What You Need to Know to be a Great BUYER!
1.) Obtain a pre-qualification, or better yet, pre-approval for a purchase loan: There are two reasons why pre-qualification is important. One, you want to have a good idea what payments will be for a certain priced home to see if you are comfortable with the expense. Two, you need to know what maximum price of home the mortgage banks will allow given your income, expenses, down payment and credit score.
The basic differences between a pre-qualification and pre-approval is as follows. Loan pre-qualification is a simple process in that it only takes into account very basic information regarding your financial status usually based upon verbal statements and a credit report.
A pre-approval is a more in depth procedure. The mortgage bank will require many details regarding ones income, expenses, assets, debts, time on the job, credit history and more. In addition, much of this information will have to be verified to the mortgage lender by thirds parties in writing. This pre-approval will give one a more exact amount that one can qualify for, and will give a buyer a stronger negotiating position compared to a buyer that may just a have a pre-qualification.
2.) Define Your Wants and Needs in a Home: Now that you know the price range of the home you can afford, You can now start to plan what you need and what you want in a home. Determine your needs first such as: number of bedrooms, commute drive time to work, neighborhood safety and schools if you have children, downstairs bedroom if a parent is living with you etc. Then outline your wants assuming you can satisfy your needs in your price range. Typical wants may be; a view property, newer versus older, 2 car garage versus 3 care garage etc.
3.) Select a Realtor: Yes, I am a Real Estate Broker so I am partial to using a Real Estate Agent in searching selecting and buying a home. The reasons are many, but I will run down a short list here. a.) a good to great Realtor will assist you in making intelligent decisions for steps 1. and 2. above. Most good Real Estate Agents will know the various loan programs that are best suited to your circumstances, and can refer you to several great mortgage lenders and banks. A good and honest Real Estate Agent will also advice you on the pluses and minuses of various neighborhoods, schools, deferred maintenance that you may not notice, and much more. They can also set you up with powerful home search technologies, let you in a multitude of homes at your convenience, conduct tough negotiations to get you the best possible price, oversee the disclosure paperwork and inspections, and more. There's a lot that's involved so make sure you interview several Real Estate Agents to make sure they are experienced, productive and knowledgeable. By the way, your Real Estate Agent services are paid by the Seller in piratically every transaction.
4.) The Home Search Process: After you selected your Realtor as outlined above, the best and most efficient way to begin the home search process is to have your Realtor set you on on a custom computerized assisted home search that will scan the entire market for homes everyday seeking out the candidates that meet your basic needs. After preview and study on your part, your Realtor will set up various tours to go preview the neighborhoods and inspect the inside of these selected homes.
5.) Purchase Offer and Negotiations: Here is where a good Realtor can save you lots of money. Your agent will ensure that the written contract meets all the legal requirements according to Orange County and California real estate codes. Your agent will represent your best interests, while the Sellers agent will represent the Sellers best interests.
A typical purchase contract in California will include the following details: legal description of the property, offer price, down payment, financing arrangements, amount of the deposit, list of fees and who will pay them, inspection rights, who will handle the escrow, closing date, and any relevant contingencies. Remember that the legalities of this phase are very important. If you have any questions or concerns, they need to be addressed at this time and added to the purchase offer contract if appropriate.
After the offer is presented, the Seller has one of three choices. Reject the offer, Accept the offer, or generate a Counter Offer to the Offer. If there is a Counter Offer, here are some of the things that you and your Realtor may have to negotiate: the price, Financing, Seller paid Closing costs, Seller paid Repairs that need to be done, occupancy time frame and more.
The key to successful negotiating is keeping in mind that the end result must make both the buyer, and the seller happy. Otherwise, negative feelings will persist throughout the remainder of the process and someone may walk away feeling that they were not treated fairly.
6.) Due Diligence and Inspections: After your offer has been accepted, your agent will supervise the coordination of all necessary inspectors and serve as your advocate when working with the inspectors. Your agent will make sure that the inspectors have access to the property at the appropriate times to perform their inspections.
For instance, the property will need a thorough examination. Working with your lender, you may need to have a formal appraisal and a survey done for the property designated in the contract. A property inspection, a foundation inspection, and an environmental inspection may also need to be completed to make sure that the property is up to the standards set forth in your written agreement. If there are issues or inconsistencies brought to light during this time, it may delay or even nullify the contract depending on the contingencies set forth in the contract.
Your agent’s experience in this area will be invaluable in making sure that everything is completed on time and in a professional and legal manner.
7.) Closing and Move-in: As the closing date draws near, your real estate agent will contact the escrow company and your lender to make sure that all the necessary documents are being prepared, and that they are complete, accurate, and delivered in a timely manner. Your agent will also need to confirm that the documents will be delivered to the correct location so they can be reviewed and that they will be ready for the appropriate closing date.
The Escrow company will notify you exactly how much will be needed in order to close escrow. Ensuring that each closing document is ready and available will enable you to have a quick, easy closing.
Sellers sometimes pay for a portion or all of the closing costs, depending on local market conditions, terms of the purchase contract, and the seller’s cash and timing considerations. Any such concessions should be acknowledged in writing. Most lenders will allow a credit from the seller to the buyer for the non-recurring closing costs. However, they usually won’t allow a credit that reduces the amount of the buyer’s down payment or any of the buyer’s recurring costs, such as expenses for fire insurance premiums, PMI, or property taxes.
The actual “Closing” of escrow refers to when the ownership of the property is legally transferred to the buyer.
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