Buyers Tips! Buying your new home is a serious venture. It can be an absolute pleasure or a massive headache. Your house is not just your home, it is a serious investment in the dwelling, the area and your future. When buying a home - you're bound to have many questions. For example, "In what area can I find a home that suits my needs?", "How much money will I need to afford the monthly payments?" and "How long will the home buying process take?" Advice for First-Time Buyers Pre-Qualification: Meet with a mortgage broker and find out how much you can afford to pay for a home. Pre-Approval: While knowing how much you can afford is the first step, sellers will be much more receptive to potential buyers who have been pre-approved. You'll also avoid being disappointed when going after homes that are out of your price range. With Pre-Approval, the buyer actually applies for a mortgage and receives a commitment in writing from a lender. This way, assuming the home you're interested in is at or under the amount you are pre-qualified for, the seller knows immediately that you are a serious buyer for that property. Costs for pre- approval are generally nominal and lenders will usually permit you to pay them when you close your loan. List of Needs & Wants: Make 2 lists. The first should include items you must have (i.e., the number of bedrooms you need for the size of your family, a one-story house if accessibility is a factor, etc.). The second list is your wishes, things you would like to have (pool, den, etc.) but that are not absolutely necessary. Realistically for first-time buyers, you probably will not get everything on your wish list, but it will keep you on track for what you are looking for. Representation by a Professional: Consider hiring your own real estate agent, one who is working for you, the buyer, not the seller. Focus & Organization: In a convenient location, keep handy the items that will assist you in maximizing your home search efforts. Such items may include: One or more detailed maps with your areas of interest highlighted. • A file of the properties that your agent has shown to you, along with ads you have cut out from the newspaper. • Paper and pen, for taking notes as you search. • Instant or video camera to help refresh your memory on individual properties, especially if you are attending a series of showings. Location: Look at a potential property as if you are the seller. Would a prospective buyer find it attractive based on school district, crime rate, proximity to positive (shopping, parks, freeway access) and negative (abandoned properties, garbage dump, source of noise) features of the area? Visualize the house empty & with your decor: Are the rooms laid out to fit your needs? Is there enough light? Be Objective: Instead of thinking with your heart when you find a home, think with your head. Does this home really meet your needs? There are many houses on the market, so don't make a hurried decision that you may regret later. Be Thorough: A few extra dollars well spent now may save you big expenses in the long run. Don't forget such essentials as: • Include inspection & mortgage contingencies in your written offer. • Have the property inspected by a professional inspector. • Request a second walk-through to take place within 24 hours of closing. • You want to check to see that no changes have been made that were not agreed on (i.e., a nice chandelier that you assumed came with the sale having been replaced by a cheap ceiling light). Getting the Best Rates for Your Mortgage Naturally, you want to get the best deal for the least amount of money. This holds true for mortgage rates as well. A lower interest rate means a lower monthly mortgage payment, which can save you money in the long run. Also, it is easier to qualify for a lower payment than a higher one. You basically have two routes to finding the best rate. The first is to do all the research on your own. The second is to use a mortgage broker. Do-It-Yourself With the advent of the Internet, much of this information is readily available online. Once you have educated yourself sufficiently about real estate loans, all it takes is the time and energy to sift through online resources to find the information you need. Rates change quickly. That great rate you find today might not be there tomorrow. Once you find the rate you are looking for, submit a loan application and lock in that rate. E-Loan (http://www.eloan.com) When comparing loans, make sure that you're comparing loans of the same type. For example, you find that "Loan A" for a 30- year loan has a much lower interest rate than "Loan B" (also for 30 years). Upon further inspection, you find that "Loan A" is technically an adjustable rate mortgage. Its payment is based on a 30-year amortization, but becomes due through either payment or refinancing at the end of 5 or 7 years. These are frequently referred to as a 5-year or 7-year fixed-rate mortgage. While both said "30-year", they are not the same type of loan. Ask the lender for a statement detailing all fees associated with the loan. Factors such as "points" (loan fee), interest rate and "garbage fees" (extra fees which some lenders charge) can vary greatly from one lender to another. Mortgage Broker If you do not have the time or experience to "do it yourself," look for a qualified mortgage broker that can assist in finding the right mortgage for you. Ask friends and associates who have refinanced or purchased recently if they have a broker they can recommend. You'll want to find a broker who is energetic, flexible and knowledgeable about finance and loans and someone who has your best interests in mind. You've Opened Escrow, Now What? Congratulations, you are on your way to owning your very own home! Follow these suggestions (and your realtor's advice) so that escrow and settlement with go as smooth as possible. You will be asked for a down payment on the home you are purchasing. You can choose to put down as much or as little as you want (depending on your mortgage), but remember, the more you put down toward the total price of your home, the less time it will take you to pay off and the less your mortgage payments will be every month. During this period of purchasing your home, you are going to need an escrow or settlement company to act as an independent third party so that you know when and who to give your money to get the deed to your new home. The escrow or settlement company will hold your deposit and coordinate much of the activity that goes on during the escrow period. This deposit check may also be held by an attorney or in the broker's trust account. Make sure that there are sufficient funds in your account to cover this check. The deposit check will be cashed. Assuming the sale goes through, this money will be applied to the purchase price of the home. If for any reason the sale is not consummated, you may be entitled to receive all of your deposit back, less standard cancellation fees. In certain instances, the seller may be able to retain this money as liquidated damages. Prior to executing a purchase contract, it would be wise to speak with your counsel regarding whether or not it is your best interest to have a liquidated damages clause as part of the contract. The period that you are "in escrow" is often 30 days, but may be longer or shorter. During this time, each item specified in the contract must be completed satisfactorily. By the time you have opened escrow, you have come to an agreement with the seller on the closing date and the contingencies. Each contract is different, but most include the following: Inspection contingency: this should be completed as soon as possible after the contract to purchase is signed as unsatisfactory results of the inspection may mean that you will want to cancel the contract. Financing contingency: once the contract is signed, you have a period of time to secure funding. If, for any reason, you are unable to secure funding during the period of time granted to you by the contract (and the seller will not provide a written extension of time), you must decide whether you want to remove the contingency and take your chances on getting a loan. You may choose to cancel the purchase contract. A requirement that the seller must provide marketable title. With an attorney or title officer, review the title report. The title must be "clear" to ensure that you do not have legal issues regarding your ownership. Check into local and state ordinances regarding property transfer and make sure that you and/or the seller have complied with them. Secure homeowner's insurance. This will probably be required before you can close the sale. Due to such requirements as special fire and earthquake insurance, obtaining this insurance may require a lengthy period of time. It would be in your best interest to apply for insurance as soon as possible after the contract is signed. Contact local utility companies to schedule to have service turned on when you close escrow. Schedule the final walk-through inspection. At this time, you should make sure that the property is exactly as the contract says it should be. What you thought to be a "permanently attached" chandelier that would come with the property might have been removed by the seller and replaced with a different fixture entirely. You've made it! Once the sale has closed, you're the proud owner of a new home. Congratulations!