Home Buyer Information

Buying a home is the largest purchase most people make. However, most people don’t buy a home often enough to become experts in each step of the process.  Home buying can be a pleasant experience if you rely on experienced and knowledgeable professionals to assist you throughout the purchase.  These professionals can help you avoid pitfalls and rebound from any complications.

Real Estate Agents

Early in your experience you will decide whether or not to use a real estate agent.  Of course you have the opportunity to change this decision at intervals while you are looking for a home.  It is common for buyers to choose to hire a real estate agent to assist in their purchase of a new home. 

If you choose to hire an agent, interview several before you sign with one agent.  This is one area where experience is a must.  Find an agent with a proven record.  Ask how long this agent has been selling real property, what types of property this agent typically sells, and whether this agent sells property full time. Ask for the names of recent buyers as references for this agent.  Then call the buyers who used this agent.  Ask the buyers how long ago they purchased the house and whether they were satisfied with the agent’s representation. 

Buying property without an agent is possible, even for first-time home buyers, but it requires much more work from you.  Obviously, you have to find your own prospective houses by driving around the neighborhood, reading ads and checking on-line.  And you may be at a disadvantage in negotiating a purchase price without market data.  When it comes time to actually make an offer, you should consult with an attorney to draft a contract and review any contingencies or counteroffers.

It is imperative that you hire an agent or consult with a lawyer regarding the contract.  Professional assistance can help avoid many closing dilemmas.  The cost usually can be paid at closing.

Lenders

Another early decision involves finding a lender.

Lenders make money in two ways: By charging a higher interest rate and/or by charging fees at closing.  The Truth in Lending form required by the Federal Government is designed to allow you to combine these two expenses into one number, the APR, for real comparison.  The problem with the APR is that some lenders don’t have to include all of their fees in the APR.  You can actually compare lenders’ fees better if you ask all lenders to quote fees based on the same rate.  Then you decide whether you would prefer to lower your rate and pay lender fees at closing or pay a higher rate and fewer closing costs. 

Apply with at least two lenders; include one mortgage broker and one bank mortgage lender.  Mortgage brokers have the advantage of many different loan programs with many different lenders.  They can use their experience with lenders to know which lender has the best loan program for your situation.  Bank mortgage lenders usually have limited programs and differ tremendously in their policies.  Each bank has its own policies about local rates versus national rates, allowable risks, and loan retention.

You should not necessarily decide on a lender prior to finding a house, but you should have completed enough of the application process with at least one lender to be pre-approved for a purchase price.  This information has many benefits.  You know that you qualify for lending.  You are able to negotiate your contract as a pre-approved buyer.  You know what purchase price fits your budget.  You are able to sign a contract without a contingency that you must apply and qualify for a loan.

One other important benefit you gain by applying with more than one lender is that, if at closing, the lender was unable to provide you with the loan you expected, you already have a back-up plan in place.  You can complete the application with your other lender and still close.

Find a home.

Now comes the fun part -- actually choosing a new home.  Visit as many homes in your price range as you have time to see.  Once you have found “the one,” you will begin contract negotiations.  If you have an agent, rely on his or her experience to introduce all contingencies necessary to ensure your satisfaction with the house and closing.  If you don’t have an agent, bring your concerns to your attorney to draft a contract that includes appropriate clauses.

In all situations, your contract should allow you time to hire a home inspector, receive and review the inspection report, and re-negotiate or void the contract depending on the inspector’s report.  This is one of the most important benefits.  Unless you are a professional builder or inspector, there may be issues you are unaware of when looking at a house.  An inspector can direct your attention to structural problems, faulty systems, and other nightmares of a new home owner.  Even if the inspector finds only slight issues with the house, you are now in a position to renegotiate repairs with the seller.  I cannot stress how important an inspection is!

Your contract should consider seller-paid closing costs as appropriate to your situation.  Your lender should advise you of any necessary contract stipulations.

Contracts can also include clauses requiring the seller to make repairs, including paying for painting, carpeting, and other aesthetic changes to the house.

Your contract may include a clause that you are provided with a home warranty which will cover any repair expenses you might have during the first year of your home ownership.

When negotiating a closing date, allow yourself and your lender plenty of time to complete the application process, have the property appraised, order a title exam, and complete any other stipulations that the lender requests.  It would be exciting to get into the new house right away, but it is wiser to make sure all involved parties have sufficient time to complete their portion of the process.

Closing

Schedule your closing at least a week before the contract requires closing.  Make sure that you have time remaining under the contract to regroup if an unforeseen issue arises at closing.  If everyone has done his or her part prior to closing, then closing can be trouble-free. 

The first document you see at closing is the settlement statement.  This details all of the financial items of the transactions.  The seller will execute a deed transferring the title of the property to you and you will execute a security deed transferring a security interest in the property to the lender.  You will also execute a note detailing the loan and repayment schedule.  The lender will also have many other documents to explain the transaction and secure its interest in the property.

At closing you have the opportunity to purchase owner’s title insurance.  Your lender requires you to purchase a title insurance policy to protect its interest in the property against any title defects.  You have the option of purchasing a policy to protect your interest in the property against title defects, mistakes, and forgeries.  The cost is based on the sale price, but you get a huge discount when you purchase simultaneously with a lender’s policy.  Ask your closing attorney the exact cost and title risk in your situation.
 
After all documents are signed at closing, you are a new home owner.  And you still have things to do.  After closing, your attorney will mail to you the deed transferring title to you and an owner’s title insurance policy, if you purchased one.  You need to file for “Homestead Exemption” with your county’s tax commissioner.  Take your settlement statement or Warranty Deed with you and complete the form. This entitles you to reduced property taxes on your personal residence.  Investment properties don’t qualify. 

Please contact me to let me assist you with a trouble-free closing.