Determine how much you can afford, then how much of this you are willing to pay. Tell your Realtor the maximum you can/will pay and let the Realtor decide the price range of properties to show you, in order to reach this.
Prequalification or Preapproval.
This is a beneficial first step. It helps both you and the Realtor by knowing the price you can afford, and it also points out any potential qualifying problems early, so that you may be able to have them resolved early rather than delaying a closing or even losing a home you want. It also helps you in the negotiating stage as the Sellers will want assurance that you can purchase the home. A prequalification can be done rather quickly, and can be done by phone. It lets you know what you can afford, and basically is saying that IF what you say is correct and can be verified, they SHOULD be able to grant the loan. A preapproval is actually an approval of your loan, subject only to the house qualifying, i.e. subject to its appraisal and inspections. This step will require a signed loan application, and probably the payment of a fee for the credit report. You should determine how long this approval is good for, and whether it locks in an interest rate, or how it would vary if the rate changes.
Make out a two lists of what you are looking for in a house: those things that you MUST have, and those things that you would LIKE to have. When talking to your Realtor, go over not only what you want, but why you want those things – a good Realtor may be able to suggest homes that don’t meet your stated requirements, but do meet your needs.
Shop with a pad of paper – make notes.
It’s usually helpful to name houses, so you and your Realtor can more easily talk about them and know you are referring to the same house. Past buyers have come up with such labels as The Pink House, The Grumpy Lady’s House, the House with the 3 dogs, the House with the Neat Kitchen, etc. Years later you may still remember some of the labels of homes and laugh.
Share your feelings with your Realtor.
Don’t just say Yes or No, but express what things you liked and did not like about each house. Your agent should begin to see a pattern, and set his creativity to work. The first day’s appointments were made ahead of time, but the second time out the homes chosen should reflect the information gleaned the first time. By the third time, if the agent just doesn’t get it – it may be time to choose another agent.
When you’re ready to make an offer on one, have your agent do a market analysis on the home – what have comparable homes sold for in the area, how do they compare to this home, what others are on the market – and have him review it with you. Your offer should be made based on what the home is worth rather than on the listing price of the home. There are no hard and fast rules on negotiating strategy – it depends on the situation and the parties involved. Rely on your Realtor here, which is one of the places that experience counts – successful experience, that is.
Once the terms are acceptable to both sides and all parties have initialed all the changes, the date of the last signature or initial becomes the effective date of the contract, which is the trigger for many of the time frames in the contract. Until all parties have initialed all changes, you don’t have to have a contract!
Between Contract and Closing.
You/your Realtor should schedule the inspection immediately – the good inspectors may be backed up for weeks ahead, so schedule as soon as you can. Sometimes I schedule the inspection as soon as the negotiations start, if I think they will be successful, in order to get the inspector of choice within the time frame. You may want to also have a roof inspection. If you are purchasing a home near the water, you will want to have a seawall inspection done as well. (Damage to seawalls, docks and swimming pools are not covered by flood insurance.) If you want to have inspections for radon, lead-based paint, environmental hazards, etc. you will need to have these completed within the same period. Pest control inspections are generally not done until 30 days before closing, due to lender requirements.
Going to the Lender.
Bring a copy of the fully executed contract to your lender. If you have not made written loan application, do so now. Be sure the lender notes the deadlines not only for closing, but for written loan approval. Tell the lender that you want a copy of the closing statement at least two days prior to closing. Be sure to make formal application (signed application, along with check for any application fee) within the time specified in the contract. If you do not do this timely, the financing contingency may be declared null and void. Have your lender fax your realtor the loan application that has been made.
The lender will order your credit report and order the appraisal of the property.
You/your lender/your Realtor will order the survey. This used to be done at the end of the process, once your loan received written approval. Due to insurance requirements, especially if an elevation certification is required, this should now be done soon after you have a contract. Ask your lender to order this right away.
Start on your insurance now.
If a typhoon or tropical storm is within a certain distance of Guam, insurance companies will not issue policies unless they have already been paid for in full. So do this right away, don’t wait for a tropical storm to come into the area. Most lenders do require typhoon insurance, but you may want to check with the lender, especially if the home you are buying comes with typhoon shutters.
At least two weeks prior to closing, arrange for the utilities to be turned on in your name as of the date of closing. Most of them will require an advance deposit from you.
Your funds to close must be paid by a locally drawn cashier’s check (made out to the title company) or wired funds.