Buying
Decide To Buy
Owning your own home is part of the American dream. Whether this
is your first purchase or time to trade to a different home that better meets
your needs, this decision deserves careful consideration.
Why Do You Want To Buy A Home? Are you tired of
paying rent? Have you outgrown your current home – do you need more bedrooms or
a home office? Would you like a larger yard, or are you tired of yard work?
Would you rather live in a different neighborhood? Do you want to be closer to
work, school, recreation, or family? Having a good idea of your reasons will
help you choose the home that best “fits” your needs.
Has Your Income Grown? Take advantage of your
new good fortune – Historically, home ownership has been a very good
investment. Also, home ownership can provide a means of “forced savings”: every
month, part of a fully-amortized mortgage is applied toward paying down the
principal part of your loan, thus building your equity over time in addition to
any market appreciation in your area.
Can You Afford To Buy A Home? Experts recommend
spending between 33-40% of your income on housing. If you’re renting, you might
be shocked when you add up what you’ve spent on rent over the years. Many
people find the tax advantages of home ownership make it less expensive than
renting!
Down Payment Blues? While there may be
advantages to making a down payment, many loan programs today allow you to buy
your home with little or no down payment.
Do You Need A Tax Break? You may be pleasantly
surprised to discover that you could afford to spend more money each month on a
larger mortgage, because the tax benefits from your mortgage can actually lower
your income taxes!
Get Organized
Now that you’ve decided to buy real estate, you may be getting
excited about looking at properties. But before you go shopping, do some
additional homework to help avoid disappointment and frustration later.
Start a Green File: A Green File should contain
all of your important financial documents. Start by making copies of all your
financial statements; bank accounts, investments, credit cards, auto loans,
recent pay stubs and two years’ tax returns. If you haven’t already, start
saving a down payment and extra funds for incidental home buying and closing
costs (i.e., inspections, appraisals, title insurance, etc).
Check Your Credit Rating: Credit scores range
between 400 and 800. 620 + is considered “good”. 680 + is considered “premium”
and may possibly help get you a lower interest rate.
Below you will find the contact information for the 3 major
credit reporting agencies to help you determine your credit rating. Ask your
lender how to improve your credit score if you need to. Going forward, treat
your credit like gold.
Get Pre-Approved By A Lender: There
are two key benefits to getting pre-approved. First, you will know how much
house you can afford. Second, when you find a property you want to buy, your
offer will be better positioned than someone less prepared. Your lender may
want to know some of the following information:
Toe The Line: Now is not
a good time to change careers, move your money around, or buy big ticket items.
Lenders like stability. So if you are considering any major changes, it pays to
meet with a lender and ask them how to proceed before you make any changes! If
you are tempted to buy a big ticket item, consider the following:
A $500 a month debt payment (like a credit
card or auto loan) could lower the amount of home you can afford by about
$83,000! * |
Sell Before You Buy
You may have already started shopping and dreaming about your
next home. Surely you can just put your current home on the market once the
offer on your dream home gets accepted, right? Actually the opposite is true!
When to Buy - When to Sell: Unless you have
considerable financial resources, it could be risky to put an offer on a new
home before your first home sells. In fact, you might lose your chance to buy
your new home if you cannot sell your first home in time or if you do not get
the sales price you expected. You might even have to make payments on both
homes until the first home sells.
Selling a Home Takes Time: It might take longer
than you expect to sell your first home. It can take several weeks just to get
a home listed for sale. It might take another month or two to find a buyer.
Then depending on the lending market and the results of home inspections it
might take another month or two for the buyer to close the transaction. Remember:
Sellers don’t want to wait for you to get your home sold!
Expert Advice Will Help Negotiations: A real
estate agents job is to get you into the strongest negotiating position
possible. Sellers will choose qualified buyers who are ready to close the
transaction quickly and easily, over buyers who are less prepared. If you are
serious about buying, let an agent help you prepare so you can make the
strongest offer possible. Lastly, an agent will help you structure your offer
so you are protected in case things don’t go as planned.
Worried Where You Will Live? This is a common
concern when juggling a purchase with a sale. An experienced agent will have
many ideas to help you. For example, an agent can negotiate a rent-back period
so that you may rent your first home back from the buyer for a month or two
while the help you find and buy your new home. Let a professional help you find
the most convenient and affordable solution to minimize the moving impact on
your lifestyle.
Real Estate Agents Are Valuable Assets: Agents
know the market and can help you prepare your home for sale. They can make
helpful suggestions so that your home looks its best. They can help you budget
for clean-up and any repairs that may help the home sell easily. An agent can
help you decide which inspections should be completed prior to listing your
home for sale. They know how to price homes appropriately so that your home
will not be overpriced and sit on the market for a while without receiving
offers. An agent also knows that you may need them to go the extra mile to keep
both your purchase and your sale transactions going smoothly.
Shop For a Home
Perhaps one of the most enjoyable stages in the process, shopping
for a home is filled with dreams and possibilities. Now to just find the
“right” one!
Time to Go Shopping: Now that you’ve done your
homework, it's time to go shopping. Your checklist of the reasons why you want
to buy a home will keep you focused on homes that will meet your needs. Your
lender’s pre-approval letter will keep you focused on homes you can afford.
Getting to Know the Neighborhoods: You may want
to drive by a number of homes to become familiar with the neighborhoods and
what your money will buy.
Selecting Homes & Making Appointments: Select
the top few homes and have your real estate agent make appointments to go
inside.
Make an Offer: Use our knowledge of the market
to guide your offering price. We can tell you what similar homes sold for, and
we will help you write an offer that is likely to be accepted by the seller.
Some homes are listed at a price that may be lower or higher than the price at
which it will actually sell. From our years of experience, we can help you
understand the possible costs for any deferred maintenance and repairs before
you decide to make an offer. We can help you select a title insurance company
to ensure you can purchase “clear” title to the property and an escrow company
to hold your deposit and ensure your contract terms are met before you buy.
We’ll help you put in safeguards to your purchase offer, such as loan
contingencies and physical inspection contingencies. Since this can be an
emotional situation, it is especially important to have your real estate agent
negotiate on your behalf with the seller.
Escrow, Inspections
& Appraisal
During this stage of the home buying process, you will have the
opportunity to learn a lot more about the property.
What Is Escrow? In a nutshell, escrow begins
when your earnest money deposit and purchase offer is accepted by the seller.
Escrow ends when you become the official new owner, registered in the county
records.
Title Company and Escrow Holder: We can help you
select a title company and escrow holder (often the same company), whose job it
is to act as a neutral third party which holds all instruments necessary to the
sale, including funds and deed with instructions as to their use. The title
company will research the complete recorded history of this property, to insure
that the title is free and clear of encumbrances by the date of closing and
that all new encumbrances are properly added to the title. You will receive a
“preliminary report” that will show current encumbrances and easements. For
example, some properties are subject to CC&Rs (covenants, conditions and
restrictions) which may limit various activities from building to parking
restrictions. There may be recorded easements and encroachments, where others
have limited rights to use your property. We will always explain the title
report to you in detail.
How to Hold Title: How will you own the property?
By yourself, or with someone else? There are at least half a dozen ways to own
property, each with its own legal, estate, and tax implications, particularly
with respect to selling or transferring, or disposition upon death. It
advisable to consult with an attorney or your tax advisor to be sure you select
the best way to hold title.
Inspections: Once your offer is accepted by the
seller, we will recommend professional inspectors to evaluate your home’s major
systems. We will even set the appointments for you. Plan on attending all of
your inspections with your agent and feel free to ask any question that comes
to mind of either the inspector or your agent. During these inspections, you
can learn a lot about how your new home functions as well as anything that may
be wrong with it. Your agent may recommend other inspections, including but not
limited to roof, chimney/fireplace, property boundary survey, well, septic,
pool/spa, arborist or mold. Knowledge is gold.
Appraisal and the Loan Process: Keep in close
communication with your lender, who will let you know when additional documents
are needed to approve your loan application and fund your loan. The lender will
often send an appraiser out to the property and you may pay a fee for this
service. Appraisers are specialists in evaluating properties, based on a
combination of square footage measurements, building costs, and recent sales of
comparable properties, all to make sure you are not paying too much for the
property. Ask for a copy of your appraisal. When you are within two weeks of
closing, double check with your lender to be sure the loan will go through
smoothly and on time.
Close The Deal
This is the culmination of the buying process. You’ve already
started packing, the movers are scheduled……Congratulations! You are now a
property owner!
Final Walk-Through Inspection: A few days before
you take possession of the property, you and your agent will visit the property
together one last time. This final visit ensures that the property’s condition
meets your expectations compared to its condition when you made your offer.
your agent will have a checklist for you to note any last minute details for
the seller to attend to.
Home Services and Utilities: You will need to
change the services and utilities into your name: Your agent can provide you
with a list of phone numbers to call the local utilities and services
providers, to put everything under your name as of the date escrow will close.
If Things Get Complicated: Sometimes everything
doesn’t go according to plan. This is when you really need an experienced real
estate agent. Maybe something doesn’t work in the new house, or the seller
can’t move to their next home as scheduled; there are a lot of variables. They
will have a number of strategies and options to smooth out this transition as
much as possible for you.
Close of Escrow: When your transaction is nearly
completed, the title company will provide you with a “closing statement” that
details all of the financial details of your home purchase (i.e., pro-rations
on property taxes and all the transaction-related costs.) We will go over this
with you to be sure it is accurate. At the last step in the buying process, the
title company will have you sign the final documents, including loan documents
(“deeds of trust”). When everything is complete, the title company will record
the transaction for you at the County Assessor’s Office, and you will become
the official new owner.
Keys: Your agent will coordinate the delivery of
your keys to coincide with the recording at the County Assessor’s Office.
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