Setting up for success: The six steps to buying a home in Santa Cruz
Thinking about buying a house? It’s easy right? Well, it’s like hiking a new trail or touring a museum in a foreign country. Even if you have the best maps and equipment, having the right guide is essential because there are bound to be some twists and turns along the way. Here’s my take on the process and some tips that will help you set yourself up for success!
Step 1: Get pre-approved with a local lender
This is one of the most important steps when you’re considering buying a home. Until you’ve confirmed the price range that makes sense for you, all that online perusing is mere fantasy. Working with a local lender will also strengthen your offer. Santa Cruz is a small community and reputation is everything, so a trusted local lender will ensure a smooth close, and increase your chances of getting your offer accepted.
A listing agent is more likely to advocate for an offer with financing provided by a lender they know and trust. Hot tip: some lenders can underwrite your loan up front so you are completely approved (subject to the appraisal) and there are no surprises further down the line. This will also strengthen your offer, especially if you’re up against an all cash offer.
Step 2: Start seeing houses, in person with your real estate agent
There’s no denying the fact that we live in a digital world, but real estate is a tangible asset. It’s an investment that you’ll actually be able to touch, improve, and find comfort in everyday while it appreciates. Life is busy and it’s always tempting to hop online to see houses but once you’re serious about buying, it’s imperative that you actually set foot in as many houses as possible. That’s the only way you’ll start to gain confidence about the process and grasp a better understanding of the market.
I also highly recommend looking through disclosure packages even when you aren’t serious about some of the properties you initially visit. This gives you an opportunity to become more familiar with the inspection reports and disclosures typically provided, and you’ll feel much more confident when making an offer as you’ll have more context about which items in the inspections are red flags and which are things you can easily get repaired by a contractor, handyman or DIY work for a Sunday project.
Step 3: Make an offer
You’re pre-approved and you’ve seen a variety of houses in person. You’ve discovered which neighborhoods you love and you’ve come to terms with the things you can and cannot live without. You’ve mustered up your courage and you’re ready to make an offer!
It is crucial that your agent is proactive about actually talking (not texting) with the listing agent and your lender to make sure your offer is presented in the best possible way. There are details and tonalities that simply cannot be captured via text. Take your time when choosing an agent and make sure they’re the right fit and have the experience necessary to navigate today’s market. There is a lot that goes into an offer presentation and it will have a huge impact on your outcome!
Step 4: In Contract
The moment has finally arrived! Your offer was accepted and in around 30 days you’ll get the keys to your new abode! Things are about to get real. You may find yourself sorting through all the disclosures a 2nd, or 7th time, and scrutinizing every photo of the property you can find online. This is a normal part of the process and once you go back and visit the house again, you’ll remember why it’s the one you chose.
During the contract period, your real estate agent, lender, and escrow officer will work together to make sure you meet all your contract deadlines and everything goes as smoothly as possible. It’s important that you or your agent informs your lender that you are in contract right away so they can order your appraisal as quickly as possible. You’ll also need to wire your Earnest Money Deposit (usually 3% of the purchase price) to the escrow/title company. Those funds will remain in escrow until the sale is final, barring any unexpected changes.
Step 5: Releasing Contingencies
At this point, you’ve done any other property due diligence that made sense (this is something your agent will help you assess). Your lender has received the appraisal report and has reviewed and approved it. Your loan has also gone through underwriting (your lender knows more about you than you know at this point!) and you’ve received full loan approval. Congratulations! Removing all contingencies is a huge step and you are very close to owning your own little slice of heaven.
Now, this also means your 3% escrow deposit would be at risk if you were to back out of the purchase before the close of escrow, so this is a very pivotal point in the process and it’s important that you feel comfortable and confident moving forward.
Side note: up until recently, many buyers were removing all contingencies when they submitted their offer in order to compete with the all cash offers floating around in abundance. More recently, we’ve seen demand cool so buyers actually have a chance to make contingent offers – a welcome change! This means you can make an offer on a home and if your offer is accepted you’ll have the opportunity to investigate the property further to make sure it is the right home for you.
Step 6: Closing Escrow
Leading up to the close of escrow, you’ll have the opportunity to do a final walkthrough at the property. The goal is to confirm that the condition of the property hasn’t changed since you made your offer. The resident toddler hasn’t drawn on the walls and the family pup has refrained from chewing at the baseboards in protest of the move. You’ll also meet with a mobile notary to sign your closing documents (these consist of your loan documents and the title/escrow documents).
Be prepared: there are lots of documents to sort through, but having your real estate agent with you can help make the process much less daunting. Once your signed documents have been returned to the escrow officer by the notary, the escrow officer will work with your lender to get your loan funded. You’ll also need to send a wire transfer with your “funds to close” to the title/escrow company.
Once the escrow officer has all the signed documents back (from you and the seller) and all the funds are in escrow, you’ll be set to close! Soon you’ll hear the fantastic news that you are “on record” and the property has been transferred into your name with the county. Time to set up your utilities and begin your move! Need help organizing in your new home? I know an expert who can help.
If you’re thinking about purchasing a home and would like to talk through it, I would love to help. Call anytime!