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C H A P T E R    M E N U
 ❑ Get Your Finances In Order
 ❑ Shop for a Loan
 ❑ Search for a Home with Realtor
 ❑ Get the Seller's Disclosure
 ❑ Make an Offer & Sign the Contract
 ❑ Home Inspection, Appraisal, etc.
 ❑ Secure Your Mortgage
 ❑ Homeowner's Insurance
 ❑ The Closing
Now that you are detremined that you are going to be a homeowner. Although it may seem quite overwhelming at first, you certainly can negotiate this process successfully as long as you know the the steps to take and are informed about the choices you are likely to face along the way.


Step01 - Get Your Finances in Order
The first step to buying a house is to save the down payment and have good credit scores. Having a decent down payment (typically 15-20% of the sales price) is the key to get approved for a mortgage loan with a reasonable interest rate. Also keep in mind that credit reports are not always accurate. If you find errors in your credit report, contact the credit bureau, submit the supporting documents (payoff letter, etc.), and get them to correct your credit report. Good credit not only helps you qualify for a loan in the first place, it helps you get a better deal when you do get a loan. Please read the sections on Down Payment and Credit Scores in the previous chapter if you have not already.

Another important thing is to keep your "Debt-to-Income Ratio" below 40%. Most lenders wouldn’t let you take out a loan if your total debt is more than 40% of your income. ”. If your monthly income is $3000, then the bank figures your total debt can be $1200 monthly (that is including the mortgage payment for your new home, of course). But if you already have $1000/month in debt, then you have only $200/month left for mortgage payments. Pay down your debt as much as possible to increase your borrowing power. Pay down the highest-interest debt first (credit cards) before lower interest debt (car loans, student loans).

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Step02 - Shop for a Loan
Although this may seem backwards, it is a good idea to talk to a mortgage specialist before you actually start looking for a house because it will tell you how much you can afford to spend on a house. Submit necessary paperwork (see the "Basic Documents Needed for a Mortgage Loan" section in the previous chapter) to your mortgage specialist to see how much loan you can get approved for.
Be sure to ask for “Pre-Qualify Letter”. This letter will help you be taken more seriously by agents and sellers because they will recognize you as a determined buyer who is well-prepared. Some sellers even requires this letter when you make an offer for the house.
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Step03 - Search for a Home
Hiring a Buyer’s agent can help you in numerous ways, especially because you are, more than likely, already paying for those services. Typically, both the seller's agent and the buyer's agent are paid out of the transaction proceeds that are included in the sales price of the home. Even if you are planning to buy a home available through foreclosure or a for-sale-by-owner (FSBO), you can still use the services of an agent. Agents will negotiate with you on their fees and the amount of service you will receive for those fees, and you can arrange for them to be paid out of the transaction, not out of your pocket. Regarding importance of having a good realtor, please read THIS SECTION on the previous chapter.
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When you find a house you want to buy, your realtor will ask the seller for a Seller's Disclosure report. This is a form that a seller must give a buyer, which details all physical problems and defects that the seller is aware of. It is a crime under Georgia Law for sellers to hide any problems and defects from the buyer. However, it is no crime if the seller doesn't disclose a problem on the form simply because (s)he wasn't aware of it.

If the Seller's Disclosure report a problem that seems major, your realtor can try to negotiate to have the seller fix them or to lower the sales price unless the price may have already been set low to take into account any problems with the house.
If the items on the Seller’s Disclosure are minor and can be negotiated, you can decide to go ahead to the next step.
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Step05 - Make an Offer
Once you decided on the house you want, it is time to make an offer. This simply means telling the seller how much you're willing to pay for the house. Your realtor can give you guidance about how much to offer and type up a contract for you. Generally, most realtors suggest the buyer to offer a little bit less than the seller’s asking price, but in the case that the seller is receiving multiple offers, you might have to offer the full, asking price or even more. If the seller accepts your offer they will sign the contract, and then you can proceed to the next step. If they don't accept your offer, they will likely make a counter-offer, by preparing a new contract with different terms that they ask you to sign. The process repeats until you either have a contract signed by both parties, or the deal falls apart because the two parties couldn't agree.

When you make an offer, you will have to attach an earnest money check with the contract. Earnest money is usually around 1% of the sales price, and it is considered as cash deposit which will be applied towards the down payment if the deal goes through. If the deal falls apart, then you can generally get your earnest money back, though this depends on how the contract is written. If you default on the contract, for example, by not having the house inspected in the timeframe (called “due diligence period”) specified in the contract, then you can lose the earnest money. Until the closing date (or the day the deal falls apart), earnest money is held in escrow by independent third party, not the realtors or the seller.

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Step06A - Inspection, Appraisal etc. Step06B - Secure the Mortgage
Now that the sales contract is signed by both parties, you need to quickly hire a professional inspection company to thoroughly examine all the structural systems of the house and give you a written report detailing any problems found. This will cost around $300 depending on the size of the home, and you will have to pay up front for most cases. Ask your realtor if (s)he has a home inspector (s)he trusts. The inspection takes at least a couple of hours, and you should attend so the inspector can show and explain problems to you. It will be way easier for you to understand the inspection report than to be explained over the phone.

The mortgage lender will arrange the house to be appraised, which may affect whether the loan is granted. Home appraisal typically cost around $400, and is completely different from home inspection. Appraisal is done because the lender wants to make sure that they are not loaning you more than the house is worth. Ask your mortgage professional if you have to pay the appraiser up front or you can pay at the closing as a part of your settlement cost.

Also, most lenders require the buyer to get a survey done at the house you’re purchasing, which will cost around $350 – 400. Typically, in Georgia, the closing attorney will order the survey according to the lender-approved surveyor, and it is likely that you get to pay for this at the closing. The surveyor prepares an official diagram indicating property lines, sidewalks, public utilities on the property, etc. You'll get a copy of the survey with the all the papers you receive at the closing.

You will also pay a pest control company to do a termite inspection. This cost about $100. Besides the fact that having a termite inspection done is a good idea, it is a requirement at most banks (they don't want to lend money on a home that's rotting away). If termites are found, don't freak out about it! They're easy to get rid of, though the treatment is a bit pricey ($700+). Ask your realtor if (s)he can negotiate with the seller to pay for this treatment.

You may want to have other tests on the house done such as radon gas test, septic tank test, stucco inspection and swimming pool inspection if these apply to the house.
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As you get inspections & appraisal done on the house, you have to work on getting your mortgage loan secured. Submit all of your paperwork if you haven't done so already, and get the final approval by the mortgage lender.

It is imperative that you move quickly. If you don't get the final approval within the due diligence period stated on the sales contract, and you find out that you cannot get the loan secured after all, then you will lose your earnest money.

Besides submitting all the necessary documents to the lender (see the "Basic Documents Needed for a Mortgage Loan" section in the previous chapter), they need the appraisal report, proof of Homeowners' Insurance, etc. to finally approve your loan. We will talk about the Homeowners' Insurance in the next step.

Step07 - Homeowner's Insurance
Select an insurance agent to handle your homeowner's insurance, and give the agent's contact information to the title company (or closing attorney). It is often a good idea to consult the insurance company you already have other policy with (such as auto insurance) if they offer homeowner’s insurance. You may get a discounted premium.
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Step08 - The Closing
You'll need to bring a bank check or cashier's check (not your personal check) for the down payment. If your closing costs are not included into your loan amount, you'll also need to bring a cashier's check for the closing costs, too. If you don't know the exact figure of the money you need at the closing table, have your bank make the check a little over the estimated figure. The attorney will write you a refund check if your check amount is too much.

For the mortgage money itself, your lender will most likely wire the money directly to the title company. That way you won't have to make that trip to the title company with a big, scary check in your pocket.

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You just learned the basic ideas and things to consider before staring your home search. If you still feel that purchasing a house is the right thing for you instead of renting after reading this chapter, you are ready to buy a house of your own. Now, let us start going through the typical steps you're likely to face in the process of buying a home.

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