Home Buying Process
Step 1: Home Buying Consultation
When buying a home, it is important to identify your family's needs and formulate an individualized plan to move forward. The Shepherd Real Estate LLC staff knows how to ask the right questions to customize a search for your new home, and we do not charge a buyer fee for our services. (Some Lancaster area real estate companies do charge a fee for buyer representation.) We offer the most client-focused buyer representation plan in the area.
Between local photo listings and online realty sites, some people wonder, “How hard can it be to find the right home at the right price?” The truth is, buying and selling real estate is a complex matter.
The questions “why, what, where, and when?” are important whether you are a first-time home buyer or entering the marketplace as a repeat buyer.
- Has a career or lifestyle change necessitated your relocation to a new community, or is your home purchase a matter of preference?
- When viewing homes for sale, what characteristics are you looking for that your current property lacks?
- Are you interested in new construction or finding a new home builder?
- Do you want to focus your home search in Manheim Township, Lititz, Hempfield, or another specific area of Lancaster County?
- Do you have a timeframe for purchasing your new home?
- Are you looking for a condo, townhome, duplex, single-family home or farmette?
You can count on one universal truth in real estate: All properties are unique. Homes vary greatly, as do contract terms, inspection guidelines, mortgage and financing options, and closing expenses. No two transactions are alike, which is why it's essential to have knowledgeable real estate advisors to guide you through every step of the home buying process.
Shepherd Real Estate LLC will provide you with information detailing current market conditions, financing choices, and any negotiation issues that might apply to your unique situation. Because market conditions can change, the strategies that apply in one negotiation may be inappropriate in another. We will stay in close communication with you to keep you updated and alert you to each step in the transaction process.
Step 2: Obtain Loan Pre-approval
Just as homes for sale come in all shapes and sizes, loans also differ significantly. The real challenge with real estate financing is not obtaining a mortgage (which almost anyone can do if they're willing to pay lofty interest rates). Rather, the focus should be finding the loan that's right for you—the mortgage with the lowest cost and best terms.
We suggest that home buyers start the mortgage process early in their search for a new home. By meeting with lenders—either by phone or in person—and learning about the various loan options, you will learn which programs best meet your needs and financial capabilities. Once you've made an educated decision, you can seek loan pre-approval in preparation for placing an offer on a home.
“Pre-approval” simply means you have met with a loan officer, your credit files have been reviewed, and the loan officer believes you can readily qualify for a specified loan amount with at least one mortgage program. Based on this information, the lender will provide a pre-approval letter. Although not an official loan commitment, the pre-approval letter can be shown to sellers as evidence of your borrowing power. It legitimizes your offer on the home by demonstrating that you have the ability to go through with a purchase. This information is important to sellers because it gives them confidence that your offer is unlikely to fail due to financing complications. It can also give you an advantage in the event of competing offers.
Pre-approvals are recommended for another reason: Once your offer on a home is accepted, you may be required to apply for financing within a short time period. By meeting with loan officers in advance and educating yourself about the available mortgage programs, you will remove the stress of having to quickly find a lender, check credit, and rush into a financing decision that may not be the best option for you and your family.
Step 3: Look at Homes
The housing market is complicated because the stock of homes for sale(link to search page) is always changing. Buyers are aiming at a moving target—listings are constantly changing as new homes become available and properties for sale are placed under contract. The Shepherd Real Estate LLC staff has its pulse on this constantly shifting market, and we will alert you to any changes that affect your home search.
Before you begin viewing houses for sale, it's helpful to prioritize the list of features and benefits you're looking for. Consider pricing, location, size, amenities (such as a pool or an updated kitchen) and design (one-floor ranch style or two-floors, colonial or modern, etc.). If you can't find a home with all the features you want at the price you can afford, then which features are most important? Would you give up a bedroom for a larger yard? Settle for a smaller garage to get a finished basement?
Lastly, consider your future needs. Will you need more space down the road? If so, perhaps now is the time to buy a bigger house rather than moving or expanding in a few years.
All neighborhoods and communities have unique personalities. Are you looking for an historic community with homes that reflect its heritage? Would you prefer to be located near a school or park? Close to shopping? Easy access to highways?
Shepherd Real Estate LLC can help you differentiate between the many wonderful older neighborhoods and new home communities in Lancaster, Lititz, Hempfield, Manheim, Ephrata, and all Lancaster county.
Step 4: Select a Home
Imagine that your search is over—you've found a home and you are prepared to make an offer. How does it work? The seller has already placed the home on the market and set the asking price. Now, you make an offer with the price and terms that you choose. The seller may then accept, reject, or make a counter-offer.
This is where the experience value of your Shepherd Real Estate buyer representative is most clearly demonstrated. We are well-acquainted with the local and regional real estate markets and know the communities, have viewed numerous homes for sale, understand local values, and have spent years negotiating real estate transactions.
Many buyers think about offering a particular price for a home, but an offer encompasses other details (also referred to as “terms of sale”) that can result in thousands of dollars of value to either the buyer or seller. The terms are extremely important and should be carefully reviewed with your Shepherd Real Estate agent.
It is common to hear suggestions that buyers should offer a certain percentage below the asking price, or make a low offer to leave room for negotiations. However, current market conditions should always be considered when making an offer. Supply and demand determine a buyer’s or seller’s market. When few homes are available, steep competition can lead to multiple offers higher than the asking price. Conversely, offers below the asking price may be expected in a buyer’s market when demand is low.
In a typical situation, you will propose an offer that your buyer's representative (Shepherd Real Estate) will present to the seller or the seller's representative. The seller, in turn, may accept the offer, reject it, or make a counter-offer. Counter-offers are common during negotiations. Both parties are expected to respond quickly at this point, so we will remain in close contact with you to review any proposed changes to the sale agreement.
Residential real estate transactions can require one or more inspections. The most common include checking for termites and other insects, appraisals to determine value for lenders, and home inspections to determine if there are structural or mechanical defects, and whether expensive repairs and replacements are likely to be required. Some inspections do not require your presence, but we highly recommend that you attend the home inspection. This is your opportunity to ask questions and learn more about your new home. The inspection can lead to further negotiations, and you will be more comfortable throughout the process if you have a complete understanding of any repairs that need to be made.
Step 5: Get Financing
Getting a pre-approval letter (Step 2) means you already have a good understanding of how much you can borrow and which loan programs will work best for your situation. Now that your offer on a specific home has been accepted, the lender can move forward with concrete figures, and you can make a final decision about the type of loan you will choose.
Financing will involve additional costs beyond the purchase price of a home. Buyers should seek as much information as possible regarding mortgage programs and costs. Your mortgage choices will likely be determined by these key factors:
- Down Payment Amount.
- Loans with 5 percent down or less are available. If you place less than 20 percent down, lenders will want the mortgage guaranteed by an outside third party such as the Veterans Administration (VA), the Federal Housing Administration (FHA) or a private mortgage insurer (PMI).
- What is Your Credit Score?
- The answer to this question will determine whether you qualify for the best rates and terms. To get the best loans, make a point of paying credit cards, installment payments, rent, and mortgage bills in full and on time.
- Home Ownership History
- First-time home buyers, and those who have not owned a home in the past three years, can sometimes qualify for special programs.
Obtaining a loan involves completing a written application and providing supportive documentation, such as recent pay stubs, rental checks, and tax returns for the past several years. Mortgage financing can be obtained from mortgage bankers, mortgage brokers, savings and loan associations, mutual savings banks, commercial banks, credit unions, and insurance companies.
Step 6: Get Insurance
The purpose behind real estate insurance is to protect homeowners and lenders in the event of catastrophe and will be required by your lender at settlement.
There are various forms of insurance associated with home ownership, including these major types:
- Title insurance
- Homeowners' insurance
- Flood insurance
- Home warranties
Individual insurance policies and warranties have different limitations, levels of coverage, deductibles, and costs. Shepherd Real Estate routinely works with several excellent local companies and would be happy to make recommendations.
Step 7: Purchase Your Home
The closing process is also referred to as "settlement."
Closings bring together a variety of parties who are part of the "transaction" process. Besides the buyer, seller, and their representatives, those present may include an attorney, closing agent, and a representative of the lender.
At closing, transfer taxes must be paid and other claims settled (including closing costs, legal fees, and adjustments). The closing agent usually completes the paperwork needed to record the loan.
What to expect:
Settlement is a brief meeting at which the relevant parties sign all the necessary paperwork needed to complete the transaction. Closings are typically held in an office setting, sometimes with both buyer and seller at the same table, sometimes with each party completing their papers separately.
Before closing, buyers typically walk through the property one more time to assure that its condition has not changed since the signing of the sale agreement. At closing itself, all papers have been prepared by closing agents, title companies, lenders and lawyers and will be verified by buyer and seller to ensure that they accurately reflect the sale agreement. The buyer then receives the keys and the seller receives payment for the home. Deeds, loan papers, and other documents are prepared, signed and the closing agent will later file them with local property record offices.
Step 8: After the Purchase
After determining your search criteria, looking at homes, making an offer, obtaining financing, and going to closing—the home is yours.
There are a few other steps to remember:
- Protect the papers. Your settlement papers are extremely valuable, so hold onto them! They can help establish tax deductions for the year in which the property was purchased. They will also be important for tax purposes when the property is sold.
- Maintain insurance. As the value of your property increases, be sure to raise your coverage accordingly. Speak with your insurance professional for details.
- Have fun! Buying and owning real estate involves contracts, loans, and taxes, but the most important part of home ownership should be enjoying your purchase with those you love.