Buying a Home
Buying a home is an intense task full of variables, deadlines, and potential pitfalls. Whether you have been through this process before, or this is your first home, there are many moving parts and changing paperwork involved. The good news is I am here to handle all of that for you. This guide will walk you through some of the more critical steps in the home buying process, and it is my hope this helps you understand what will be expected from everyone involved in the process.
One of the most important things to remember while buying a home is that all contracts and agreements in Texas work under the instruction that "time is of the essence." Time is of the essence means there are deadlines throughout the home buying process. We must work diligently to meet those deadlines as soon as possible and not wait until the actual deadline to comply.
This guides essential steps throughout the home buying process, but the home buying process is different for each person. If there are other circumstances with your transaction, I will communicate that to you, and we will work through them together. This guide helps you through the process and anticipates most – but not all – Buyer needs.
Lender and Pre-Approval
One of the most important first steps is to contact a mortgage lender to determine your eligibility and price range for purchasing a home. It would be best if you did this as soon as possible so I can show you the best homes within your price range. I will gladly show you homes before you have contacted a lender, but if we look at homes that wind up being beyond the amount you can afford, you will likely be less impressed with homes in your actual price range.
The mortgage lender will provide a pre-qualification letter required by the Seller and Seller's Agent, along with proof of funds (cash Buyers), during negotiations. Sellers and Listing Agents will not accept offers without this. You should make sure you are 100% confident in your ability to obtain financing before submitting an offer.
There are numerous Mortgage Lenders, and I may send you a list of my preferred lenders, but that list is not an endorsement of those lenders. You are free to choose any lender you like. The lenders on my list have done well for me in the past and are effective communicators, which is why they are on my list. I can work with any lender, though. I will caution that lenders that are not physically located in our area have been known to delay closings from time to time. Local lenders have leverage with Appraisers and Surveyors that may be necessary for your loan. During busy times, a local lender can influence these providers to get things done within the required time frame. Lenders located out of our area do not have this same ability because they do not have the same relationships with the providers.
DO NOT open any lines of credit, savings accounts, stock accounts, or make any significant purchases from the time you start your property search until the home closes. Unless directed by your Lender, do not pay large amounts to your credit cards during your loan processing. Do not buy a new vehicle during the course of your loan processing. Save all of these for AFTER you have closed. Even opening a savings account in these current economic times will trigger an investigation by your Lender. Do nothing that will affect your financial or credit health, even if you think you are doing something right. Electronic deposits out of the ordinary like online apps such as Venmo, Pop Money, or even PayPal can trigger an explanation from Buyer to Lender and possibly delay closing.
Do not change jobs during your loan application unless absolutely necessary! HR departments take a long time to do employment verifications, and most lenders want to see pay stubs from the new employer that you may not have in time or at all. Please contact your Loan Officer before accepting any job offer.
Always consult your Lender for advice before dealing with finance or credit. You may inadvertently impact your interest rate or ability to get a loan.
Once you decide on a Lender, I will need the Loan Officer's name, phone number, and email address. PLEASE PROVIDE THIS INFORMATION ASAP.
You should expect to bring a minimum of 3.5% of your own money to contribute to the sale for an FHA loan and up to 20% for a condominium purchase. The down payment percentage is based on your debt-to-income ratio, income, and credit score (along with other factors).
You should expect to bring up to an additional 3% of the purchase price to closing for your closing costs. Closing costs are listed in paragraph 12 (2) A and B of the real estate contract.
Let Me Know Your Details
You should disclose to me any circumstances that may affect performance under the contract, such as:
- Current and future marital status. Are you single? Divorced? Pending Marriage? Pending Divorce? Is there a marital decree; are there any court judgments again you? Even after a divorce is final or a judgment has been lifted, there is a 30-day appeal period.
- Let me and the Lender know of any judgments for alimony, child support, and unpaid taxes.
- Who will be taking the title of the home and how? If you are unmarried and purchasing the property with another individual, you need to consult the title company representative to see which type of deed fits your situation. Only a lawyer can give legal advice.
- Intended use of the property (residential, tear down, condo/townhome, commercial, rental, etc.)
- Any future plans with the property. (adding a swimming pool, RV shed, basketball goal, addition, carport, garage, fence, etc...)
All information shared with me will be kept confidential, and it may be information that is essential for me to ensure we live up to our deadlines under any contract you submit.
Searching For a Home
Once we have your financing pre-approved, we will start the process of looking for a home. This is usually the fun part, and you should plan to see as many homes as you like to find the one you want to purchase. There is usually not a "perfect" home, but expect to see several that will work for your needs and may need a little personalization by you.
I am here to show you as many or as few homes as you want and never want my clients to settle on something that is not right for them if waiting a little longer means there is a better fit for you later on. My goal is to find you the right home for you no matter how long it takes because I plan to be your Agent for life and not a single transaction.
Seller's Disclosure Notice
All homes listed for sale require the Seller to complete a Seller's Disclosure Notice where they notify potential Buyers of known issues with the home. You must review the Seller's Disclosure before writing an offer. Not only does the Seller's Disclosure Notice let you know of any issues, but homeowners are usually reluctant to sign a repair request that includes items mentioned in the Seller's Disclosure as those are known when the offer is made. You and I will discuss the things on the notice before submitting an offer.
Making an Offer
Once you find the right home for you, we will discuss terms to be included in the home offer. There will be several questions, but be prepared to let me know how much money you plan on putting down on the home, your preferred closing date, and items you saw during your tour of the home that you know you want to be repaired before purchasing, etc. Once all this is decided and I have completed the offer forms, I will send the contract and any necessary supplemental forms to you for electronic signature. If there is more than one person on the contract, the emails requesting the signatures will go to the first person on the contract and then the second one after the first has completed signing.
When all Buyers have signed the paperwork, I will send the offer to the Listing Agent, who will then present the offer to their Seller. The Seller may present a counter-offer, which we would need to respond to. It is not abnormal for the offers and counter-offers to go back and forth a few times.
In Texas, and on the Texas Real Estate Contract, the refrigerator and washer and dryer are NOT considered "real property" (as are TV screens, pool tables, surround sound, and any hung mirrors (usually in the bathroom)). Therefore, they are excluded from the contract, and the Seller is allowed to take those appliances with them after the sale closes. If you are interested in negotiating these items into the contract/deal, please make me aware of this upfront. This needs to be part of the initial offer.
Anything other than refrigerator and washer and dryer will be kicked out of a contract by your Lender. Any of the Seller's items you wish to purchase with the home must be negotiated with the Seller, out of the contract, and off the closing statement. Some Lenders will allow a "bill of sale." Please check with your Lender.
Execution of Contract
Once the offer is agreed upon by you and the Seller, the contract moves to "executed" status, meaning the contract takes effect that day. All deadlines in the contract start at this execution date, and we must do everything we can to meet or beat these deadlines. I advise completing the tasks much sooner than any of the deadlines to ensure your compliance under the contract and allow ample time for any negotiations that may occur with any contract amendments or addendum.
You should immediately start the loan approval and underwriting process. This is different than the pre-approval process you previously completed; this finalizes the loan approval and approves you for financing. You should verify with the Loan Officer that financing can be obtained within the number of days specified in the first paragraph of the Third Party Financing Addendum. I will send them a copy of the executed contract, which will start the loan approval process on their side.
You should immediately contact an insurance company to determine the property's eligibility and coverage. You must have insurance to obtain third party financing. I HIGHLY recommend getting the insurance quote during the Option Period. Sometimes the home's roof, or type of roof, may disqualify the property from being insured, and the loan will be declined. (NOT APPLICABLE TO CONDOMINIUMS).
You should verify the property's current City zoning and seek approval for your future plans for the property. (adding a swimming pool, RV shed, basketball goal, addition, carport, garage, fence, etc.) when purchasing a single-family home.
Earnest Money and Option Fee
Once a contract is executed, two fees will be due within 3 days of the contract's execution date. Those are Earnest Money and the Option Fee, which are explained below.
Upon the Seller's acceptance of an offer you make on a property, you will write a check to the Title Company for the Earnest Money. The Earnest Money's primary reason is to impress the Seller that the Buyer "earnestly" intends to purchase the property. The amount of Earnest Money varies from purchase to purchase, depending on various factors. If a property generates a lot of interest, a Buyer may make a larger Earnest Money deposit to convince the Seller that their offer is stronger than the others. During "hot" markets, deposits are generally larger than during slow markets. In Dallas, the Seller usually expects at least 1% of the total offer price. A $200,000 offer would merit a $2,000 earnest money check. The Title Company will cash the Earnest Money check. If you choose to terminate the contract during the Option Period, the Earnest Money will be refunded less any expenses incurred from the Title Company, i.e. the cost of a property survey (if already ordered). If you elect to terminate the contract after the Option Period has passed, the Seller retains the right to keep the money, plus any specific damages incurred. Most title companies can receive earnest money electronically. If this is your preferred method, please inform me to help coordinate this and have the funds delivered within the required time frame. As your Agent, I will handle the delivery of the option and earnest money checks if that is your preferred method. Simply give me the checks, and I will get them to their destination.
Upon the Seller's acceptance of an offer, you will also write a check to the Seller for the Unrestricted Right to Terminate, or Option Period, at the time of making an offer. Current residential contracts promulgated by the Texas Real Estate Commission offer the choice of an Option Period, under Paragraph 23. During this period, the length of which is negotiable, you have the right to inspect the property and have an absolute right to terminate the offer/contract for any reason, without penalty (other than losing your Option Fee). In exchange for this Option Period, you pay an Option Fee to the Seller. This fee must be delivered to the Listing Agent or the Seller within 72 hours of the contract's execution. If this is not delivered within the first three days of the contract, you forfeit your Option Period and can no longer terminate the contract and receive a refund of your Earnest Money.
Option fee delivery is your responsibility, and it is highly advised to deliver in person or use an electronic or overnight service. Mailing the option fee regular U.S. mail is NOT a good idea, as you cannot accurately predict or track the delivery. Some Sellers will accept electronic funds from services such as Venmo or Zelle, and if this is your preferred method, please inform me so I can arrange it. As your Agent, I will handle the delivery of the option and earnest money checks if that is your preferred method. Simply give me the checks, and I will get them to their destination.
The Option Fee may be credited back to you at closing if you decide to continue with the property's purchase. If you choose to terminate the contract, the Option Fee is not refundable, but the good news is that Option Fees are small and usually range from $100 to $500 -- depending on the price of the home you are buying. Typical Option Periods are from 5 to 10 days long.
Once you have an executed contract, you should immediately contact a Home Inspector. I highly recommend using a Texas Real Estate Commission approved, licensed Home Inspector (even on new construction properties). I can provide a list of Inspectors. I do not recommend any particular Inspector but have a list of Inspectors that have done an excellent job for other Agents in my brokerage and me in the past. It is your responsibility to call an Inspector and arrange the inspection time. Please let me know when you choose one, so I can make sure they coordinate the time with me to be present at the end of their inspection.
The fee associated with an inspection and prices is based on various factors—square footage, type of foundation, etc. The average cost for an inspection is around $450.00+, with an extra $85.00+ should you elect to have a termite inspection. If the home has a pool and spa, check with the Inspector, you chose to see if they will inspect them or if a pool specialist needs to be called to inspect them. Only Principles to the contract should be present for the Inspector's report. As your Agent, I will be present for the Inspector's report with you. The inspection typically takes 4 hours, and the Inspector will ask that you arrive at the end of that timeframe to present findings. You are encouraged to check out an Inspector's ratings and reviews independently.
Measurements and Contractor Quotes
It is best practice to schedule all third-party Inspectors during the same time the Home Inspector has arranged. The home will be open during this time, and this will provide a comfortable cushion between these inspections and the expiration of the Option Period.
If this can not be scheduled during the time the Home Inspector has arranged, be sure to do this well before the Option Period expiration. Remember, time is of the essence. Your Option Period is meant for you to have the home thoroughly inspected and for us to request any repairs from the Seller you would like. If there are specific items you want to receive pricing on, or if there are specialists recommended by the Home Inspector, this is the time to have them out. We must submit all repair requests well before the end of the Option Period in order to have all agreements finalized by the end of the Option Period. If the Option Period expires and we have not submitted any repair requests, the Seller is under no obligation to make any repairs, and you will lose your Earnest Money if you back out of the contract.
If using a Third Party for financing (Lender), a Lender will require you to have an appraisal of the property to meet the Lender's guidelines. Please remember that a "fair market value" is not the same as the "Lender’s Appraiser’s determination of value”. It is also important to remember that the Lender has hired an Appraiser to protect their interest in the property. Sometimes, an appraisal may come back 10-20% lower than the actual market value. Please also remember: Zillow and the Dallas Central Appraisal District’s value is not reflective of current market conditions, nor fair market value.
If the home does not appraise at, or greater than, the sales price listed in the contract, you have an “out” of the contract and may terminate the contract due to the property not qualifying for the loan if obtaining financing through a third party financer. If you elect to move forward with the contract, we can negotiate a lower sales price with Seller, or you may be required to put forth the difference in the sales price and appraised price from your own funds if no agreement can be reached between you and Seller. I advise against this second option.
If you are receiving Seller’s contributions, you may have to forfeit the contributions in order to make the property appraise. Should you elect to terminate the contract, any expenses incurred previous to the contract's termination, such as inspection fees, option fee, survey expense, etc., will not be refunded.
If purchasing a condominium property, you should know that your Lender will require a condo questionnaire form for which you will pay. This is a required form for Lender underwriting that provides the same information as a condo resale certificate. A condo resale certificate is required by the title company and is typically paid for by the Seller. The cost of a condo questionnaire form is excluded from the part of the contract where Seller and Buyer negotiate for which party pays for the resale certificate and HOA documents and restrictions. The cost varies from Management Company to Management Company. The cost can be from a few dollars up to a few hundred dollars. This amount is usually not included in your Good Faith Estimate provided by the Lender. You should be prepared to pay this fee as this is part of the Buyer’s ordinary closing costs and expenses. Your Lender, nor Buyer’s Agent, Listing Agent, Seller, Title Company, nor any other person involved in this contract will pay this fee. Your Lender will provide you this form to get filled out from the HOA company. Most Lenders will do this for you, but again, be prepared to pay this fee on your own. This is not a Buyer’s Agent’s responsibility or cost. It may be required to repeatedly ask your Loan Officer about this form and if it has been filled out. As your Agent, I will be doing the same, but you should follow up alongside me.
Public Improvement District
Some homes are located in Public Improvement Districts, which requires a title transfer tax for both the Buyer and Seller of the home. Please verify if the property is located in a Public Improvement District or any public/municipal utility district. Please verify if the home you are purchasing requires a transfer tax by Buyer and Seller. There are 12 PIDs in Dallas, with Uptown and Oak Lawn being the two largest PIDs.
This information is usually included on a Seller’s Disclosure Notice, but other sources are available: Tax District website, City of Dallas website, Google, etc., and the title company where you are closing will know this information as well.
Residential Home Service Warranty
Our contracts allow for the request for a Seller-paid Residential Home Service Warranty (Home Warranty) in the offer (I recommend this for all my Buyers). These warranties are for the first year you own the home and cover various mechanical items in the home in the event they fail.
It is your responsibility to research review Home Warranty companies and those company’s brochures. Please be advised there are different service levels offered by companies and different price plans for each of those levels. Your contract will state the amount the Seller is paying toward your first year of the home warranty, so please keep that amount in mind while selecting your plan. I cannot choose your Home Warranty company or plan, and it is your responsibility to verify what is covered in each plan. Once you decide on a Home Warranty company, please advise me along with the title company representative we are working with of the selection you have made.
Buying a Flipped Home
Please be advised if the property you are purchasing has been sold previously within the past six months, the Lender will require TWO appraisals, and this will be a fee (for each) for which you are responsible. This is part of the new lending guidelines and is typically found in recently flipped homes.
You and the Seller do not communicate via phone, fax, email, letter, etc., during the time from making an offer until the close date. All communications should be through me.
Do not schedule deliveries of appliances and other home goods or schedule contractors until AFTER closing. Closings are delayed up to two weeks sometimes, especially now with the new lending laws in place. Closings are consistently delayed. You will be in a bind if you do not close on time and have deliveries lined up. You cannot deliver to, occupy, or change a property you do not own.
Please be aware that a Buyer’s credit and employment verification will be checked at the beginning of the loan process and at the end before closing.
If you are not going to be in town for the closing documents' actual signing, please make me and Title Company aware of this two weeks before the close date. The Title Company can make arrangements for a mail-out closing and arrange a notary to meet you in the city you will be in that day (if you are in a foreign country, you will need to report to the U.S. Embassy). Once the documents are signed, you will overnight the original documents back to Dallas. There may be a cost involved for the notary service, although most will cover the expense. Most title companies will provide a shipping label as well.
If you change financing options during the contract, the Seller is not obligated to amend the contract in any form to meet your needs or requests. Example: A Buyer can change from a cash transaction to a loan, but the Seller does not have to agree. A Buyer may change from a convention loan to a VA or FHA loan, but the Seller is not obligated to agree. If the contract does not close with the terms originally agreed upon, you will be in default of the contract, and the Seller is entitled to Earnest Money.
When your loan approval is finalized with the Lender, they will send you a Settlement Statement that will detail the charges and credits you will see at closing. As of Oct. 4, 2015, the federal lending laws changed, and I can no longer receive the settlement statement without your permission. You must sign a form at/for the Title Company if you would like me to review the settlement statement. The new lending laws now require all closing documents to be prepared and approved (INCLUDING YOUR SIGNATURE) three business days before closing. Since this is a federal law, this is non-negotiable, and this period often delays closings. Failure to sign the disclosure statement will result in a delayed closing.
ASK ME FOR ANY ADDITIONAL INFORMATION OR QUESTIONS YOU MAY HAVE CONCERNING THE HOME BUYING PROCESS.