What a First Time Home Buyer Needs to Make An Offer

So you have spent some time looking at houses online, have visited some open houses and maybe have seen a few houses with your agent if you have one - you have a pretty good idea of what you are looking for. But when you find the house that you love, will you be ready to make an offer? What exactly will you need? To make the process a little clearer for first time home buyers, below are some of the main items that you should have


1. Speak to a mortgage agent or lender to get pre-approved for a loan, and obtain a loan pre-approval letter. This is really something you should do before you even START looking for a property. A mortgage broker or lender will be able to tell you exactly the type and amount of loan you would qualify for, based on your credit, income, etc., which will tell you the exact price range you should be looking. They will also be able to provide you with a written confirmation of your loan approval (called a pre-approval letter), which will be required by just about all sellers to be submitted with your offer.

2. Have a good buyers agent representing you. A good agent will be able to not only help you locate all of the available properties within a given area and price range, and tailor the search to fit the exact features you like and dislike in a property, but their true value is proven once you have found the home you would like to buy. A good agent will research all of the comparable sales in the area to help determine the fair market value of the property, and help you acquire the property at the best possible price through negotiations on your behalf with the listing agent and seller. Your agent will also prepare and explain to you all of the intricacies of the paperwork compromising the offer, and well as make sure the myriad of additional forms and disclosures are completed as required by law in each transaction. The agent will also coordinate and guide you through the additional steps in the closing process, such as the inspections, appraisal, possibly negotiating a credit from the seller, etc.. Agents who represent buyers in the purchase of property are customarily paid by the SELLER, so having a good agent on your side is not only essential to a buyer, it is also FREE!

3. Be prepared to provide proof of funds for the cash down payment amount, and a copy of the deposit check with your offer. These days more than ever, it is customary for sellers to require that potential buyers submit a "proof of funds" with their offer, demonstrating that they have enough available liquid cash on hand sufficient to cover the amount of the purchase price that is not being financed. Generally, a copy of the bank statement reflecting a sufficient balance would be acceptable. Most sellers will also want to see a photocopy of the check from the buyer for the opening deposit with the offer, which is customarily equal to 3% of the total purchase price. Only when the offer is accepted by the seller will the deposit be required to be actually submitted to escrow, so you will not have to put forward any money until you have an accepted offer in place.

4. Be ready to schedule your inspection immediately upon acceptance of your offer. The time periods on each transaction are negotiable, but the standard time frame for the inspection contingency is 17 days in a California Association of Realtors Residential Purchase Agreement. The contingency period means that during this time, the buyer has a right to back out of the transaction and cancel escrow for any reason relating to the physical inspection of the property, and have the right to request the opening deposit returned to them and not be at risk of losing that deposit to the seller. It is strongly recommended that all buyers obtain a physical inspection, which generally runs approximately $300-$400, and is paid for out of pocket by the buyer. The inspection report will show you the detailed condition of the property and any potential problems, and could be a basis for asking for a price reduction or credit from the seller for problems diagnosed in the report. In order to stay within the time contingency periods and protect the buyers deposit, the inspection, review of the report, and negotiations with the seller should be done all within the time contingency period. Therefore it is critical to have your inspection scheduled and performed as soon as possible upon having your offer accepted.

Hopefully by this time you will be well on your way to becoming a homeowner!

Nine Steps to Buying a Home

Buying a new home can seem like an overwhelming experience for many first time (as well as seasoned) homebuyers. It may seem like there are so many things to remember and so many things to do, and can seem daunting for some. It helps to to have a great agent to help you through the process, and it certainly helps to be able to break it down step by step and just concentrate on each individual portion at a time, as you march down the path on your journey toward home ownership!

Here is how the Dept. Of Housing and Urban Development (HUD) breaks down the home buying process in nine steps. The link to the source of the info can be found at the bottom of the post.

Step 1: Figure out How Much You Can Afford

Talk to a lender or a good mortgage broker, and they can run your credit score and see how much of a loan you would qualify for, based on your income, credit score, employment, etc.. It is definitely a good idea to do this up front, so that you know your exact purchasing power and the price range in which you should be seriously concentrating your house hunting efforts. Also, most all seller’s entertaining offers on property they are selling these days will require that a pre-approval letter be included with any offer coming in to them. Best to start here, and possibly save yourself wasted time and effort in the future.


Step 2: Be Aware of your Rights!

Familiarize yourself with the Fair Housing Act

http://www.hud.gov/offices/fheo/FHLaws/FairHousingJan2002.pdf

and the Real Estate Settlement Procedures Act (RESPA):

http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm

Both are designed to protect borrowers and buyers in the homebuying process – it is highly recommended for all borrowers to familiarize themselves with the provisions, so you KNOW YOUR RIGHTS!


Step 3: Shop for a Loan

Now that you know you are pre-qualified and are ready to do some serious looking, devote some of your serious attention to shopping for a good loan in addition to the time spent looking for your new home. If you do your homework, comparing costs with several lenders and looking at the different costs and interest rates may save you serious dollars over the life of the loan.


Step 4: Learn About Homebuying Programs

Downpayment assistance is available if you qualify! – you can find information on some of California’s programs here: http://www.hud.gov/local/ca/homeownership/buyingprgms.cfm .

Contact me at john.barry@coldwellbanker.com for more information about specific programs available in your area.


Step 5: Shop for a Home

This is the fun part!! (Or it can be the most frustrating part!) Remember that it is not easy to find a home with EXACTLY 100% of what you are looking for. If you find a property with 80% of the features you are looking for in a home, it might be the one for you & you seriously consider making an offer, especially if the amenities or features it is missing is something that can be added later on. Choose an agent you like and trust who can help you and guide you through the process from searching for the home to moving day!


Step 6: Make an Offer

This is where your real estate agents expertise and knowledge of the market conditions will help them advise you of what would be a fair price to offer on a property, to help give you the highest possibility of getting your offer accepted. Sellers do not necessarily look at the highest dollar offer as the strongest offer. When buyers are in a multiple offer situation for the same property, there are other things that sellers look for in an offer besides the final price, when deciding which to accept. A good agent can assist you in presenting the strongest offer possible which would give you the greatest chance as a buyer of having it accepted.


Step 7: Get a Home Inspection

Now that you have found a home you love and have an accepted offer (lucky you!), you are ready to schedule a home inspection. This should be done as soon as possible as soon as you have an accepted deal. Any property you purchase should be contingent upon the buyer being able to obtain and approve of a physical inspection of the property. By spending a few hundred dollars up front, a potential buyer can find out about the condition of the home, and discover any minor or major repairs needed on the home before committing to the purchase. If the potential buyer discovers any serious issues with the condition of the property at this point, they can then go back to the seller and ask for a credit at the close of escrow based upon the estimated cost of the repairs, or decide to cancel their purchase of the property based upon the inspection contingency. Again, a good agent will be able to help you & guide you through this process. Contact me at john.barry@coldwellbanker.com for personal assistance, or if you would like a referral to a qualified agent in your local area.


Step 8: Shop for Homeowners Insurance

All lenders will require homeowners insurance, so be sure to shop around for the best deal possible. Not all insurance companies may offer you the same rate.

The US Govt.’s Insurance Information Institute (iii) has some great information on 12 ways to lower your home insurance costs, which can be found here: http://www.pueblo.gsa.gov/cic_text/housing/12ways/12ways.htm


Step 9: Sign Loan Documents

You’re almost there!! One of the final steps before closing is to sign loan documents – be sure to read everything before you sign! Some helpful information on settlement costs and other as[pects of the loan process can be found here: http://www.hud.gov/offices/hsg/ramh/res/stcosts.pdf

Usually you will be required to go into the escrow office to sign the loan documents where a notary will notarize the applicable ones. Sometimes it is possible for the escrow company to arrange a mobile notary to meet the borrowers and have them signed outside of the escrow office (although this is not always allowed by the lender and the borrower will also usually pay several hundred dollars extra for this service). Once the loan documents have been signed and returned to the lender, and once everything else is in place and the buyer has deposited their final down payment, the lender funds the loan, and the escrow officer sets up the file for closing.

The next biggest decision you will have to make is what to serve your guests at the housewarming party!!!


Source of information: US Department of Housing and Urban Development (HUD) - http://www.hud.gov/buying/index.cfm

Hew Help for Homeowners as Obama Signs New Law...

President Obama has signed into law the "Helping Families Save Their Homes" Act, designed to help homeowners who are having difficulty making their monthly mortgage payments refinance to an affordable rate, and help homeowners increase the affordability of their mortgages, and avoid preventable foreclosures.

"These landmark pieces of legislation will protect hardworking Americans, crack down on those who seek to take advantage of them, and ensure that the problems that led us into this crisis never happen again," said President Obama.

The new act strengthens provisions in the existing Hope for Homeowners program, requiring principal writedowns by lenders to help homeowners increase the value of equity in their homes. The eligibility requirements of refinancing underwater mortgages will also be eased, allowing refinancing for a greater number of borrowers.

In addition, the Act also has provisions to help restore the credit flow in the US economy, including an extension of the temporary increase in the Federal Deposit Insurance Corporation's (FDIC) deposit insurance limits providing added confidence to borrowers, but also increases the borrowing authority of the FDIC to $100 billion. The Act also increases the borrowing authority of the National Credit Union Association (NCUA) to $6 billion.


A press release on the new law from The White House in Washington, D.C. can be found HERE.

Southern California Buyers Cashing In on Today's Market...

Check out the article at the bottom of this post, which I came across while browsing the online edition of the San Diego Union Tribune...

With 30-year fixed-rate interest rates AVERAGING under 5% (4.96% according to the most recent Freddie Mac survey), and tremendous value to be had as a home buyer in today's market, its obvious that buyers are indeed cashing in on what is being seen by many as a FANTASTIC opportunity!! With interest rates at historic lows, and incredible value and great opportunities to be found in today's SoCal housing market, there may NEVER have been a better time to realize the dream of owning your own home...

Check out this article:

Lower SoCal home prices lead to sales spike

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Don't Worry, Escrow Will Take Care of Everything....

Some people believe escrow officers must be miracle workers. And honestly, there may be some truth to that... I mean, who else in your typical real estate transaction has to deal with not only ALL of the parties involved, (buyers, sellers, lenders, attorneys, mortgage brokers, real estate agents, title officers, insurance agents, and the list goes on and on..), but their emotions as well, trying to walk a tightrope between them all, at the same time wearing the hats of a psychologist, therapist, and referee? (Ever heard the saying "Too many chiefs & not enough indians..." ??) And typically, without fail, no matter how hard the escrow officer works to avoid it, the grant deed will be delivered two day before the scheduled closing, signed in PENCIL, and with NO notary acknowledgement. (Reason being, of course, that everyone knows the effect of Murphy's Law is three times as prevalent in Real Estate than any other profession...)

"Oh, and by the way..", the seller's agent will say with a straight face, "My seller just left for a two week safari in Africa, and he will be spending most of the time traveling from village to village in a dugout canoe through the jungles of Botswana, where he of course won't be reachable by fax or phone, and the nearest Fed-Ex office or internet connection is at least two thousand miles away..."

"...but this deal HAS TO CLOSE ON FRIDAY!!!!!!"

To most people, escrow is a mysterious process, something that you have to go through if you are buying or selling property but don't really want to, and something that doesn't really sound all that appealing, anyhow. But an escrow officer is there to keep the communication going and the documents flowing between the parties, so everyone is aware of what is going on and there are no suprises approaching closing time... A good escrow officer will be able to use their experience and knowledge to help anticipate and identify any potential problems that COULD arise in a transaction, potentially jeopardizing the closing, and will work to keep everything on track for a smooth and painless transfer of the property (that is, until your seller decides to jet off to Africa to photograph a few zebras and giraffes at the most inopportune time...).

I have been in the escrow industry in the Greater Los Angeles Area for over a decade, much of that time as an Escrow Officer. And believe me, the safari story is not even CLOSE to being the craziest thing to befall a closing in my time...