Home Buying Tips

When shopping for a home, list the Top 10 features (fireplace, fenced-in yard, new appliances, etc.) that are most important to you. Establishing this criteria early will save time shopping for inappropriate homes and keep you from buying a home on a whim. Your top reason for buying a home should be the value you are getting. That being said, some of your top 10 amenities could be sacrificed if an incredible value becomes available.

This is often the most thrilling part of the process. But, if you’re not careful, it can get out of hand. The best way to proceed is limit the number of homes you look at in a single day. Visiting too many homes back to back will make it difficult to remember one house from another. It’s a good idea to create a checklist of homes to look at, and check them off as you visit them. Not only is this helpful in reminding you of which homes you visited, it allows you to eliminate homes from your search more quickly. Remember, communication is crucial. Explain to your agent why you like or don’t like a particular house. The more you communicate with your agent about your preferences, the better he/she will be able to find exactly what you’re looking for.

After narrowing the search to 2 or 3 homes, your agent will do whatever research is necessary to aid you in making your decision. Ultimately, however, it is your decision. Some tools that can help you make that final decision include school reports (if you have or are planning on having children), statistical information from the local chamber of commerce, future zoning or road expansion from local planning offices, etc. Whatever the factors of importance are to you, have your agent help locate that information.

Once you have selected a single home to focus on, your agent will conduct a comparative market analysis on that property. This involves determining “fair market value” by looking at what other buyers were willing to pay for properties similar to yours in the same neighborhood or area.

One of the biggest decisions to make before putting a contract on a home is how to finance the purchase. Lenders aggressively compete for your mortgage business in a variety of ways. Today, you can apply for a loan over the Internet or even use a mortgage broker to shop for your loan with hundreds of lenders. When choosing a lender, compare fixed rates to fixed rates, not fixed rates to ARM’s, etc. Create a chart that lists different types of loans, fees, and at least five mortgage providers (including a mortgage broker).

Selecting a lender is a matter of personal preference. Many people often shop around, looking for a lender that offers the lowest rate. More often, however, people will choose a lender based on a referral from an agent or friend. Most lending institutions will offer the same basic programs, such as FHA, VA, conventional fixed rate, etc.; and most will meet or beat another lender’s rates. What usually separates one lender from another is their “niche” product. An example would be a lending institution that specializes in low down payments, as compared to another that specializes in self-employment financing. Most agents will be able to point you in the right direction based on your particular situation.

Once you select a lender, you should speak with a loan officer as quickly as possible. At this point, there is one thing you should know. Pre-qualifying means absolutely nothing. All pre-qualifying does is determine the amount of the loan you could qualify for based on factors such as your credit, salary, etc. It does not guarantee that a lender will actually loan you the money. It’s more important to get PRE-APPROVED. Pre-approval means that your application has been submitted to a lender who is willing to extend you a specific loan amount, pending a property and appraisal. Being pre-approved lets you know that you won’t be denied for a loan, and it also provides you with leverage to negotiate the purchase price of a home with the seller. From the seller’s standpoint, a buyer who’s been pre-approved is a buyer with “cash-in-hand”, who’s serious about purchasing the home with little worry about the deal falling through. Just be sure that once you’ve been pre-approved, you have a clear understanding of what your total estimated payment will be and the estimated cash you will need to complete the loan (from beginning to closing).

Now that you know the “fair market value” of the home you like, it’s time to determine how much you are willing to pay. Establishing this prior to making a formal offer helps define your personal limits. You should determine how much to offer, how much earnest money you will put down, how much of the closing costs you will ask the seller to pay, when you plan to settle, and what inspections you plan to have conducted. Your agent will offer great advice for structuring your offer. Remember to ask your agent about contingencies and their importance. If you don’t fully understand something, be sure to clarify it.

After presenting your offer, a seller will do one of three things: Accept your offer outright, reject it, or counter it. It’s possible for the counter process to go back and forth several times, so be flexible during this phase. Determine what’s negotiable and non-negotiable. Be willing to give a little on things of lesser importance to you. This will help the negotiating process immensely. The main thing to remember is to stay cool and objective. Everyone has the same goal in mind: to complete the transaction.

Make sure that the contract you put on a house allows you to arrange financing, inspect the home and negotiate any problems that you uncover. Ensuring that the contract you sign will minimize potential legal battles will let you swim in your new pool with your family and neighbors instead of with the sharks.

This is a very necessary process, used to ensure that your new home is free from defects that could potentially cost you thousands of dollars later to repair. Home inspections will often reveal problems that you can have the seller correct before agreeing to purchase the home. This is known as a contingency.

Most offers are usually contingent offers. This means, that the offer is contingent on another factor, such as a favorable home inspection or the ability to obtain insurance. In general, contingencies are safeguards for both buyers and sellers, but should not be overdone. In addition, it is important to meet all deadlines and that all contingencies are met exactly the way the offer describes. Your agent is responsible for making sure contingencies are written correctly.

Which type of loan fits your particular needs? Are you a first home buyer or are you moving to a larger home? If you’re planning to own for a short time, an ARM may be the best type of loan. If you’re shopping for your dream home or you plan to raise a family, a fixed rate mortgage may be more suitable for you. If you choose an ARM, the index should be based on the Cost of Funds Index if rates are increasing, and Treasury Bills if they are decreasing. The COFI’s are less volatile over time than T-Bills. Find out what the teaser rate is and what the real rate would be.

Whichever loan you choose, make sure that you examine closing costs. If you are required to have a mortgage escrow account and private mortgage insurance, make sure you understand the terms and cancellation procedures. Also, make sure there are no prepayment penalties so that you can utilize an accelerated mortgage plan. A good mortgage reduction plan can save you tens of thousands in interest costs, and shorten your loan term, with only small extra principal payments. If you experience negative changes in your job, health, or marital status, you can revert to the standard payments in your mortgage contract.

The sales contract will decide who gets to choose the attorney to represent the sale. This is normally the buyer’s decision. If you don’t have a particular attorney or title company in mind, your agent can recommend one. The attorney is responsible for ordering a survey, title insurance, conducting a title search, and drawing up all of the documentation. They will also conduct a settlement. It is important to note that the attorney does not represent the buyer or the seller. They represent the transaction itself. Their job is to make certain that all of the terms previously agreed upon have been met. If any problem(s) were to arise, the buyer and seller would need to retain separate attorneys to resolve the issue(s).

To protect both yourself as well as the seller, it is a good idea to purchase a home protection plan. A home warranty, or home protection plan, is a service contract that protects homeowners against the cost of unexpected repairs or replacements on major systems and appliances that break down due to normal wear and tear. A negotiable contract between the buyers and sellers which do not overlap or replace homeowner’s insurance policy, this type of warranty can save the new homeowner lots of headaches, as well as put seller’s fears to rest. The warranty covers mechanical breakdowns, while insurance typically repairs the related damage, for example: if a hot water heater bursts and destroys a wall in your home, the warranty would repair the water heater and your insurance would pay to fix the wall.

This is the day you “sign your life on the dotted line”. At this point, you will be signing all of the loan documents, which can seem never-ending. During the settlement, the attorney should be able to explain every document to you in a satisfactory manner. Do not ever feel intimidated. If you come across something you don’t understand, don’t sign. Your agent will help you understand everything. If you like, you can request blank copies of the documents you will be signing in advance so that you can carefully review them. You will decide at the settlement whether your want owner’s title coverage or just lender’s. You will have to present whatever down payment and closing-cost funds you were expected to pay. This check must be certified as personal checks are not accepted.