The purpose of this short informative essay is to give anyone thinking about buying a home in Minnesota, United States a step-by-step guide to follow during this often confusing process. This essay does not contain everything there is to know about purchasing a home. However, it will organize the process in a simple, easy to understand way, and provide you with important questions to ask the professionals.

If you are thinking about buying a home within the next 6 months, you should start by contacting a mortgage broker. There are hundreds of mortgage companies in Minnesota that would love to help you get a loan. The important thing to remember is that the fees that these mortgage companies charge vary from company to company and are negotiable. Therefore, it is in your advantage to use someone you trust. The standard fee for a mortgage agent is around 1% of the loan amount and is paid at closing. For a list of qualified mortgage professionals in the Minneapolis, Minnesota Area go to:

Once you find a mortgage broker the next step is to work towards getting pre-qualified for a loan. Being pre-qualified does not guarantee that you will get a loan. It is simply an estimate of what you could get a loan for depending on your credit and income and which loan program works best for you.

The down payment for a home loan depends on the loan program that you choose. If you are unable to put 20% down most lenders will require you to pay mortgage insurance, which is an extra monthly fee. However, there are ways around this and one of them is through a split mortgage program. With this program you can put 0 down and pay no mortgage insurance.

·         Estimated Monthly Payments

After you have decided on a loan program, your mortgage agent will give you a letter specifying that you are pre-qualified to purchase a home in a certain price range. Even though the price range is determined by your income and credit, only you know what you can comfortably afford every month. Once you have decided on a monthly payment that works for you, you can begin searching for a house in this price range.

B.     Schedule a meeting with an agent and discuss the following:

Now that you have decided on an agent to represent you it is time to setup a meeting to begin the exciting process of finding a home. During this meeting be prepared to discuss:

Your real estate agent will have you sign a couple forms during this meeting. The first one will be titled Agency Relationships. This form is not a contract it is simply an informational form that describes all the possible relationships you might have in any real estate transaction.

The second form that you will be asked to sign is titled “Buyer Representation Agreement”. This form is a contract that you will sign with your real estate agent that basically says you will work exclusively with your agent for a specified period of time. The purpose of this contract is to guarantee you that your agent is working for you and must always work in your best interest. It is also to guarantee the agent that after locating and securing you the home of your choice that they get paid by the seller.

It is very important to have an idea of the timeframe that you are looking to buy. For example, if your lease expires in August then you need to have an accepted offer on the house you want by June or July. It typically takes about one month from the time your offer is accepted to the time you can actually move into your house. Therefore, you will probably want to be looking at houses in May and June if you plan on moving in August.

A.  Searching for a Home:

Your real estate agent will take all the information that you have given him/her and will make appointments at your convenience to show you the houses that you are most interested in. The best way to view the houses is to take notes on each home so that they will be easier to compare at the end of the day.

Click here for a list of homes in the Minneapolis, Minnesota Area:
http://www.unifersal.com/property/search/1/US/Minnesota/Minneapolis

            B.  Write an offer on the house you want:

When you find a house that you want to buy your real estate agent will help you write an offer. You will have to submit a check with your offer to be used as earnest money. This is money that shows the seller that you are serious. If your offer is rejected you get the earnest money back. If it is accepted and you close on the property the money will be credited back to you at closing. It can then be used towards your down payment or to pay closing costs. The typical earnest money check for a first time home buyer is around $1,000.

Negotiating is a very complex process in the purchase of real estate and one of the most important aspects because you will be negotiating thousands of dollars. There are many variables that affect negotiation a few of these variables include:

• Number of days the property has been on the market
• Market value of the property in comparison to other properties sold
• Number of buyers interested in the property
• Overall condition of the real estate market

These variables should all be considered when making the offer. It is important to find an agent who specializes in the buying process and can juggle these variables to get you the best price possible.

You also will be given the option to do a home inspection. It is in your best interest to get a home inspection unless the home is new and doesn’t have any problems. The offer you write can be made contingent upon the house passing inspection. Which means that if the house doesn’t pass inspection you have the option to cancel your offer and look for a different house.

A. What to do after the offer is accepted:

Once you have an accepted offer, it is time to finish up the loan process. You should contact your mortgage agent to check on current interest rates, go over mortgage options again and decide if you would like to lock in your interest rate. Rates can change at any time and often do more than once throughout the day. You will have the option to “lock in” your rate or “float”. Locking in means your rate will be what you locked at assuming you close on time. Your rate will be guaranteed for a specific amount of time. If rates go up, you are protected; if they come down, you cannot get a lower rate. A lock-in agreement will have to be signed at the time you lock in your rate. If you float your rate, you are subject to any fluctuations that happen until you lock in, whether they are good or bad.

During this time your mortgage agent will be ordering the appraisal for the property you are purchasing. This is necessary to get the loan. Appraisals normally cost around $300 and you will have to pay for it at closing unless the seller is paying your closing costs.

Once you pick out your house, you will want to decide where you will be purchasing your homeowners insurance. Shortly before the closing, you will pay for your first year of homeowner’s insurance, and from then on it will be included in your house payment along with your property taxes.

Please do not do any of the following without consulting your mortgage broker first:

• Do not move money around, make large bank deposits over $100 for which you cannot provide a paper trail, change jobs or take on additional debt without checking with us before doing so. It could affect your pre-approval and closing.

• Do not pack or shred financial documents.

• If you will be going out of town at any time during the process, please notify your mortgage broker.

Finally, the day will come when it’s time to get the keys to your new house. The following is a list of typical things to bring to the closing. There may be additional requirements; your mortgage agent and real estate agent will let you know before closing if you need to bring anything else.

1. Certified Check: You will need to get a certified check made payable to yourself for any cash that you need for closing. Just round it up to the nearest $100.00. If it’s off a little either way, the title company will give you a refund check or you can usually write a personal check for the difference.

1. Identification: You will need to bring your driver’s license, your proof of insurance and of course yourself. Please contact your real estate agent in advance for instructions if one of the purchasers will not be at the closing.

1. Proof of Homeowner’s Insurance: Proof will be in the form of what’s called a “binder,” which is simply a receipt and it must show you have paid your insurance in full for the first year unless the seller is paying that for you at closing.