You Got to Get the Keys, the Keys

Okay, so you were supposed to read the title to the tune of Keys by DJ Khaled. If you didn't, then we can't be friends (just kidding). Anyway, this post is about getting the keys to your first home and some of the steps and people who will be involved along the way. This is in response to me posting about accessing a home's equity before talking about having a home. Let's get things back in order and get into getting the keys for the first time.

Home ownership is important because it is a sign of stability and a home can be used as leverage/collateral for future endeavors. Owning a home is one step to building wealth and one has to be smart about the process and the choices made to accomplish this task. Unfortunately there are some people who are better equipped and prepared than others to become home owners. There are people who do not have to take any steps to become home owners because it has already been planned for them, and there are people who were born and subsequently became home owners. This post is not for them because everything is already worked out and the ownership is already established. This is for people who have to make the decision to become a home owner and to take the steps to make this a reality. This is for people who are stepping out and completing this task for the first time and for their family and legacy.

Before becoming a home owner, one needs to know what kind of home to purchase. This is when one makes a list. Do you want a new construction, how many bed and bathrooms, location, architecture type, single family, multi-family, condo, and amenities are all things that should be listed. The next thing is to figure out how much house one can afford. Will you be using FHA or traditional financing, are there programs to assist with the down payment or financing, are you eligible to use any other type of benefits (i.e. withdrawals from retirement account). Also make sure to look at the property taxes. This is very important because in some communities the tax rate is very burdensome and removes the affordability from owning a home in the area. One example of this in my area is Country Club Hills, Il. This township has homes which can be purchased for $200,000 but the property taxes for said home are closer to $9,000 - $15,000. This is an extra $750 - $1250 responsibility per month paid just to the city and it does not count towards owning your home. Once these answers are established then it is important to mark those things that are absolute necessities and those which are optional. Once this is done, make sure to download realty apps like Redfin, Zillow, and Realtor. Put in these same preferences from your list and keep an eye on the market in the area where one wants to purchase. This allows one to keep an eye on the market, gain an idea of what is fair pricing and what is overpriced, and it also allows room for better insight into what can be expected.

At this point one needs to bring in a lender. The lender can be a big bank like Chase or Bank of America, a credit union like USAA, or an independent mortgage servicing company like Freedom mortgage. It is important to reach out to the lender so the borrower can get an idea of what he/she can afford. The lender will run your credit so don't do this until you are ready to make a move. That way you can avoid unnecessary hard inquiries on your credit file. So to make sure there are no surprises, make sure to keep an eye on your credit with free apps like Credit Karma, Credit Sesame, Capitol One Credit Wise, Mint, etc. Many credit card companies also provide a copy of your credit score. This way once you speak with the lender there will not be any surprises. The result of the credit inquiry will determine how much house you can buy with your income and monthly obligations. The lender will let you know if you can afford to get everything on your list. The lender will give you an idea of how much you can afford to pay for homeowners' insurance as well. It is important to find a great policy with adequate coverage to protect the new asset. An honest lender is important as well because they will not push you into a loan which will be overwhelming and increase the likelihood of you losing your home. Make sure to shop around for lenders because some also have rebates and payback offers if you choose them or one of their suggested realtors.

The realtor is the next person who is important and added to your process. The realtor is the one who will take you around to see the houses that you are interested in seeing. This person is the liaison who is responsible for getting you into the house of your dreams. They are incentivized by the commission they will receive so make sure your realtor is listening to you and working for your advantage. Your realtor should be available, knowledgeable, tough, and kind. The realtor should be available to meet your needs, answer your questions, and show you around. The realtor needs to be knowledgeable about the area you are researching, the housing market, the actions of the market, and costs for upgrades/amenitities, just a to name a few things. The realtor needs to be tough because they need to be able to offer/counter offer to your advantage. They should know when to apply and release pressure. They should not be responsible for you missing out and your deal falling through. This means as the buyer, you also have to let them tell you how things will work and if you choose to have them do different then don't hold them responsible. The kindness is important and goes with being tough because you can always catch more bees with honey than vinegar. Also you want to work with your realtor, you should not dread contact with them and neither should the sellers.

Depending on the type of financing one may need to have an appraiser involved. I recommend getting an appraiser no matter what just so any hidden problems can be uncovered. This protects your interests as a buyer. This why the seller is made aware of things which are unacceptable before the sale can happen. The seller is then responsible for fixing these issues at their cost and not yours as the buyer. You want not to have to come out of pocket for repairs right after buying a house. The only thing you want to be expected to do is customize your home, not repair and customize.

This is a bit different for new construction homes. Instead of looking for repairs, you need to go through the home to make sure all of the requests were completed correctly. This check-in happens more frequently in newly constructed homes because there can be mistakes which cannot be corrected after completed. A newly constructed home does have more people involved because there is a construction company which you work with as the buyer. You need to work with their designers to make customizations and then you have to work with the other contractors to make sure they complete the steps they have correctly.

After all of these things are done then the title company is where the magic happens. This is the only time when the buyer and sellers will be together. Everyone will need to be present to sign all of the agreements and paperwork. Sometimes there will be a third party involved because the seller may be out of state or not able to complete the selling on their own. This happens sometimes when an employer covers their employee who they paid to relocate. Either way, this is where it is important to ask any remaining questions and make sure all of the requests have been completed. Once everything is signed the home becomes under the buyer's ownership with a lien on the deed by the mortgage company. The dimensions and boundaries of the property are finalized for the buyer to understand. The money changes hands at this point and the business is completed. The move in date is scheduled and the for sale sign should be removed from the yard.

In each of these steps the people one chooses is important because they have a specific function and that function needs to be completed most competently for a happy start to your home ownership. Be honest with yourself and follow through when you are ready to make a move. Think about how much you spend renting and that you don't get anything at the end. At least with a home, you have an end goal. It will be yours at the end and one day will not have a mortgage on it and be yours free and clear. So in summary and as a snapshot:

• Make a list of desires/requirements

• Download realty apps like Redfin, Zillow, and Realtor

• Check your credit for anything that needs to be corrected/removed/improved

• Find a lender with favorable rates, incentives, and honest lending practices

• Find a realtor who can meet your needs

• Find an independent appraiser

• Find an adequate policy of homeowner's insurance

• Complete closing with the title company

I got the keys, the keys, the keys...