What To Know When Buying A Home
Whether This Is The First Time Or The One Hundredth Time Purchasing A Home, You Have Come To The Right Place!
Depending on which type of buyer you are (see below), the process is a little different for each category. In most cases you will need to speak with a lender (unless you are paying cash) to see how much money you are able to borrow as a mortgage. This is based on your current income, credit scores and outstanding debts. Speaking with a lender will also help you decide which type of loan you want to get (FHA, VA, Conventional), and the lender will help explain which loan will work best for you.
Once you know how much you can afford, keeping in mind what you can afford and what you want to afford are usually two totally different things, then for First Time Buyers and Investors it’s time to start the home finding process.
If you are a Move Up Buyer, this is when you will need to decide if you want to keep the home you currently own, or sell it and use the proceeds as your down payment on the new home.
One EXTREMELY Important Warning
Once you have been approved for your loan to purchase your home, DO NOT open any new credit cards or get a loan of any kind. Do not make any big purchases (appliances, furniture, etc…) with out first consulting your lender. The same goes for CLOSING any accounts you have. Opening or Closing any new accounts will have a severe impact on your credit and debt to income ratios. I have seen many people open or close an account during the home buying process, and as a result they are no longer able to purchase a home.
Picking The Right Property For You
There are a lot of factors to consider when you are narrowing down your search for homes. Below is a list things to consider when you are looking for a home that will fit your needs:
Price: The number one factor should always be price, you don’t want to start looking for homes that are above your comfort level.
Area: After deciding on which price range you are comfortable in, you should then start narrowing down the areas (which neighborhood, city, or part of town) you would like to live in. If you are a move up buyer, you may decide that the area is the most important factor, then look in that area to see if you are able to afford living there.
Amenities: After Price and Area it is time to start looking at amenities. How many bedrooms do you want, do you want to be on a corner lot or cul-de-sac street, do you want RV access, do you want to have block wall fencing, do you want a single story home or a two story home,do you want a pool, etc… If you narrowed your search down too far, you may want to go back through the amenities list and start looking at wants versus needs, and decide what features you are willing to do with out.
Timing: Depending on how much time you have before you need to make your move, you may want to eliminate viewing certain sale types. A normal time frame to close escrow (after placing, and having an offer accepted on a property) is 30-45 days. This usually varies on your financing type. A Standard (Equity) Sale is usually a pretty quick process, however if the person selling the home can’t move until a certain date then this may not work for you. Foreclosure and Flip (Investor Owned) properties are a close second for how quickly the sale of the property can take place. In some instances they are quicker than an owner occupied standard sale, and can close as fast as you can get your loan. Short Sales and Probate Sales typically take the longest, but in some cases they can move as quickly as any other sale (if they have already been approved).
Once Your Offer Has Been Accepted
This is when the process becomes real to most people. This is where you have to start writing checks, and coming out of pocket for inspections such as the home inspection and appraisal. Below is an overview for the life of an escrow, however every deal is different and some parts of the process are out of our control.
Out of Pocket Expense: You will need to write a check to the escrow company for the deposit amount we negotiate in our offer with the seller. The deposit is refundable as long if we cancel before we release our contingencies, which typically happens about two weeks after we open escrow. If you choose to do a home inspection (highly recommended) you will need to pay the inspector at the time of inspection. The inspections start around $250.00 and the prices will vary based on location and size of the home. The cost of the home inspection is not refunadable. If you are obtaining a loan to purchase the home, you will need to pay for an appraisal (this is ordered by your lender). Appraisals typically cost around $600.00, and the cost can vary depending on several factors. The cost of the appraisal is not refundable. Then at the end of the escrow, about a week before we close, you will need to bring in the balance of your down payment and closing costs.
Opening Escrow: Once your offer has been accepted (seller has signed the offer, or counter offer) the contract is sent to a third party company, which is an Escrow Company. The escrow company will handle all the receiving and disbursing of funds, order a couple of the reports, and help the buyer and seller with completing the appropriate paperwork to transfer ownership and record the information with the County.
Deposit Check: Once the escrow company has received the contract and provided a Escrow Number, you will need to write your deposit check payable to that escrow company, for the amount agreed upon in the purchase agreement.
Inspections: We will need to order a home inspection (if you elected to have one, we highly recommend doing so), if you don’t know of any home inspectors we will be happy to provide you with a list of people to choose from. If you would like to have any other inspections done, now is the time to order them. Other inspections would include a roof inspection/certification, septic inspection/certification, termite inspection, heating and air conditioning inspection, pool and spa inspections, etc… You will also want to check out public information regarding the neighborhood, such as http://www.crimereports.com and http://www.meganslaw.ca.gov/, in addition to you driving through the neighborhood at various times of the day and different days of the week.
Appraisal: As soon as we have the executed contract, we send it to your lender and have them order the appraisal. It usually takes 7-10 days for the appraisal to come back in, unless it is a VA appraisal which takes around 15 days to come back in. These time frames are subject to change due to how backed up or how light the appraiser’s schedule is, which is why it is so important to get it ordered as soon as possible.
Disclosures: The seller has a list of disclosures they need to complete and provide to us for you to review and sign. Depending on the sale type (standard, flip, probate, short sale, foreclosure) the number of forms the seller is required to provide will vary. If there is a home owner’s association (HOA), mello roos (special tax assessments), or any other material fact affecting the property the seller will need to let us know this information as well. We highly recommend getting Natural Hazards Disclosure Report as well, even if the seller does not agree to pay for it. This report will let you know if the property is located in any kind of Natural Hazard Zone, such as fire, flood, earth quake zones that will require you to have additional property insurance policies. The seller and escrow company will also provide a preliminary title report to us, which will let us know of any items affectign the title of the property like liens, tax assessments, and if there are any pending easements on the property that will affect future development.
Request For Repair: If there are any items we would like the seller to repair (items that were called out on any of the inspections or appraisal report), we have to submit our request to the seller within 17 days of our offer being accepted. The seller is not obligated to complete any of these repairs, but it is definitely a negotiation point. If we can not come to an agreement, you are able to cancel the escrow and get your deposit back (as long as everything was completed on time). Usually however, the seller will complete any repairs called out on the appraisal as they need to be completed in order for you to get your loan and proceed with closing, as long as the costs are not a large dollar amount. This process is subject to change depending on the sale type, and we will explain this to you on a case by case basis.
Contingency Removal: This is the turning point of the escrow process. After our 17 day inspection period has ended, the seller may require us to sign a form called the Contingency Removal. This form (in a nutshell) states that we have completed all of our inspections, appraisal, reviewed the disclosures, and are completely satisfied with the information we know about the property. By signing this form your deposit will become jeopardized if you do not close the escrow. This is a topic that is best explained in person, which we will be more than happy to discuss with you at any time.
Signing Loan Documents: This is the last big task for you. Signing you loan documents takes approximately two hours, and is the last chance for your payment and loan fees to change (as long as we close escrow on time). This will include your payment amount, as well as a breakdown of the payment, and commits you to paying the mortgage on your new home. Typically, we are able to close escrow within one week of you signing the loan documents. Some lenders are able to do it quicker.
Final Walk Through: A few days before we close escrow we take one last walk through the house to make sure everything is still the way it is supposed to be, and that the home had not been vandalized, or the seller had not removed anything they weren’t supposed, and that there were not any unexpected damages from issues like a roof leak or malfunction with the plumbing.
Funding: This is the last event that takes place before the closing. After your lender reviews the loan documents you signed, and ensures everything has was done correctly, they will wire their funds to the escrow company to close. You will (usually, unless you are obtaining a VA Zero Down Loan) also need to take your closing funds into the escrow in the form of a cashiers check, if you were not instructed to provide the cashiers check when you signed your loan documents.
Closing: Typically closing occurs the next business day after the escrow confirms that they have received your closing funds, as well as your lenders funds for the balance of the purchase price. Once the County confirms with the escrow company that the received the paperwork transferring ownership into your name, and they have recorded the information into public record, we will be notified that the file has RECORDED! This is when we have the wonderful opportunity to deliver to you the keys to your new home! We often like to celebrate this event by taking your picture in front of the home, and giving you a copy to share with your friends.
We will stay in touch with you to answer any questions you may have as you go through the process of now owning your own home, as well as provide you with any resources we have to help you with any changes or repairs you wish to do to your home.
Our goal is to provide you with such great service, and make the process as easy as possible for you, so that when ever you hear anyone talking about buying or selling a home you tell them that they have to call us because of the great job we did for you.