|Step 1: Know your price range
- Two good resources are E-Loan's Home Affordability Calculator and Amerisave's How much can I borrow? calculator.
- E-Loan will also provide you with a free credit score. It's a good idea to check this score early on, so you'll have time to improve it by fixing errors or making changes in your finances.
- You'll probably be pleasantly surprised at the amount of money you'll be able to borrow. But before you start house hunting, you should think carefully about how much you should borrow. Here's a good resource for thinking this through.
Step 2: Find a neighborhood
Step 3: Find a home
- Real estate agents are usually happy to show FSBO homes to buyers, since many sellers offer them commissions for finding and assisting buyers. But one of the advantages of buying a FSBO home is that you can often capture much of that commission for yourself simply by finding and visiting the home on your own. Since a buyer's agent's commission on a $600,000 home typically ranges between $15,000 and $18,000, you can save lots of money by shopping on your own.
- Look for FSBO homes at FSBOSonoma.com and Craigslist.org.
- You can also look for homes on Realtor.com and GreatHomes.org. These directories include both FSBO and agent-assisted listings, but their rules won't allow listings to be identified as FSBOs.
- Drive around on Sunday afternoons and look for open houses.
- For more tips, see FSBOPrimer.com.
Step 4: Do research
- Check out other homes on the market and visit as many open houses as you can so that you can get a better sense of market prices.
- If you're buying land, go to the Sonoma County Permit and Resource Management Department and discuss zoning restrictions on the parcel.
- Call an insurance company to verify that the home you want is insurable.
- If you're worried about flooding, ask the seller for a C.L.U.E. (Comprehensive Loss Underwriting Exchange) report for the house.
- If the home is governed by a homeowners association (HOA), ask about monthly fees and CC&Rs. If you're buying a condo or cooperative unit, ask to see the association's legal and financial documents.
- Get a parcel map at Netronline.com for $3.
Step 5: Get a pre-approval letter from a lender
- The letter will say that the lender has researched your income and financial information and is willing to lend you enough money to enable you to buy the house at the price you're offering. Attaching such a letter to your offer strengthens it by reassuring the seller that you'll be able to follow through.
- Be careful when shopping for a loan--there are a lot of bad players in the lending business. The Mortgage Professor recommends using an Upfront Mortgage Broker or an Upfront Mortgage Lender when shopping for a loan. Two good online Upfront Mortgage Lenders are Amerisave and E-Loan.
Step 6: Make an offer
- FSBOPrimer.com has suggestions about how to appraise a property and come up with an offer price.
- If you want to make an offer on a FSBO property, you have these options:
1. You can make an offer through an agent (many FSBO sellers offer generous commissions to buyers' agents).
2. You can make an offer through a lawyer or discount broker. You can pay by the hour, pay a flat-fee, or let the lawyer or discount broker take the commission being offered and rebate most of it back to you.
3. You can make an offer yourself and waive the buyer's agent's commission. Most FSBO sellers will accept a lower offer price if you spare them the expense of this commission. You can purchase downloadable legal forms for $19.95 at Nupplegal.com.
Step 7: Select a title insurance company and escrow officer
- California law says that it's up to the buyer to select one.
Step 8: Make sure you're getting the cheapest loan
- You're under no obligation to get a loan from the lender who issued you the pre-approval letter.
Step 9: Move in