Buying a Home
For most people buying a home is the biggest investment
they will ever make and it is a decision that requires a lot of thought. This
is the place where you will bring up your children or perhaps this is where you
will retire.
The better prepared you are, the less confusing the buying process will be, the
intent here is to provide you with the information you need to make an informed
decision. If you have any questions just give me a phone call or drop me an email.
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Homebuyers Manual
If you would like a free copy of the Homebuyers Manual give me a call or email
with your name and address and I will mail it to you.
Importance of Getting Preapproved
Most lenders can prequalify you for a mortgage over the phone. Based on general
questions about your income, debt, assets, and credit history, lenders can
estimate how much mortgage you qualify for. However, being prequalified and
preapproved are two different things.
Preapproval means that you have applied for a mortgage, filled out the mortgage
application, received your credit report, and verified your employment, assets,
etc. When you are preapproved, you know exactly what the maximum loan amount will
be.
A prequalification letter is not verified and in essence, does not count for much
if you are competing with other buyers who are preapproved. When you are preapproved,
you and the seller know exactly how much house you can afford. It gives you credibility
as an interested buyer and lets the seller know immediately that you will qualify for
a loan to buy their property.
Get prequalified/preapproved
GMAC Premier Service
I am a GMAC Premier Service provider. You will be provided with a certificate
guaranteeing the superior service that you will receive. On completion of your
escrow the independant Premier Service administrator will ask you to complete a
report card on how well I lived up to the Premier Service guarantee. My continued
certification depends upon these report cards so it is very important that I do a
good job.
Do Not Make Any Major Credit Purchases
If you are thinking about buying a home or in the process of buying a new home
defer any credit purchases until after the close of escrow. Your mortgage preapproval
is subject to a final evaluation of your financial situation and you could find that
you no longer qualify for the amount needed.
Every $100 per month you spend on a credit payment could cost your around $10,000 in
home eligibility. A $300 per month car payment could reduce your loan eligibility by $30,000.
Even if you believe you have sufficient funds, circumstances could change to the point
that you wish you had not made that credit purchase.
Earnest Money Deposit
After you have come up with an offer price, the next step is to determine how large
a deposit you want to make with your offer. You want the "earnest money deposit" to be
large enough to show the seller you are serious, but not so large you are placing
significant funds at risk.
If you put down a large deposit the lender may want to know how you came up with the
funds. You might have to provide a copy of a canceled check along with a bank statement
showing you had the money to begin with.
Although significant problems are the exception rather than the rule, they do occur.
The less money you have tied up in a deposit, the fewer funds you have placed at
risk.
On the other hand during a hot market there may be multiple offers on the property.
A large deposit may impress a seller enough to accept your offer even when up against
a slightly higher offer.
Putting Contingencies in Your Offer
You may want to write some safeguards into your purchase offer so that you can cancel
the contract without penalty if things don't work out as expected. These are called "contingencies". Without contingencies you could find yourself forfeiting your
earnest money.
If you have a house to sell you might make closing your own sale a condition of your
offer. If you do not include this as a contingency, you could be stuck making two
mortgage payments instead of one.
You probably need a mortgage to buy your home, a condition of your offer should be
that you successfully obtain suitable financing. It would be wise to include a
contingency that the property must appraise for at least what you agreed to pay for
it. Yet another contingency should be that the property inspection report is satisfactory.
What Does Escrow Do?
Escrow has the role of a neutral third party. The escrow company follows the
instructions that were agreed upon by the buyer and seller (basically the purchase
contract) and when everything is in place the seller is given his money and the buyer
receives the title to the property.
The escrow company employs the services of a title company to verify that the seller
is the clear legal owner of the property. The title company issues title insurance
which protects the buyer against loss due to a subsequent discovery that there is a
problem with the title.
Importance of Inspection
As a buyer, you are entitled to know exactly what you are getting. Don't take for
granted what you see and what the seller or the listing agent tells you. A
professional home inspection is something you must do, whether you are buying an existing home or a new one. An inspection is an opportunity to have an
expert look closely at the property you are considering purchasing and getting both
an oral and written opinion as to its condition.
Beforehand, make sure the report will be done by a professional organization, such
as a local trade organization or a national trade organization like ASHI (American
Society of Home Inspection). Not only should you never skip an inspection, but also
you should go along with the inspector during inspection. This gives you a chance to
ask questions about the property and get unbiased answers. In addition, the oral
comments are typically more revealing and detailed than what you will find on the
written report. Once the inspection is complete, review the inspection report carefully.
The inspection must be written in as a contingency when you present your offer if
you do not approve the inspection report, then you don't buy. Most real estate
contracts automatically provide an inspection contingency.
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