An Overview of the Home Purchase Process

Buying Real Estate in Washington State

Purchasing a home for the first time can be a little intimidating. Even when it's not the first time, I understand it can be one of the biggest decisions and largest purchases one will make in their lifetime. If you are a first time buyer, or it's been a while since you've purchased a property, hopefully the information below will be of value to you.

Unless a purchaser intends to pay cash, financing is necessary in order to complete the process. Finding a good loan officer who communicates effectively, informing buyers of their options is a necessary part of the equation. A buyer will need to provide a loan officer with some preliminary information, such as income, employment history, outstanding debt to name a few. A loan officer will obtain a borrowers credit report and credit scores are another variable to factor in when determining how much a borrower will be approved for and at what interest rate. This is an early step which needs to be taken in pursuing a purchase. A buyer will learn what type of loans they qualify for and should receive an estimate of what monthly payments will be on a specific loan amount. For most, these estimates should also include property tax payments and insurance costs, not just principal and interest alone. A good loan officer will take the time to meet in person w/ a buyer and explain options and details. There is still one awesome 100% financing program through the US Dept of Agriculture called a rural housing loan. There are still some Realtor's and loan officers who are unfamiliar or inexperienced w/ this program. With this loan, a borrower needs to have a credit score in the mid 600's. Areas of eligibility are limited to more rural areas. Manufactured homes are ineligible.

Sellers in Washington (and Hawaii - where I started in this business) ordinarily expect to see an earnest $ deposit in an amount of 1-2% of the purchase price. Many buyers who are in the market for homes in the 100K - mid 200K price point can realize acceptance of an offer with earnest money deposits ranging from $500 - $1,500. At the close of escrow or completion of property transfer, buyers need to be aware that there are charges associated w/ the transfer of property, called 'settlement' or 'closing costs.' Both buyer and seller typically EACH pay 3%. As a Realtor, I commonly write and see offers accepted where the seller AGREES to pay the buyers closing costs (so 6% from the seller and little or possibly nothing from the buyer at closing). In this type of scenario where the buyer asks the seller to pay their closing costs, the buyers should take this into consideration when determining an offering price.

With condominiums, keep in mind there are monthly maintenance fees in addition to a mortgage payment. These help with up keeping the exterior, landscaping, pools, etc. - those things which are shared by and benefit all unit owners, otherwise known as "common elements."

The other fees associated with a purchase a buyer has to be prepared for involves a home inspection. An inspection is not required, but advised to make sure there are no surprises after purchasing regarding plumbing, foundation, roof, electrical, pests, etc. (and if issues of concern are discovered, a buyer can rescind the deal within a certain time frame and not lose their earnest $ deposit). The cost of the inspection is determined by the dwellings square footage; to give you an idea of a home w/ less than 1500 sq ft, up to 3000 sq ft, an inspection will run in Washington from $350 - $450. Realtors are not to hire an inspector for the client, but can provide a buyer w/ a list of names and numbers and some questions to ask to assist with the decision making process. *A common time frame for the completion of a transfer of property is 30 days, depending on terms of the contract. It is possible however for it to go longer (especially with vacant land) or be slightly less (3 weeks is not unheard of and of course if one is paying cash, it can be shorter than that if title is clear and the inspection is waived or completed quickly). After finding a home and submitting an offer and receiving acceptance, the next thing to be arranged is obtaining a homeowner's insurance binder, usually within 5 days after acceptance. My suggestion to a client would be to either contact the insurance company who issued their automobile insurance policy and see if they provide homeowners as well. Some companies offer a discount if one uses them for all their insurance needs; or one can seek an insurance broker who will shop different companies and inform one of the best rate they can get and let the purchaser decide from there. Typically, an insurance broker will be looking out for the clients interests more so than going through the company directly and should inform one of what is necessary and what is not required, thus possibly saving $. Some lenders I've worked w/ don't feel it's necessary to take care of this piece of business in the early stages, but I like to see as much as possible taken care of up front, thus minimizing the potential for unpleasant surprises further in the process.

* A Form 17 or Sellers Real Property Disclosure Statement is usually provided to the buyer within 3 days of acceptance and then typically, the buyer has 3 days to review and accept or reject based on the information disclosed.

*The inspection period needs to be completed or satisfied typically within 10 days of acceptance.

* A good Realtor will review, understand and explain some things found on the Title report and other documents received such as CC&Rs (Covenants, Conditions and Restrictions - pertaining to home and neighborhood) or Condo Association docs. This is imperative since sometimes there will be findings which raise a red flag. More than once, I've heard stories about buyers completing a purchase, not knowing what was on the title report and or other documents....I have some really good examples I could site which may discourage anyone from going the For Sale By Owner route, without at least hiring a Real Estate Attorney to review everything. I am grieved when I hear about people who have had these experiences. Of course, Title and Escrow can be questioned directly as well and this is encouraged.

* LOAN approval is typically the last thing that needs to happen prior to the closing of the transaction and an appraisal of the property needs to occur. (An appraisal typically runs about $500). Buyer should be advised NOT TO MAKE ANY LARGE PURCHASES during the home purchase process as it may result in denial of the loan and loss of the property. All credit card purchases should be kept to a minimum.

* Some other issues with inspections and documentation that may possibly pertain to a specific property could be the following: Septic, Well's, Feasibility Study (investigation of specific details regarding vision for a property), and as mentioned earlier, approval of CC&R's and other Home Owner Association Documents (HOA's are common w/ condo's).

* At closing, a buyer will either need to go to the escrow company - or it may be possible that an escrow officer may come to the clients home or meet them somewhere convenient. Obtaining signatures for all the required documentation is necessary to complete the process and this usually takes an hour. Expect a sore wrist when it's all over since the stack of paperwork is ordinarily more than an inch thick.

If there is any reason a purchaser may not approve of the inspection, title, sellers disclosure, etc, (or receive loan approval, through no fault of their own), most times, the earnest $ deposit will not be forfeited. Notification however must be given during the specified contingency time frames. Make sure you as the buyer, find a knowledgeable, diligent and ethical Realtor who will facilitate what needs to occur when it needs to. A good Realtor will also be in regular communication w/ their client and provide required documentation to all parties (client, lender, escrow, listing agent).

home sweet home....

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Comments 7 comments

christinekv profile image

christinekv 7 years ago from Washington Author

Sorry Greatcreditscores, I didn't see this comment until 3 mos later. I'm not really too familiar with the housing market in Tacoma due to it being far from where I live ...I have shown some property in Pierce county, but it was east and really close to the King County line (I primarily focus on King and Snohomish Counties). If I'm not mistaken however, one can buy a new 3 bedroom, 2 bath home in the $200K in the Tacoma area. Of course there are foreclosures or pre foreclosure and short sales properties to be had which may enable one to get something for around the $175K range. If you need help finding a good Realtor, let me know.

Hi Dave -

Glad you found the article useful. People with good credit can still get good loans and FHA financing requiring only 3.5% down is one of the best programs available. VA loans with 100% financing are also available for those who have served in the military. There is another loan program which a lot of Realtors are unaware of and it's a Rural Housing loan. One can buy in eligible rural areas w/ 100% financing and not have to pay mortgage insurance like one would in any other program where at least 20% has not been applied (down payment). There are restrictions regarding household size and income as well as one may not own another property within 100 miles of where purchasing and utilizing this program and if one does, the other property I believe has to have a rental history.


David Hebert 7 years ago

Wow! Great article! Its very useful information for the first time home buyer. Though it is tough to purchase real state in Washington. But now I think it is quite possible to purchase house in Washington state. Moreover to say, offering loan services will help the dreams come true. Thanks for the excellent hub.


GreatCreditScores 8 years ago

How is the housing market in Tacoma? I've been thinking about moving to that area for awhile now, but want to wait until the time is right, market-wise.


christinekv profile image

christinekv 8 years ago from Washington Author

All the best to you Lynn!


Lynn Byrne profile image

Lynn Byrne 8 years ago from Daytona Beach Florida

Christine,

I'm in Ormond Beach and serve the Daytona Beach market. I've been with the big franchises in the past, but I'm on my own now because in the down market, I added property management to my services. I needed to start my own brokerage to do that effectively.

We were really affected by the bubble popping, but we're beginning to come out of it.

Thanks,

Lynn


christinekv profile image

christinekv 8 years ago from Washington Author

Thanks Lynn Byrne! So you are in Florida?? Who are you with? If I have anyone going that direction, I'll be sure to remember to contact you about sending a referral!


Lynn Byrne profile image

Lynn Byrne 8 years ago from Daytona Beach Florida

Wow, this is a very thorough article that is a great resource for first time home buyers. I read last week that 39% of buyers in 2007 were first time home buyers. By taking this advice, they can see exactly what they need to do.

I personally take the time to go through this type of information with new buyers and your points about finding out how much loan you qualify for, and, including all costs when considering the purchase are dead on and very important. Great Hub!

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