to complete a purchase. Because pre-approval takes a closer look at your background and includes a credit check, it holds more weight with sellers than pre-qualification.
Your credit score will have a major impact on the entire purchase process, including the rate at which you can borrow money. During this process, it is important to avoid any major purchases and/or lifestyle changes.
Choosing a Real Estate Agent
Buying a home can be time-consuming and stressful but a good real estate agent can do much of the legwork for you and help to make the process fun and memorable. The key is finding the right agent who will respond to your needs. First, research any agent you are thinking of using. Ask your friends who they used and if they were satisfied. Call your local Board of Realtors. Find out if there have been any complaints about the agents you are considering. Part-time agents aren’t always available to you because they usually have another job. Look for a full-time agent.
When you have narrowed your choice to one or two agents, schedule time to visit with each of them and assess their personalities. Determine their knowledge of the area and ask them questions about how many transactions have they made. Happy customers = referrals. Ask for a list of referrals. When you finally settle on an agent, make sure it is someone you feel comfortable with because you are likely to spend a considerable amount of time with that person.
Time to Go Shopping
You have obtained pre-approval and have an agent lined up so it’s time to look at homes. Make sure your agent clearly understands your interest in terms of location, size, age, etc. Do you have a preference for any particular features? Two story or single floor plan? How many bedrooms and baths do you need? If you have no interest in considering a home that doesn’t include a fireplace, make sure to communicate that information. The agent can then provide internet links to various listings for your perusal.
A list of features can focus your search and help to clarify the features that are most important and those that are least important. While touring homes, you may find it helpful to make notes on each property. A comparison chart will help to record your impressions and avoid confusion. You may also want to take along a digital camera. Take a picture of the listing sheet first so you can remember which photos go with which home.
Once you have narrowed your search to a particular area or subdivision, ask your agent to research property values in that area.
You found a great house and want to buy it. With the help of your agent, you will submit an offer to purchase with the type of financing you desire. Before signing, read it carefully and make sure you understand every detail. Your agent will help you negotiate an offer that the seller will accept. If you wish, finalization of the contract may be contingent upon review by your attorney.
Escrow, Inspection, Appraisal and Insurance
The Closing Agent: When you sign the offer to purchase, you will also have to show that you are sincere about the purchase by submitting an earnest money deposit. The closing agent, generally a title company, will hold your deposit in escrow. The closing agent does not work for the buyer or the seller. The title company will research the complete history of the property to make sure there is no problem with the title and provide a title insurance policy. The closing agent will also secure any necessary documentation from the lender and handle all the paperwork required for the sale as well as disbursement of funds at closing.
Home Inspection: Home inspections help to avoid unpleasant surprises and prevent future headaches. Your real estate agent can usually recommend a certified inspector who is completely objective. A standard inspection report should include a review of the home’s plumbing, heating and air conditioning systems; wiring; walls, ceilings, floors, windows, doors, foundation and basement, attic and roof. The cost of an inspection is a wise investment.
Appraisal: Your lender will arrange for a licensed appraiser to determine the value of the property. This appraisal is to ensure that the mortgage company is not lending money on a property that is worth less than their investment. It also protects the buyer from paying too much for the property.
Insurance: Your lender will require you to carry homeowner’s insurance and you must have this policy in place at closing. The amount of coverage will be determined by the lender but it is wise to do some comparison shopping among several insurance agencies in order to obtain the best price. You will generally receive a discount for covering your home and your automobile(s) with the same company.
Closing – It’s the Big Day!
Before closing on your property, you and your agent will make a final walk through and inspection to ensure that all terms of the contract have been met. This inspection is generally made on the day before or the day of closing.
You will be joined at settlement by the title company representative and your real estate agent. The sellers and their agents may also be present. The title company representative will explain the following:
Deed of trust or mortgage
- Deed of trust note or mortgage note
- VA, FHA, or lender forms
- Settlement sheets
You and the seller will sign all necessary forms and you will pay the balance of the down payment and buyer’s closing costs with a cashier’s or certified check.