Buyers buyers

Austin Home Buying Guide

I want to buy a house, now what?

Step 1: Figure out how much you can afford

What you can afford depends on your income, credit rating, current monthly expenses, down payment and the interest rate. The calculator on this site can help, but it is best to visit a lender to find out for sure. One thing we can all take away from the mess of the last couple of years is that just because you can qualify for a loan, doesn’t mean you can afford that home. It is recommended to not spend more than 30% of your income on your mortgage. At JH Residential, we will never sell you a home that you cannot afford.

Step 2: Shop for a loan

JH Residential is a Private Label Realty company, which means that we have special relationships with lenders that enable you to save some money and increase the efficiency of the closing. We enjoy working with lenders we have relationships and experiences with to ensure a smooth closing process. However, we encourage our clients to compare costs, rates, ect before deciding on a lender.
Recommended mortgage officers:

Step 3: Receive Pre Approval letter

Once you have decided upon a lender, have them write a pre approval letter to submit with any potential offer. This letter gives the seller the peace of mind that you are a serious buyer. Many offers will not be accepted without a pre approval letter. Click here to see an example of a preapproval letter.

Step 4: Fill out a home inventory sheet

We have created a Home Inventory Sheet for our clients that asks questions about your home buying goals. The answers to these questions helps us to determine what type of home searches we need to set up for you on your personal website. Download a Home Inventory Sheet here.

Step 5: Use your personal website

Once we have discussed your home criteria, we will set up a personal website for you. On this website, you can save your favorites and possibilities and make notes. We are able to share this website and use it as a communication tool to further evaluate the types of homes you are interested in. From there, you will create a list of homes you would like to view.

Step 6: Start Driving!

Before we make appointments to view homes, it is helpful to do an initial drive by through the various neighborhoods. This enables you to pay more attention to the actual neighborhood and location of the home. It also helps you calculate work/home distances and get a feel for the general vicinity.

Step 7: Go See!

Set up an appointment with us to view the homes on your list. We usually recommend no more than 8 homes in 3 neighborhoods or no more than 10 homes in 2 neighborhoods in one day. Imagine trying on 10 outfits in one day and trying to choose just one (impossible for a woman, exhausting for a man)! The same goes for a home! You don’t want to see so many that you hate the last house just because you are tired. We also need ample time to set up appointments to view the owner occupied homes.

Step 8: Make an Offer

It can sometimes be nerve wracking to make an offer on a home. Just remember that an offer does not commit you to buying the house! Once you find a home that you would like to make an offer on, we will perform a market analysis on that home in order to help you make a competitive offer at a fair price, with a closing date and terms that you are comfortable with. We will draw up a contract using the promulgated form from the Texas Real Estate Commission. Once the offer is submitted, we must wait to hear back from the seller’s agent. Usually, a counteroffer will ensue. After both parties have signed off on a contract, documents are delivered back to the seller, buyer, and title company, earnest money is in escrow at the title company, option money is delivered to seller, and financing addendum is signed, then your option period will begin.

CLOSING DATE: Date that all parties will sign documents transferring ownership of property.

EARNEST MONEY: Money that accompanies an offer to purchase real estate that is kept in escrow. This money proves your intent on buying the home and will be credited to you on your HUD-1 statement at closing. If you cancel your option period, this money will be returned to you.

ESCROW: A neutral third party holds the documents and money involved in a real estate transaction and ensures that all conditions of a sale are met. This is usually done by the Title company.

TITLE COMPANY: The title company provides title insurance. They search the real estate records in the county where that particular piece of property is located to determine (1) the legal owner of the property; (2) reveal any mortgages, liens, judgments, or unpaid taxes that will have to be satisfied before the property is conveyed; and (3) detail any existing easements, restrictions, or leases that affect the property. Click here to see more information on title insurance.

OPTION MONEY: Usually $100 paid directly to the seller. This money gives you the right to purchase the property without obliging you to it. Other offers can be submitted to the seller at this time, but none can be accepted.

FINANCING ADDENDUM: Attached to the contract. It states the conditions for financing the property that must be met for the buyer to be held to close the sale.

Step 9: Option Period

This is the period, usually 10 days, in which you put down money for the right to purchase a piece of real estate within a set time period but does not have an obligation to buy. During the option period, a home inspection will be performed by a licensed home inspector to reveal any functional issues and/or repairs needed. After the inspection is completed there is generally another set of negotiations with the seller to remedy the issues discovered during the inspection. Additional investigation may also be necessary by foundation, electrical, plumbing, roofing, or HVAC professionals depending on the home. A leaseback may also be negotiated during this time.

In addition to the inspections, you will deliver the contract to your lender so that they can begin the formal loan process. The lender will now be able to give you hard numbers for your interest rate and monthly payment.

During the option period, the buyer may terminate the contract for any reason. The option money will stay with the seller, but the earnest money will be refunded to you, the buyer.

LEASEBACK: Often used when a current homeowner needs more time to secure their future home. The former owners of the home leases back their former home from the new owner on a predetermined rental agreement.
Costs involved during your option period:

OPTION MONEY: Usually $100 paid directly to the seller. This money gives you the right to purchase the property without obliging you to it. Other offers can be submitted to the seller at this time, but none can be accepted during your option period.

INSPECTOR FEES: From $275-$400 depending on who you hire and the size of the home

TERMITE INSPECTION: Usually about $75

Engineer/electrical/plumbing/roofer/HVAC/ fees: This cost depends on how extensively you would like things checked out and can sometimes be negotiated by the seller.

Step 10: Loan Process

After delivering your contract to your lender during the option period, they will begin the formal loan process. They may require that you provide additional information depending on what you provided during the pre-approval process and how much time has elapsed from your initial meeting. Once they have the required documentation, an appraisal will be ordered. The appraisal is a third party valuation of the home to determine if the property is worth what the buyer is going to pay. From here, your file will go to underwriting where your loan is officially approved. Your most important job during the loan process is to respond quickly to the lender’s requests so that the loan process moves along smoothly.

Step 11: Shop for Home Insurance

Once you have made it through the option period and the loan process has begun, you will need to acquire home insurance for your new home. Another benefit of working with JH Residential and Private Label Realty is our affiliation with a great home insurance company, AmeriFirst Insurance Agency. They will be able to get you a quote and help you compare plans so that you can obtain the best plan to suit your need.

AmeriFirst Insurance
Brooke Murphey
512-524-8808

Step 12: Transfer Utilities

Around a week before the closing date, you will need to call all the applicable utility companies to have them transferred into your name. We will provide you with a list of all the utility companies that service the home.

Step 13: Schedule a Walk through of the home

A few days before the closing date, we will schedule a time to go through the home again to ensure that all the necessary repairs were completed or, if a new home, that the builder completed the punch list. We also want to ensure that the home is in the same condition as when we first viewed the home.

Step 14: Check HUD-1 Statement

A day or two before the closing date the title company will send out the HUD-1 Statement to all parties. We will review this to verify that all the numbers are correct as agreed upon in the contract. This will also show your “cash to close” number. This is the amount of money that you will need to bring to closing to purchase the home. The title company requires that this amount be delivered in the form of a cashier’s check.
HUD-1 Statement: Stands for Housing of Urban Development Settlement Statement. A form used by the closing agent at the title company that itemizes all charges imposed upon a borrower and seller for a real estate transaction. It gives each party an itemized list of their incoming and outgoing funds. Fees associated with the transaction but paid prior to closing are also included in the HUD. They are normally marked “POC” for Paid Outside Closing. Click here to see a copy of a HUD-1 statement.

Step 15: Show up at closing date ready to sign a lot of papers!

Step 16: Congratulations! You may now move into your new home!