Power Moves

Austin's Official Homebuyers' Guide

Educate yourself on the homebuying process.

STEP 1: KNOW YOUR FINANCE OPTIONS

Are you paying with cash or will you need to secure a mortgage loan? The most important step before beginning your home search is to get pre-qualified by a reputable lender or mortgage broker. 

Why is this so important?

  1. It allows you to determine how much your monthly payment will be
  2. It helps your real estate agent to determine what price range to shop within
  3. It gives you an estimate of how much money you will need to bring to closing
  4. As a pre-qualified buyer, sellers will find your offer more attractive knowing that you can secure a mortgage loan. This may help your offer beat the competition in a multiple offer situation!
STEP 2: LOAN APPROVAL PROCESS

If you require loan financing, meet with a lender or mortgage broker to determine how much you can afford. Obtain pre-approval for the loan amount you need. This will save time in your home search, and improve your negotiating position with the seller. 

Pre-qualification vs Pre-approved:

  • Pre-qualification:
    Getting pre-qualified for a mortgage is an increasingly popular practice among buyers who don’t want to worry about going through the approval process until after they’ve found the home they want. It is a verbal exchange in which the lender tells you in advance approximately how much money you are able to borrow, based upon the information you provide the lender about your debt and income. 
  • Pre-approved:
    The pre-approval process goes a step further than pre-qualifying. Most lenders require you to furnish documents (tax returns, check stubs, etc.) to pre-approve your loan. A pre-approval is an actual commitment to lend you money, provided that, when you are ready to buy, you still meet all the qualifying conditions that were met at the time of conditional approval. 
Pro-tip:
Many sellers do not accept offers from buyers who are not pre-approved. Lenders may issue either a pre-qualification letter or a pre-approval letter that can be sent with your purchase offer.
STEP 3: START YOUR HOME SEARCH

Decide which neighborhoods you want to live in and whether you want a new or existing home. Consider requirements –such as the number of bedrooms or price range, and preferences – such as whether you would prefer a 1- or 2-story home. Your real estate agent will set up a property search to show you homes that will fit your needs. From there, you will communicate with your agent on which properties you’d like to tour!

Criteria to think about:

  1. Neighborhood
  2. Price range
  3. Number of bedrooms/bathrooms
  4. Is a home office, game room, or media room desired?
  5. Number of garage spaces
STEP 4: MAKE YOUR OFFER

When you find the right home, your agent will provide a market analysis, and will review market conditions together to decide whether to present an aggressive or competitive offer. Your agent will explain all documentation and negotiate terms that are in your best interest. The process may go back and forth a few times between you and the seller.

What an offer entails:

  • Your offer will be in writing
  • It will be accompanied by earnest money (typically 1% of the purchase price) to show good faith, as well as an “option fee” to the seller guaranteeing your right to terminate the contract for any reason within the option period.
  • When both parties agree on the terms, you are officially “under contract” and the contract is executed on the date the last party signs and/or initials all changes and notifies the other party. 
  • Your earnest money and option fee will immediately be cashed by the title company and later applied to your purchase price.
STEP 5: GOING UNDER CONTRACT

After final acceptance of the contract from both parties, you go “under contract.” At this time, you’ll provide the earnest money for the title company to deposit so they can open an escrow account, and submit the option fee to the seller guaranteeing your right to terminate the contract for any reason within the option period. Both checks will be deposited.

STEP 6: OPTION PERIOD

With an "Executed Contract," you start the negotiated Option Period, usually 7- 14 days. Final details are handled and you’ll have an inspection performed to ensure the property is perfect for you. Your agent will negotiate contract details such as repairs or a price reduction to complete repairs. During this time, you’ll need to arrange insurance for your new home. The title company will also provide a Commitment for Title Insurance for you to review. 

Things to do during the option period:

  1. Arrange for an inspection of the property. This must be completed during the option period so that if something is discovered during the inspection (that you cannot live with and the seller is not willing to fix), you can cancel the contract and have your Earnest Money refunded.
  2. Immediately following the Inspection, your real estate agent will typically complete an amendment to the contract that will include items the inspector discovered that you want to be repaired by the seller, or a monetary repair allowance in lieu of repairs. 
  3. From there, your agent will negotiate on your behalf with the seller for the repairs you want to be completed.
  4. Once an agreement on repairs to be completed has been reached, you will typically forfeit your right to terminate the contract.
STEP 7: CLOSING DAY!

You made it to closing day! Your closing will occur at the title company. If you’re making a down payment, the title company will provide instructions on how to submit that payment. You will also need to bring your photo ID! Possession of your home will occur when your lender releases funds to the seller.

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