| Keys to Smart Home Buying
Buying a home is one of life's most important investments and exciting
adventures. Even experienced buyers, however, can find this complex
process a bit overwhelming. We will guide you every step of the way.
In addition to the crucial step of locating and presenting properties
that match your search criteria, we will help you along the path between
"I want this house!" and "I own this house!"
You should start your search by determining your price range, and
how much can you afford. While lenders use different formulas for
arriving at this figure, a general rule of thumb is that you should
spend no more than 28% of your gross monthly income on housing costs
or PITI (principal, interest, taxes and insurance), and no more
than 38% on combined total monthly house and other long-term debt
payments. However, each person's financial picture is unique and
we'll be happy to put you in touch with a lender we trust to evaluate
your buying power.
Understanding the Asking Price
Many factors influence the price that a seller expects to get for
their home. While only you can decide how much you feel comfortable
offering for a property, we can gather critical information for
you regarding the factors that impact how much you should consider
paying for the home.
These factors include:
the home has been on the market
If the price
has been reduced
for other comparable homes in the area
are multiple offers
that might be included in the sale - furniture, hot tub, etc.
to sale price ratio," an indication of how competitive the
market is for homes in this area.
Why the seller
seller is offering an assumable loan or financing
Getting Your Mortgage Application Started
Being pre-approved by a lender can put you in a much stronger negotiating
position, because it shows the seller that you are a committed buyer,
financially capable of buying the property, and more likely to close
on the property. Keep in mind that pre-approval is different from
pre-qualification. Pre-qualification is merely an estimate of what
you may be able to afford. Pre-approval occurs when the lender has
reviewed your credit and believes that you can finance a home up
to a specific amount. However, neither pre-approval nor pre-qualification
represents or implies a commitment on the part of a lender to actually
fund a loan.
Here are some of the current documents you'll need to get started:
W-2s or 1099s
usually for two years
of businesses owned (if applicable)
support payments (if applicable)
Financing Your New Home
The financing process can take anywhere from 10 to 90 days, but
typically runs 30 to 45 days. We'll be involved throughout the process
to help it run smoothly. The basic timeline for what will happen
along the way is as follows:
the completed application and any required supporting documentation
to the lender
orders an appraisal of the property, a credit report, and begins
verifying your employment and assets
provides a good faith estimate of closing and related costs, plus
initial Truth in Lending disclosures
evaluates the application and your supporting documents, approves
the loan, and issues a letter of commitment
the closing loan documents and the loan is funded
sends their funds to escrow
documents are recorded at the County Recorder's Office, the seller
is paid, and the title to the home is yours
Negotiating the Offer and the Contract
You may make your offer subject to certain terms or contingencies,
including securing of financing or perhaps the sale of your current
home. You may also make the contract subject to various inspections
by both you and professional inspectors. Most contracts include
some standard provisions, such as property taxes, insurance costs,
utility bills, and special assessments, which will be prorated between
buyer and seller. Others outline what happens if the property is
damaged before closing, or either party fails to go through with
the sale. We will review with you every aspect of your offer. Together,
we will plan a strategy for getting the most advantageous terms
for you - the buyer - at the price you are willing to pay for the
Real estate contracts often contain contingency clauses that allow
buyers to inspect the property. Certain inspections are required
by lenders and others are a matter of observation and what is particular
to a region or area. Which party pays for these inspections is negotiable.
The two most common types of inspection are:
Wood Destroying Pest and Organisms (Termite) Inspection
This inspection identifies existing or potential pest, dry rot,
fungus and other structure-threatening infestations or conditions.
The initial inspection fee covers only those areas which are accessible
to the inspector. Inspections of inaccessible areas cost more and
are subject to an estimate by the inspector. These inspectors must
be licensed and can give estimates to correct noted problems, can
make the suggested repairs, and can certify that the work has been
General House Inspection
This inspection identifies material defects in the essential components
of the property based upon a noninvasive physical inspection. There
are no licensing requirements for someone to be a home inspector.
These inspectors are not allowed to give estimates to correct noted
problems, nor can the inspector perform any of the repairs.
Title Search Process
A title search spells out who has the right of ownership for a property.
It is considered "clear" if there are no claims or liens
against it. In order to make sure nothing will prevent transfer
of the property to you, a title company will conduct a title search
and prepare a preliminary title report that indicates what recorded
matters affect the title to the property and if the title insurance
company is willing to insure the title. At the close of escrow,
the title company will issue an Owner's Policy of Title Insurance
to protect you against losses that might arise from covered claims
on the title. For more information, click here.
Preparing For The Closing Costs
A home purchase is a complex transaction involving many parties
and associated fees. In addition to your deposit and down payment,
there are a variety of other costs involved in the close of escrow,
fees, appraisals, and reports
notary, and escrow fees
fees and stamps
The lender will provide a good faith estimate of these costs prior
to the close of escrow, so that you will know in advance what to
expect. Some of these costs may be negotiable items with the seller.
Naturally, we'll walk you through each item in your good faith estimate
to make sure you understand every detail.