1. Find a Buyer's Realtor/Agent
3. Look at Homes for Sale
- A buyer's agent will represent only you and have a fiduciary responsibility to look out for your best interests.
- Buyer's agents may ask you to sign a buyer's broker agreement (not common practice), but it is the seller who pays the commission.
- Interview agents until you find an agent you trust and with whom you feel comfortable.
- Common questions:
- How long he/she been a realtor/agent?
- Is he/she part-time or full-time realtor/agent?
- How many homes have he/she sold in the past 6 month or a year?
- Highly recommended to find a local realtor who knows the area you are interested in.
2. Get Pre-Qualified / Pre-Approved
- Order a free credit report online and fix mistakes, if any.
- Ask your agent for a referral to a mortgage broker, but also compare rates offered by your own bank and / or credit union.
- Ask the lender to give you a loan preapproval letter, which means it will verify your income and pull a credit report.
- Loan preapproval letter is required to submit an offer to a home.
- Determine your maximum loan amount, but choose only a mortgage type that you understand and a payment level with which you feel comfortable, which may very well be less than the maximum for which you are approved.
- Financial advise - keep the monthly loan payment at 30% (1/3 of your total monthly income) of your income, in order to have a well-balanced financial plan.
- To better understand your up-front cost, closing costs, ask your load officer for a good faith estimate.
- Good faith estimate - breaks down your monthly payment and you'll see everything that is included (not including utilities and other monthly bills).
- Use web-sites like ZipRealty or MLS Listings to search for homes. You can also ask your agent to find homes for you.
- Check crime-rate from multiple sources.
- Setup alerts in area you are interested in to get news updates.
- Zillow let's you check the home value, historic price, and market trend and more.
- Ask your agent to give you MLS print-outs of comparable sales in your targeted neighborhood (aka: Competitive Market Analysis CMA).
- Competitive Market Analysis - gives you an idea of recently sold similar nearby homes; i.e. how much they were listed for vs. how much they were actually sold at, which provides a better range to narrow your bargain for negotiation.
- Consider all homes on the market, including fixer-uppers, REOs, foreclosures, short sales and those overpriced homes with longer Days On Market (DOM).
- Take detailed interior and exterior pictures of the visited homes that appeal to you.
- Consider writing seller's market offers in sellers markets and buyer's market offers in buyer's markets.
- Select a home offer price based on the amount you feel a seller will accept or counter.
- Prepare for multiple offers if the home is considered desirable in a hot location.
- If your offer is rejected, ask your agent to explain why and don't repeat that mistake with your next offer.
- Items you will need to make an offer:
- Pre-approval letter from your Loan Officer.
- Earnest Money Deposit minimum of $1,000; the more Earnest Money Deposit you put in, the more serious your offer looks.
- Proof of funds available for down-payment; i.e. bank statement.
- Closing Costs Breakdown:
- Excludes down-payment and Earnest Money Deposit
- HOA Fee (applies to ONLY Condo and Townhomes)
- Appraisal Fee
- Inspection
- General Inspection
- Pest Inspection
- Roof Inspection
- Document Preparation Fees
- Credit Report Fee
- Loan Origination Fee
- Loan Discount Fee (optional, if buyer wants to pay lower rate for a fee)
- Primary Mortgage Insurance PMI (applies if down payment is less than 20%)
- Title Changes Fee
- Taxes
- With impound - collected 50% (6 months taxes) + title fees
- Without impound - not allowed for less than 20% down-payment
- Home Insurance
- 1st year insurance is paid up-front, then next year's annual amount is collected monthly as you go
- Home Warranty
- Sample Reports that Help better Prepare You:
- Purchase Agreement (Contract)
- Settlement Statement (HUD-1)
- Inspection Report
- Pest Report
- Expect the seller to issue a counter offer.
- If the seller counters at full price, continue to negotiate.
- During offer negotiation, share personal information about your family to give the seller a reason to care about you.
- When your offer is accepted, deposit your earnest money check with the appropriate party.
- This is normally done at a Title company.
- Do not ever make your check payable to the seller, earnest money is always paid to the title company.
- Your offer should contain contingencies that will return your earnest money deposit to you if you cancel the contract.
- Your agent or transaction coordinator will open escrow and title, if the listing agent hasn't already done so.
- Ask for the escrow officer's name, phone and escrow file number.
- Give this information to your lender and your insurance agent.
- Your lender will require an advance payment for the appraisal.
- Sometimes, the lender will order the appraisal themselves.
- If you receive a low appraisal, discuss options with your agent.
- Ask for a copy of the appraisal.
- Further negotiate the price based on appraisal.
- Lenders may ask for additional information.
- Do not make home buying mistakes such as altering your financial situation while in escrow.
- If you made a full cash offer, changing into 30 year mortgage makes a huge difference.
- When the file is complete, the lender will submit it for final underwriter approval.
- Read and question items you do not understand on the TDS, Seller Property Questionnaire, natural hazard report, pest inspection / completion and other documents such as a preliminary title policy.
- Realize you have 10 days to cancel if lead paint is a health hazard.
- Read every document in its entirety; ask questions about all seller disclosures.
- Order your homeowner's insurance early.
- Sometimes previous claims by a home owner can make it difficult to get insurance.
- Get replacement coverage.
- Hire a reputable home inspector.
- Get a quote from multiple inspection companies, to better understand the price range.
- Bring a home inspection checklist with you.
- Attend the home inspection.
- Take pictures of your things you find yourself.
- Questions to Ask from Home Inspector:
- What does your inspection cover?
- How long will the inspection take?
- Choose an inspector who carries "Errors and Omissions" coverage, in case an inspector misses a major issue.
- Do you offer to do repair or improvements based on your findings?
- What type of inspection report do you provide and how long will it take to receive the report?
- Will I be able to attend the inspection?
- Does the house meet "Up-to-Code" condition?
- How bad is a issue?
- How soon the problem should be repaired?
- How much will it cost?
- If the home inspection turns up health and safety issues, issue a request for repair by asking the seller to address those issues or give you a credit for them.
- Realize no home is perfect, and the inspector will find faults.
- Normally inspectors also provide an estimated cost of repair.
- Based on how much the repair cost is, you can use it to further negotiate the price down and/or have it all fixed before closing the escrow.
- Be reasonable.
- By default, California C.A.R. contracts give you 17 days to remove contingencies.
- Make sure your loan is firm and the appraisal is acceptable before removing your loan contingency.
- If you do not remove contingencies, the seller can issue a request to perform and then cancel the contract, on top of demanding your deposit.
- Do not pass up doing a final walk-through.
- Inspect the property to make sure it's in the same condition as when you agreed to buy it.
- If you find a serious issue, address it now before you close.
- In southern California, you will sign escrow documents shortly after opening escrow.
- In northern California, you will sign escrow documents along with your loan documents near closing.
- Bring a valid picture ID.
- Bring a certified check payable to escrow.
- Expect escrow to pad the amount, so you will receive a refund after closing.
- Your property deed, seller's reconveyance and deed of trust will record in the public records.
- Title will notify you and your agent when it records.
- After recordation, unless your contract specifies otherwise, the property is yours -- change the locks immediately.
- Be sure to change all your door-locks.
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