If you have never purchased a home before you are reading the right article. This blog will give you some tips and show you the transaction flow of a typical Real Estate transaction. These are the steps and the tips that will help you move smoothly through the process.
This process is the same for every house you will purchase. It looks an sounds complicated but your team at MAE Capital Real Estate and Loan we will walk you though the process and tell you what you have to do and when you have to do it by. We try really hard to make a complicated process fairly easy. We look forward to assisting you with your home buying needs. Call us today at 916-672-6130 or click here to have one of our team members call you.
Excellent, you have decided to pursue the American Dream of home ownership. Now what do you do? Well you need to know how much of a home you can afford with the income and bills you have. This step is the single most important step to your process of obtaining a home. This process is called getting pre-qualified or pre-approved. Although, the thought of shopping for a home may be an appealing one you should not even look at homes until you know for sure what you can buy or if you can buy. The Pre-Approval process is where you will gather all of your financial documents together and get them to a licensed Loan Officer so he or she run the numbers and your credit report and derive a number to which you can qualify for. You can read more about this process on our Pre-Approval page or our Process Flow page. Your Loan Officer will give you a loan amount, a loan program, and a sales price you qualify for based on your finances.
Once you have the Pre-Approval letter in your hand with the terms and amounts you qualify for it is time to find a Realtor to look for homes with. You may ask why you need a Realtor, and a simple answer will be it doesn’t cost you anything to be represented by one that knows the laws, the inspections requirements, contracts, and inventory. Yes, it doesn’t cost anything for you, as a home buyer, to be represented by a licensed Real Estate Agent as the sellers pay the real estate commissions to both the listing Agent and the Selling Agent. If the free service is not enough to convince you to contact an Agent to work for you how about the laws, unless you happen to be a Real Estate Attorney the laws with regards to real estate process and procedures are many. If that doesn’t scare you enough to be represented, how about the contract itself, there are items in a professional Real Estate contract that, if missed, could cost you thousands of dollars. Then there is the inventory, or shopping help an Agent can provide for you. Again you might say I can find anything I need on the internet. Again true, but, the problem with internet data is the updating of the data is old. In some cases like Zillow it requires that the listing Agent actually input the data into the system in order for the world to see it. Whereas the Multiple Listing Service or MLS is required to be used by licensed Realtors for every listing they have or they will be fined.
Now, that you are convinced to find an Agent to represent you, who do you use? I would, of course, recommend one of our qualified Agents, but if you are out of our service area we can always screen Agents for you in the areas you are looking to buy. This is a little know service, again its free to you as a buyer, that we offer to assure our clients are represented by an Agent who knows their stuff. You see, if you go dialing for dollars, as we call it, you will undoubtedly end up with an un-experienced Agent. This is because the experienced Agents are out working not sitting in the office waiting for the phone to ring, the Agents that are in the office waiting for the phone to ring are generally new to the business trying to get call in business. Another pitfall buyers run into is calling the listing Agent on a house they wish to buy and have them represent you. This is called dual Agency, and we as listing Agents love this as we get both sides of the commission, however, undenounced to the un-educated home buyer, the listing Agent’s allegiance is to the seller first, by law. So it can really pay to be consulted first by one of our Agents to have them either represent you or screen other potential Agents to represent you and your needs.
Shopping for the perfect home should not be taken lightly either. You should have a list of items that are “must have” items in a home such as number of bedrooms and bathrooms, updated kitchen, new or existing home, and most importantly location. Making this list is crucial for your Agent as they will be able to search for properties that fit your exact criteria, so you are not wasting your time looking at homes that don’t fit your needs. In addition to the “must have” list you should do a “wish list” like granite counter tops, hardwood floors, a pool etc. You should also do a list of items you absolutely do not want. You Agent has the ability in the MLS system to put in exacting parameters that you can’t get on the consumer version on the internet. Your Agent will put your parameters into the MLS system and put you on an automatic drip of homes in the area(s) you are looking in with the exacting parameters you have. Your first email of homes will be the largest as the initial search will pull all the current listings that fit your parameters. The emails you will get after that are “as they hit the market” emails, in other words you will be the first to see the properties come on the market. This is great if you are in a competitive price range as you will be able to see properties as they come on the market with no delays. This could be the difference of you getting the best home or not.
A great strategy to look at homes is to drive the properties that look good in the listings that you have viewed on line. Driving the properties will give you a real idea of where they are, what they really look like, and how they have been maintained. When driving the properties you don’t have to include your Agent as you are simply doing your own diligence. Make notes of the ones you would like to see and then call your Agent to make appointments to see the homes. Never go up to the door and disturb the occupants it is not nice nor is it safe. To see the homes your Agent will need to make appointments with the listing Agents or the owners directly for you to get inside. Your Agent will put together “a tour” that will include your availability to see them and the seller’s availability to show them. When you go to view the home take pictures and take notes so you can remember the ones you liked and disliked. You may not find the perfect house after several showings, don’t get discouraged homes are coming on the market every day and with patience you will find what you are looking for.
You did not expect to go looking for houses today and find the perfect one, but that is the way it happens, one minute you think you will never find the perfect house the next you find one you can’t live without. You now need to get it tied up so no one else can have your perfect home. Your Agent will write an offer for you and ask you to provide your pre-approval letter and a Ernest Money Deposit (EMD). The offer will be on a 10 page form that has all terms in it from the offer price to the loan amount, to the items that need to be inspected, and it also spells out who pays what. Remember you can ask for anything in the offer and your Agent will go over those details with you. Once you have decided the price and terms you will be offering you will sign the offer and your Agent will then submit your offer to the listing Agent. Within the offer you wrote a time period the seller has to get back to you with a response. When the seller reviews your offer they will either accept it as is or they will counter offer your offer with different terms. This is all part of the negotiation process. Once you and the Seller have reached an agreement and both have signed and accepted the terms you are now officially in contract.
Once in contract you will have certain dates that you must adhere to in the contract such as inspection periods. The inspection periods include your right to get a home inspection, appraisal and any other inspections you and your Agent deem fit. Those inspections periods are about 2 weeks so you should be prepared to start paying for them right away. Your Agent will know good inspectors to use so rely on them to guide you through this time period. A special note about home inspections is that they cover everything from cracks in the driveway to mold in the attic and sometimes it is difficult to determine what items are important to have repaired or if they need repair. You can talk with the inspector directly to determine this or talk with your Agent or both. If you determine you require additional repairs in order to buy the house you will have your Agent prepare a repair addendum, and submit it to the seller. The seller has the right to say that they will or will not do the repairs. If the Seller says that they will not do the repairs you may need to make the decision to renegotiate price or back out altogether. If you do back out during the inspection periods you are entitled to a refund of your deposit. If you miss the time frames in the contract and decide to back out you could very well lose your deposit. Your Agent will work with you to make all of this legal. Another variable inspection is the appraisal. If the appraisal comes in lower than the offering price your Agent will discuss your options with you. Those options will be to give the seller a counter offer with the lower value as the price, or you could pay the difference in down payment if you are so inclined. If you decide to pay the difference be prepared to make the down payment on the lower of the sales price or appraised value and pay the difference. For example if the sales price is $250,000 and you are putting 10% down for a 90% loan to value (LTV) or $25,000, and the appraisal came in at $245,000 you will be required to put your $25,000 down and you will have to add an additional $5,000 for a total of $30,000 and you will still be at a 90% LTV.
Once you have made it through the inspection periods and everything has passed your standards, we are full steam ahead to the closing of this transaction. At this time I would suggest you get back with your MAE Capital Loan Officer and make sure they are on schedule to close and see if they need any more documentation from you or explanations. By now the loan should be approved, and hopefully you are just waiting for the legal paperwork to be delivered to the escrow so you can sign and bring in the remainder of down payment and closing costs. You can always refer to the closing diagram on our Process Flow page to see where you are at in the process. There still may be a few weeks left in your escrow process so be prepared to provide more information for your Loan Officer. Now would be a good time to start preparing to transfer your utilities so you have no interruption when you move.
OK, you signed brought your money in to the Escrow and are ready to close. The lender must review everything before they release funds to Escrow to make sure all signatures are correct and the all the conditions the underwriter put on the file have been met. Once everything is good the lender funds the loan to the Escrow and they then take the Deed to the county to record the transaction to make the house legally yours. Congratulations you are now a home owner and you can move in and do anything to the home you wish. Your first mortgage payment will be due the first of the following month and be sure to make that payment on time or it will affect your credit. I hope this helped you with some basics to buying a home. If you go to our Pre-Approval page and complete the form at the bottom of the page we will contact you are start your process or give us a call we would love to talk to you at (916) 672-6130.
So 2017 is the year you are going to buy a home. I would say that is the best financial goal anyone could have. Aside from the tax advantages owning your home changes the way you look at life. As a home owner, you are entitled to fix your home as you please, paint it any color or colors you like, and when you nail the first picture on your wall in your home it suddenly becomes real that you are about to put a hole in your home, so the once simple task of nailing up a picture has changed to add a little more thought to the process. Home ownership also gives you an inner sense of achievement that only other homeowners feel. But before you get to enjoy all the good that is owning a home you first have to go through the process of qualifying for a home loan and looking for a home in your price range. It’s like my father would say to me when I was growing up “anything worth having is worth working for”.
If 2017 has been the year you have designated to purchase your first home, there are some important steps you must go through in order to get your goal. The first step should be figuring out how much money you should have saved to buy this home. It’s not too late it is still early in the year and you have time to save. The minimum down you would need to have saved without any kind of down payment assistance would be only 3.5% of the sale price unless you are a Veteran and we can get you into a home with no money out of pocket (Thank you for your service). So, if you have been looking at buying a $350,000 home you would need to be able to show $12,250 (3.5%) and that could come from savings or a gift from a parent or an employer, again zero if you are a Veteran. Now if this amount is too hard to save up for there are some programs that can assist with the down payment and closing costs. Most of these programs will require that you attend a class either on line or a traditional classroom setting. These programs can help with the money it takes to acquire a home, but there are some limitations. The biggest limitation is income you can make. You see if you make too much money you don’t qualify for the programs and each program will have different income limitations. You would have to call and speak with one of our qualified loan officers to get the correct income limits per program.
After you have figured out how much money it will take to buy a home you should also know if your credit is good enough to qualify. Generally, you can have a Credit Score (low mid score for a couple or mid score for single people) of no lower than 550 and that would be for an FHA loan or a VA loan. If you were putting 10% or more down and you were looking for a conventional loan your score would need to be above 640. If you are not sure what your score is we do run your credit as part of the Pre-Approval process.
Before even looking at homes that might be outside of your price range we recommend that we get you Pre-Approved before looking. The Pre-Approval process is fairly simple, we gather some documents from you, analyze your finical position, and we will give you a Purchase price that you would qualify for, and you could purchase any home up to that limit. We would have you either apply online or you could call in and we can take you application over the phone or we can meet in person. The idea is that we are here to help you. We have an online checklist of the items we would need you to provide us with. The basic items we will need you to provide are: 1. Current Pay-Stubs for the last 30 days; 2. Your last 2 months Bank Statements; 3. Your last 2 years W2’s; 4. Your last 2 years Federal Tax Returns. We would ask for divorce documents or child support information if you paid or received any support. If you are retired, we would ask for your retirement information. If you have a complex financial situation we can figure out how to be able to show it documents. Our job, when qualifying our you, is to be able to paint your financial picture to someone who has never met you with your financial paperwork and letters from you to fill the gaps so the lender can see you as a good credit risk. This is an art and has taken many years of experience to be able to do this efficiently and we are here to get it done for you.
Once we have taken your application, ran your credit report, reviewed your income documents, and determined you have enough funds we then issue the Pre-Approval Letter. This letter is essential to be able to be given to a potential seller of a house to show them you have already gone through the process and are ready to buy. This letter can put you at a competitive advantage as other people wanting to purchase the same house may not have the same letter, thus making your offer more attractive and more apt to be accepted. At MAE Capital Real Estate and Loan we work with you on the loan side and the Real Estate side so you only have to go to one place to get you needs fulfilled. When you work with us with the loan and as your Realtor we will bundle our services and reduce your fees and we will buy you a home warranty. This could save you thousands of dollars upfront to do with as you please.
Now comes the fun part, looking for the house you are now qualified to purchase. We have a free online toolkit to get you organized in your planning of the wants and needs of the home you want to buy. We recommend that you use these tools as it will help you organize what you want in the house and our Realtors can use your lists to search for the homes that fit your wants and needs. Our Agents use the Multiple Listing Service (MLS) to search for homes as well as word of mouth from other Agents in the industry. Having your list of items you want in a home such as number of bedrooms and bathrooms, size, location, whether it has a pool or not, whether you want land, horse property, can all be inputted into our system and we can only show you the homes that fit your parameters saving you time money and energy.
Also in our toolkit are comparison sheets so when you are out looking at the houses you can write down what they have and don’t have and be able to easily compare what you just looked at. Don’t get discouraged it is rare that you find your dream home the first time you go out looking. It is our Agent’s jobs to show you everything you would like to see on the market in the areas you want to be in. This process can take weeks and sometimes months as you may want to wait for other homes to come on the market in the specific area you want to live.
Once you do find a house that meets your expectations and you want to buy it you will need to make an offer to the seller to buy their home. Our Agents are experienced in the art of negotiating the sale price for you. Negotiation techniques will vary based on the type of market we are in (i.e. a buyer market or a seller’s market). If it is a buyer’s market usually there are more homes on the market than there are buyers to buy them and sellers have to be aware of this and be willing to negotiate on their price or pay cost for potential buyers. In a Seller’s market, there are generally more buyers interested in buying homes in the area than there are sellers to sell them, thus prices are generally firm and there might be multiple offers on the same house. Each type of market your Agent will know and advise you accordingly before you even start looking. As a first time buyer, you also want to make sure the house is sound when you purchase it. Our Agents make sure home inspections, pest reports, and any other inspections are complete so you know exactly what you are buying and the condition of it. Again, our Agents will buy you a home warranty at the close of escrow so if anything goes wrong with the house in the first year after purchasing it you will be covered. The warranty covers, appliances, plumbing, and the heating and air, giving you peace of mind that you have been taken care of by MAE Capital Real Estate and Loan.
We here a MAE Capital Real Estate and Loan strive to help our clients have a smooth and easy experience. We will walk you through the process every step of the way. We will make sure you are compliant with the paperwork and we will take care of the title company that will act as a disinterested third party to bring buyer and seller together to sign at the end of the transaction. We look forward to working with you in your 2017 goal achievement of purchasing a new home.