Buying a Home

Keys to Smart Home Buying

Buying a home is one of life’s most important investments and exciting adventures, but even experienced buyers can find this complex process a bit overwhelming. As your agent, I will guide you every step of the way. In addition to the crucial step of locating and presenting properties that match your search criteria, I will be helping you all along the path between "I want this house!" and "I own this house!"

The Search Begin

Determining your price range. How much can you afford?

While lenders use different formulas for arriving at this figure, most prefer that you 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 long-term debt payments. However, each person's financial picture is unique and I’ll be happy to put you in touch with one of the many lenders 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, I can gather critical information for you regarding the factors that impact how much you should consider paying for the home, such as:

	How long the home has been on the market?
	Has the price has been reduced?
	The prices other comparable homes in the area have sold for
	Are there multiple offers?
	Other items that might be included in the sale –personal property, hot tub, etc.
	The "list to sale price ratio," an indication of how competitive the market is for homes in this area.
	Why the seller is selling?
	Whether the seller is offering an assumable loan or financing?

Getting Your Mortgage Application Started

Being pre-approved by a lender will 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. Pre-approval is different from pre-qualification, which 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:

INCOME

Current pay stubs

W-2s or 1099s

Tax returns, usually for two years

ASSETS

Bank statements

Investments/brokerage firm statements

Net worth of businesses owned (if applicable)

DEBTS

Credit card statements

Loan statements

Alimony/child support payments (if applicable)

Financing Your New Home

The financing process typically runs 30 to 45 days. I’ll be involved throughout the process to help it run smoothly. The basic timeline for what will happen along the way is as follows:

	You submit the completed application and any required supporting documentation to the lender
	The lender orders an appraisal of the property, a credit report, and begins verifying your employment and assets
	The lender provides a good faith estimate of closing and related costs, plus initial Truth in Lending disclosures
	The lender evaluates the application and your supporting documents, approves the loan, and issues a letter of commitment
	You sign the closing loan documents and the loan is funded
	The lender sends their funds to escrow
	All appropriate 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 that 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. I will review every aspect of your offer and contract with you. 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 property.

Inspections

Real estate contracts often contain contingency clauses that allow buyers to inspect the property. Lenders require certain inspections, 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 infestation 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/or can certify that the work has been completed.

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 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 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.

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.

	Loan origination fees, appraisals, and reports
	Surveys and inspections
	Mortgage insurance
	Hazard insurance
	Taxes
	Assessments
	Title Insurance, notary and escrow fees
	Recording 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, I’ll walk you through each item in your closing to make sure you understand every detail.