Key Steps for Purchasing A Home
CONSULT WITH A MORTGAGE BROKER, BANK OR FINANCIAL ADVISOR
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 real estate agent as you embark on the search for your new home.
GET PRE-APPROVED FOR A MORTGAGE
Once you have determined your budget, you should obtain a pre-approval letter from a bank or mortgage broker. Your real estate agent will need this letter to submit with any purchase offers to demonstrate your credibility as a buyer.
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, for example neighborhood, building type, particular view, exposure, or amenities, and make sure to communicate these to your real estate agent. If you have pets or require specific services, be sure to let your real estate agent know that, too.
NEGOTIATE
Once you have identified the property you want to purchase, your real estate agent 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 of these terms and use them to your advantage.
CONTRACT SIGNING
Once you have agreed to 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, among other items. When your attorney has completed these steps and advised that the deal is sound, you will sign the contract and return it to the seller’s attorney with a down payment (typically 10% of the purchase price). The seller will then countersign whereupon you have a binding contract. Until both parties have signed the contract, neither party is bound to the transaction so it is very 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. 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; reference letters; and the loan commitment as well as other bank documents related to mortgage financing.
COMPLETE THE PURCHASE APPLICATION
Nearly all cooperative and condominium buildings require buyers to submit a purchase application, aka a “board package,” for review and approval by the board of directors. Your real estate agent will guide and advise you through this process and assemble the package on your behalf. The required materials typically include the completed application; a financial statement detailing income, assets and liabilities together with substantiating documents including bank statements for all accounts; two to three years of tax returns; reference letters; and the loan commitment as well as other bank documents related to mortgage financing.
SUBMISSION OF THE BOARD PACKAGE
Once the board package is complete, your real estate agent will submit it to the building’s managing agent for initial review. It is then sent to the building’s Board of Directors for final review. If you are purchasing in a cooperative, the Board will then decide whether to grant you an interview which is the final step in the approval process. Your real estate agent will instruct you on how to prepare for the interview. If you are buying a condominium, a board interview is not typically required.
CLOSING
Once board approval is secured, your real estate agent and attorney will take the required steps to schedule closing. There are often many parties involved in the closing so it typically takes at minimum one to two weeks following approval for closing. In total, the process from accepted offer to close can take between 30 and 90 days. Speak with your real estate agent and attorney to establish the budget for closing costs. Prior to closing you should also secure homeowner’s insurance for your new home.