Assembling a Home Buying Team

In this topic, you'll learn:

• The role of real estate agents.
• Considerations when choosing a lender.
• Other team members, from inspectors to lawyers.

Especially if you're making your first home purchase, it's important to understand who will help you in the process. From real estate agents to lenders, assembling the right team can help you find the right home - and avoid the stress of unnecessary surprises.

Real Estate Agents

If you choose to use a real estate agent, your family and friends can be a great source for recommendations. Buying a home can be stressful, so be sure to interview two to three agents before making your decision. You'll want someone who understands your needs and is experienced enough to guide you through the entire process.

It's also important to know the difference between a real estate agent and a REALTOR®. The main difference is that REALTORS® are members of the National Association of REALTORS® and must subscribe to their Code of Ethics. REALTORS® are also subject to the oversight of the association. Real estate agents are simply salespeople who are qualified to sell homes.

When a real estate agent is selling a house, they're acting in the interest of the homeowner, not the buyer. When working with an agent, some home buyers choose a "buyer's agent," an individual who exclusively represents the interest of buyers. Since real estate agents are paid by the home seller, there's no cost difference to the home buyer.

Your Lender

You may be very familiar with a particular financial institution, which is probably a good place to start your search for the right mortgage lender. Don't discount other sources, though. First-time homebuyers in particular may qualify for government loan programs and low-income buyers may qualify for assistance from nonprofit organizations.

Assuming the same mortgage loan amount, type of mortgage, and term of repayment, it's helpful to compare at least three lenders' mortgage programs within a 60 day time period on the following factors:

• Down payment requirements
• Interest rate (APR)
• Other costs and fees
• Prepayment penalties

For example, if you're looking for a $200,000 fixed-rate mortgage that's paid over 30 years, comparing each of the points above will help you understand the actual differences in cost. In some cases, a lender with a lower interest rate may have higher fees that actually increase your total cost.

The Home Inspector

Once you've selected a house and made an offer, you should have it inspected by a professional home inspector, which will cost between $250 to $300.

The inspector will examine the house's structure and mechanics. The structural inspection should include the foundation, roof, doors, windows, ceilings, walls, and floors. The mechanical inspection should include plumbing, electrical systems, heating, air conditioning, insulation, ventilation, and septic systems. It's impossible to predict all of the costs you may incur when owning a home, but the inspector will alert you to things that need repair or that may cause long-term issues if not corrected. 

Be sure to accompany the inspector during the home inspection - he or she can likely offer a great education on your potential home. Take the opportunity to gain knowledge of major systems, appliances and fixtures, learn maintenance schedules and tips, and ask questions about the condition of the home.

The inspector creates a written report listing any issues and may also give you a list of recommended repair companies if needed. If there are significant issues with the home, it may be best to back out of the purchase. If repairs are needed, those costs can be helpful in negotiating the purchase price of the home or you could ask that the repairs are made prior to your purchase.

Other Team Members

Here are some of the other individuals who may play a role in your home purchase:

• Escrow Officer. This person keeps the original purchase contract and other documents and holds your earnest money. This may be your real estate agent if you have chosen to use one, your attorney, an escrow company or a title insurance company.

• Title Insurance Officer. This person reviews the title of the home you want to purchase to ensure there are no liens against the property, to determine what the taxes are and if they have been paid, any deed or zoning restrictions, and what, if any, homeowners' association dues are required.

• Appraiser. This person determines if a home's value is sufficient for the loan request. The value is determined by more than a structural inspection. The appraisal also takes into account the home's market value based on what other similar homes in the area are selling for and what it would cost to re-build the house from scratch.

• Surveyor. This person assesses the boundaries of the property and outlines the location of the residence, fence lines, and any improvements that have been made to the property such as a deck or pool to be sure they do not go over the borderline of your neighbors' property. A surveyor will also point out any established easements, access to any public right of way and determine if everything is up to code.

• Insurance Agent. Communication with an agent is the key to finding the policy that protects your new home as well as your pocketbook. It's key to sit down with a few insurance agents to discuss all of the options, including whether or not flood insurance may be needed. Lenders will set minimum insurance requirements as part of the mortgage agreement.