Home Buyer's Guide

Residential Real Estate First Time Buyers’ Guide

Are you ready to purchase your first home? Congratulations! You are about to start on an exciting journey and make an investment in your future. However, though you might be looking forward to the house hunt (or be relieved to have finished it), know that finding the right home for you is just the first step.

We are here to guide you through the remaining steps of your journey. Once you’ve found that perfect house, here is what you have to do next:

Learn more about each of these steps by clicking on the links on this page. Our real estate attorney has been assisting residents of Milford, Orange, and Shelton, CT for over twenty years with estate planning, business law, foreclosure prevention, and more. If you have questions or would like legal assistance, please give us a call today.

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1. Make an Offer

Before you can make an offer, you must first figure out what you can afford. Meet with a mortgage broker to see how big of a long you qualify for. It can also help to get a “pre-approval letter,” as that will ensure sellers that you are serious.

Once you find the home you want to live in, notify your real estate agent. He or she will put together a real estate binder to present to the seller. This binder contains yours and the seller’s contact information, the address of the property being sold, the price you are offering to pay for it, how big your mortgage will be, other contract information (like what items will remain at the home), and a “good-faith” deposit (generally 1%). Note that while it’s called a binder, this document isn’t legally binding. Instead, it’s the framework attorneys will later use to draw up the legally binding contract.

2. Negotiate Price, Credit, and Repairs with the Seller

Once your binder is accepted and an initial selling price is agreed upon, it’s time for the home inspection. Contact a home inspector you trust and go through the home from top to bottom. Often, the home inspector will find issues that must need to be addressed, from faulty appliances to broken windows, radon, etc.

At this point, you can negotiate with the seller to determine who will be responsible for these repairs and how they will be paid for. Sometimes the seller will take care of the repairs; sometimes the seller will give the buyer a credit so that they can pay for repairs; sometimes the seller will make no accommodation and insist the home be sold “as-is.” If you and the seller cannot come to an agreement, you are both free to walk away.

Keep in mind, however, that if you have an FHA loan (which is insured by the government), all repairs must be resolved before the property is closed. Any outstanding issues will be noted in a “rider” attached to the contract. Other items that might be addressed in riders include special stipulations for a condominium or short sale.

3. Sign the Contract

After negotiations are complete, it is time to draw up and sign the contract. The seller’s attorney will write the contract, while the buyer’s attorney will review it. The contract is the legal document that lays out the terms of the real estate sale. The binder is used as a guide and framework, and the contract formalizes what was in it.

In addition to the terms laid out in the binder, the contract can include the following:

The mortgage contingency date (the date by which you, the buyer, can back out if you cannot obtain a mortgage/get a commitment from the loan company)
A detailed list of items included in and excluded from the sale of the property
The condition of the property and how it will be delivered
Penalties for delay
Descriptions of what would constitute a default for both parties

When the contract is signed, you will be expected to put forward a deposit of 9%. This is in addition to the 1% binder deposit.

4. Obtain a Mortgage

Once the contract is signed, it’s time to obtain a mortgage. (Ideally, however, you should start this process beforehand.) The bank will usually charge you to have the property appraised, to ensure that it is worth what you are paying for it. Your back will also provide you with a Good Faith Estimate (GFE) of your closing costs. Be sure to compare these as well as mortgage rates as you shop for a loan.

You will need to complete a great deal of paperwork in a short amount of time, which many people find frustrating. Be sure to gather tax returns (at least 2 years’ worth), pay stubs, bank statements, and explanations for any unique deposits, bonuses, or expenses. Also, keep in mind that your original pre-approval letter is no guarantee of a loan. Your contract probably has significant contingencies attached. Therefore, your attorney should not release the contract’s mortgage contingency until you are guaranteed the loan.

Finally, you will have to obtain home insurance in order to secure the loan. If your home is on a flood plain, you will also need flood insurance. This insurance protects the bank as well as you.

5. Obtain and Ensure Clear Title

There is very little you have to do at this stage – your attorney will be the person completing all of the legwork.

You need more than a deed to prove that you own your home or other real estate. It’s necessary to look at the “chain of title” to ensure that there are no potential claims on or encumbrances to the property. Your attorney will conduct a title search to ensure that this is the case.

Your bank will probably have strict policies regarding the purchase title. The bank will, in all probability, require you to purchase Mortgagee’s Title Insurance to ensure that your title is protected for the lifetime of your mortgage.

Your attorney will also recommend that you purchase an Owner’s Title Policy to protect you (not just the bank) from potential title defects. This should only cost a few extra hundred dollars if you are already purchasing Mortgagee’s insurance. The title insurance company will compensate the attorney for selling you the policy.

6. Close

As the date of closing gets closer, the attorneys and lenders will work together to obtain and prepare all documents needed for the closing. The morning of the closing, you’ll meet with your real estate agent for the last time to give the home a final inspection. After this inspection, you’ll meet with your attorney and sign all of the mortgage papers. There will be one document known as the HUD that gives detailed information on all the money changing hands. Your attorney will provide a closing statement that gives a simple explanation of all of the terms of the transaction.

Once you have signed the paperwork, the buyer’s attorney and seller’s attorney will meet to exchange the paperwork and money for the purchase (which is sent by the bank). Your attorney will then record the warranty deed and mortgage on town land records.

After this is complete, the home is yours! You can move in whenever it is convenient. However, your attorney’s job is not over, as he or she will have to make sure that mortgages and liens the seller may have had are properly closed out in the records. This process could take months, and your attorney will contact you when it is complete.

Congratulations, you’ve just bought your new home!

Potential Setbacks and Problems

There is very rarely such a thing as a smooth path to buying a home – there are almost always bumps in the road. Keep in mind some of the potential setbacks and problems you might face, so that you can deal with them as they come up.

Repair Issues: There is no such thing as a perfect home. Of course, you want all issues to be fixed before you move in (or else credited), but the seller might not want to pay to fix every little thing on a home they will no longer enjoy. This is where your attorneys come in, compromising to find an acceptable solution.
Infinite Paperwork: You have a busy life; buying a home is just one thing among many you have to do. Gathering all the paperwork is time-consuming, and while the closing process is long, you might not have time to gather everything at the last minute. You might also run into problems if some documents are difficult to obtain.
The Last Minute: Your mortgage company is probably processing thousands of loans every day. Your account may sit for days and weeks with no activity, only for there to be a frenzy in the days before closing as the mortgage company and attorney obtain all the paperwork. It’s on your attorney to stay on top of the mortgage company and ensure everything is set by closing.

The good news about these setbacks is that very few of them are insurmountable. Your attorney is here to work with you to help everything go smoothly. Before long, you’ll be enjoying your days in your new home sweet home!