Buying your first home in Columbia, SC? Realtors are your professional guides. Make sure you choose a top Columbia, SC expert! Work with the #1 Team in the Midlands!
You might be a bit afraid or intimidated by the whole process of buying your first home. As top Columbia, South Carolina real estate experts, it's our job to guide you, from beginning to end. Even if you are not a first time buyer, the process of buying a home has changed dramaticallly in the past decade, so you may find some useful information below.
Here we sketch out the broad process of home buying. If you decide you are ready to begin your home search, simply let us know, and we will get to work!
From choosing the right property, to securing financing, to negotiating often complex details under the best possible terms, homeownership can be downright intimidating. So why go it alone? As your personal real estate experts, we can answer any questions, big or small, day or night. Having navigated hundreds of buyers through the buying process, we're confident that we can do the same for you. This guide will help you gain additional understanding of the the home buying process from start to finish!
South Carolina law recognizes the following types of agency relationships:
• a Customer Relationship, where the agent involved represents the seller while the purchaser chooses to be self-represented;
• Buyer Representation where the agent represents the buyer exclusively;
• Dual Agency, where the agent offers somewhat limited representation to both parties to the transaction, keeping confidential information obtained from either the buyer or the seller that would benefit one party over the other;
• Designated Agency, where a single real estate company allows two of its agents to be involved in the representation, each of whom is assigned to represent either the buyer or the seller.
The full SC Agency Brochure explains agency relationships is readily available from us.
One important fact about Buyer Agency that many people do not understand is that you can enjoy the many benefits of buyer representation and rarely if ever pay for that service. In the vast majority of transactions where an agent represents the buyer, the agent is, in fact, paid by the seller, despite the fact that this agent is working in the interests of the buyer.
How do you obtain these valuable benefits? The State requires that an agreement between the agent and the client be signed. This form is called a Buyer Agency Agreement. Once completed and signed, you will then have officially entered into a client relationship with your agent. At that point, we will be able to negotiate on your behalf and offer you client level services that work in your favor throughout the transaction.
Speaking to a lender before you start your home search is critical, particularly in these days of dramatically changed lending practices. A lender can help you determine exactly what you can afford and also provide you with a pre-approval letter free of charge. Being pre-approved for a home loan shows the sellers you are capable of buying their home. This letter can give you an advantage during the offer process, especially if multiple buyers are competing for the same house. Keep in mind that a low interest rate isn't the only criterion by which to evaluate a loan. You should consider the terms of the mortgage, what your closing costs will be, and the reputation of the lender.
Here are some of the things that lenders will use to determine an appropriate price range for you:
Credit Report – Using your social security number, full name, and address, all of your past finances are compiled and rated. The higher the score the better off you are. If your score is found to be 750 or higher, you are considered to be at the top of the list and in great financial shape. If your score falls within the 680-740 range, you are considered in the game but may have hoops to jump through for a better interest rate. Finally, if your score falls below the 650 range, you can still get a mortgage but usually at a much higher interest rate.
Work History - Two years of steady work history with the same company is best, but two years of steady work history in the same industry is still good. A constant change of jobs and industries is not beneficial for your credit rating. Your work background should show a steady income which predicts future ability to pay. Your work history also indicates to banks and mortgage companies that you are a stable, comfortable, and safe bet for them.
Payment History - Any loan, credit card, rental, or payment contract will report when you are late on payments. A consistent history of late payments on any loan could put you out of the game for buying a home. To prove you are worthy again, you must change your habits and make payments on time over a period of 6 months, 12 months, or possibly longer.
Current Loans – Along with your new mortgage payments of how much you can safely handle each month, all loans where you are currently making monthly payments, including credit card balances, are included in the calculation. You may be required to pay off all your credit cards and loans before you can receive the mortgage loan.
Student Loans – Student loans tend to sometimes be seen as the “forgotten loans” because the government insures most of these low interest programs and only puts minimal effort into collections. Student loans may have shown up on your credit report in the past when buying a car, major appliances, or leasing a property but was never considered a big concern. However, with a home purchase everything is a big concern. This could not only slow down the purchase process of your home but could stop the purchase process in general. You will at minimum be required to bring this current or may be required to pay it off in full.
Property Ownership - Owning a house, a car, or a boat with no loans is a good thing. All of these are assets and add to your net worth. It is much more attractive to a lender if you own something out right than it is for you to be making monthly payments.
Credit Cards – The number of credit cards you have and the amount of credit you are allotted are both factored in by the lender. Your ability to pay your mortgage is based on your current payment obligations. Car loans, credit card payments, and student loans are all added in to the monthly calculation. When those totals exceed certain parameters you will be limited in the amount a bank or Mortgage Company will extend to you.
Defaults and Judgments - If any Defaults, Judgments, or Liens have been entered against you personally, entered against any business that you own, or entered against any business that you have owned, you will need a detailed explanation and proof of release before you will get any mortgage loan.
Closing costs are simply the fees associated with purchasing a home, borrowing money, and preparing paperwork to finalize the sale. Your total closing costs will vary depending on the property you are buying, the price of your home, and variables within the loan structure.
Your lender can be good source in helping you to determine the fees associated with the loan. Closing costs often include attorney’s fees, prorated property taxes, title search and title insurance fees, homeowners’ insurance on the property, and any applicable home owner’s association fees.
Closing costs are traditionally paid by the buyer, but you can request that all or some of the closing costs be paid by the seller within your offer. This is part of the contract that can be negotiated, and we can discuss your preferences when writing the offer.
When writing an offer we will use a standard pre-printed contract issued by the National Association of Realtors. This contract offers protection for both the buyer and the seller. Because it may seem confusing to you, we will go through the contract together so that we can explain all of the details. Next we will begin filling in the details specific to your purchase. These include points such as: purchase price, financial arrangements, closing costs, closing date, expiration of the offer, and any other special terms you would like to include.
Submitting an offer will require earnest money. Earnest money is paid up front by the prospective buyer to show the seller that the buyer is serious about purchasing the property. It usually accompanies the offer to purchase and is payable to the buyer’s broker and held in a non-interest baring trust account until the completion of the sale. The amount paid will be applied to the purchase price of the home at the time of closing. If the buyer defaults on the contract, the seller may be entitled to the earnest money deposit. In general, we recommend 1% of the approximate purchase price as a range for earnest money.
We will submit your offer to the seller’s agent as soon as possible and wait for the seller’s response. This response could be to accept the offer, counter the offer, or reject the offer outright. There may be several rounds of counters depending on the distance between the parties. Once both you and the seller agree to all the terms of the contract, the contract is considered ratified, and you are ready to move into the next phase of the process.
An investment of any size should always include a professional inspection, and nowhere is this truer than in the purchase of real estate. After a contract is signed by both parties, you have a 10 business day due diligence period to have the property inspected by professionals. We will help coordinate the inspectors and review their reports with you. We have several reputable general home inspectors we can recommend to you when the time comes. The pricing, on average, can range from $250 to $310 for homes of up to 2000 square feet. Of course, the choice of your inspector is entirely up to you.
Along with the general home inspection you will also want to get a separate termite inspection (around $125) and a separate heating and air inspection (around $150 for a single unit). New laws require that the termite inspection be performed within thirty days of closing. Since most inspections and most home closings are just over thirty days, some termite companies are charing an additional fee to do a reinspection.
We can also help provide recommendations for these and other professionals (electricians, plumbers, pool companies, etc.) to give more detailed opinions and estimates if you desire.
After we have received the reports, we will discuss the issues that are important to you as the future owners. We can then collaborate to write a repair request list that will be given to the seller. From this point, repairs will be negotiated, and the seller can say yes to your requests, no to your requests, or possibly some combination.
Once all the repairs and terms of the contract have been agreed upon, your next job is to stay in touch with your lender and make sure they have all the information they need. It is important that all the paper work is in good order so the loan will be ready in time for closing.
As the closing approaches, you will need to arrange to have the utilities transferred into your name on the date of the closing. If you do not have a current account with the companies, you might call in advance of that date to have any paperwork they require taken care of. It can be more expensive and time consuming to have the utilities cut-off and re-instated versus having them transferred.
SCE&G – Electric and Gas
Columbia Water- Water and Sewer
If internet and cable are important to you, it would be wise to try and schedule an appointment well before the close date since these companies can sometimes take several weeks to get the service started at a new location.
You will also need to arrange insurance coverage on your home. Although mortgage companies will require you to have insurance on the property at closing, they do not specify a company that you have to use. Shop around and see what rates you can get.
Once your lender sends the loan package to your closing attorney, he or she will begin to prepare a HUD or closing statement. This statement itemizes the funds that are payable at closing, including loan costs, seller fees, and escrow amounts. The HUD statement can sometimes be overwhelming, but we are happy to answer questions. The closing attorney will also go over the statement in detail at the closing.
The HUD provides a summary of the seller's net proceeds and the exact amount you will need to bring to closing. For this you will need to have the funds wired directly into the closing attorney’s bank account or bring a certified cashier’s check to the closing. Personal checks are NOT accepted in real estate closings. We will do our best to make sure you have this information as quickly as possible so that you will have time to get your funds in order.
On the day of closing we will arrange to do a walkthrough of the house.
At the closing, the attorney will carefully go over the HUD statement and review the terms of the contract. Depending on the mortgage and property type, the closing normally takes between 1-2 hours. After all the final signatures are completed you will be the proud owner of a new house!
Make sure that once your deed has been recorded by the county (usually done within 3 months of closing) that you apply for the legal resident tax rate. The closing attorney will go over this with you during the closing as well. If you do not apply for it you will be charged at a 6% tax rate instead of 4%. It can raise your tax bill substantially if you fail to apply for this important deduction.
In some cases when you buy a home, the seller will provide you with a transferable termite bond. The termite company requires that you contact that them within the first month after you have closed to have this transferred into your name. This is also a good time to learn about the terms of the bond including finding out when it expires. The same company may also be able to help with your general home pest control.
If you chose to get a home warranty when you purchased your home, take some time after closing to carefully read the terms of the warranty. These warranties can be very helpful and can save you money, but only if you follow their rules. It is important to read the brochure, understand what is covered, and understand how to handle problems. Your home warranty can be renewed after the first year for a fee so keep this in mind as you approach the end of your first year in your home.
If you decide you are ready to begin the home buying process, simply contact us, and we will get to work finding the best possible properties in your preferred price range.