Home Buyer Procedure Where Do You Start

Dated: 01/10/2018

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Home Buying Procedure: Where do you start?

1.Agent Representation: We play a pivotal role in your transaction. Our fiduciary responsibility is to you, we are contractually bound to do everything in our power to protect you contractually & what's in your best interest. We will be involved in recommending and coordinating several of the other key people necessary every step of the way. Protecting your interests by diligently investigating, negotiating price, preparing contracts, coordinating repairs and other vital details of the purchase on your behalf. Real estate transactions are almost always about the bottom line. Our knowledge of the local market, access to accurate home listings and sales data will be crucial in recommending a realistic purchase price. Best of all, as the buyer, your real estate agent will cost you nothing! Our service is FREE to you! The seller of the house you purchase pays our fees/commissions!

2.How much do I need? This varies on many factors, you need to determine if you qualify for financing and how much, what type of payment are you comfortable with? Low down payment options do exist for civilians. Qualified veterans can purchase with zero down! You need to be in touch with one of our trusted lenders or your own as early as possible in the process. We have done the research for you; we know the best lenders to work with. They will coach you to improve your application and securing the best loan package for which you qualify. Specific circumstances include credit score, income, and down payment if available. In addition to your loan you will need a EMD: Earnest money deposit which is generally 1% of the purchase price. An EMD shows the seller that you are serious about purchasing the property. When the purchase is finalized the EMD is put towards the down payment.

3.Finding your home? Upon securing financing and getting pre-approved, the home shopping process begins. Finding the property that best fulfills your wants and needs within the price range for which you have been pre-approved. Prospective homes will usually be found through a system in which we provide known as the Multiple Listing Service (MLS). This listing’s will contain pictures and various known details of the home and is commonly emailed to you. Together we will coordinate a plan not only to view these homes but physically inspect them as well eventually finding a house that you would like to make your home.

4.Making an offer: Upon finding a home that you want, a contract known as the Residential Purchase Agreement (RPA) will be strategically drawn up by us, sent to the agent representing the seller of the home, often accompanied by your pre-approval letter from the lender and some sort of proof of funds typically a bank statement. Offer gets presented to the seller’s and three things can happen: One: they accept the offer, which means everything is agreed upon exactly as presented. Two: our offer gets countered, which means they accept but with different terms and conditions (generally price), negotiating begins. Three: offer gets rejected, typically because the offer was too far from expectations and the seller believes there cannot be any kind of mutual agreement or they have accepted a better offer.

5.Accepted offer: Opening title & escrow: Once we have mutual acceptance on all terms of the purchase contract, the clock will start clicking on timelines and various tasks that are required and escrow will open. The escrow period is customarily 30 days but can be shortened or extended. You need to confirm your intent/commitment of purchasing the property by providing your refundable Earnest Money Deposit (EMD) to escrow within 3 days of an accepted contract. This is typically a wired transfer but can be made by check. The deposit is typically 1 % of the purchase price and will be applied towards the sale. Customarily sellers choose who they want to use for title and escrow for the transaction.  

Escrow: Escrow officers are a neutral 3rd party that ensures everyone involved receives what they expect out of the transaction. They coordinate all loan documents as well as all other documents/paperwork associated with the sale of the home. They also ensure all documents are signed correctly and that you are properly recorded in public records as the new owner. Buyer and Seller each pay their own escrow fees.

Title: Your lender will always require title insurance policy which is paid for you by the seller. The title officer is in charge of determining that there are no outstanding liens/claims against the property and you have clear ownership.

6.Home Inspection: A home inspection will typically be scheduled within 3-7 days of an accepted offer. The inspector’s responsibility is to thoroughly investigate and locate if any: structural/foundation problems, defects (plumbing, electrical), maintenance issues and safety hazards, minor repairs that may be needed. This inspection is strictly for the buyer’s sake and paid for by the buyer. You should not be alarmed if some issues arise that need attention. It is highly unlikely that any inspector would enter a home and provide an inspection report without finding any issues. All homes will reveal common wear and tear. A home inspection typically costs between $300-$500, which is a small price to invest considering the entire amount of money involved in the entire purchase. The report is typically returned in 24 hours.

7. Termite Inspection/Repairs: Seller’s pay for the termite inspection. If the termite report reveals any type of termite issues, repairs will be scheduled and paid for by the seller.

8.Appraisal: The appraiser conducts an analysis of the property to determine its current value and that its worth at least the sales price. A mandatory requirement by the bank lending you the money. The average cost of home appraisal is between $400-$700$. Once the property has been seen, it will usually take the appraiser 7-10 business days to complete the final report. VA appraisals may take longer.

9.What are disclosures? Upon opening escrow and during that 30 day period, typically within the 1st few weeks a series of disclosure documents as well as other documents will need to be reviewed and signed. These documents are typically sent via email for review and electronic signature. Upon selling a home, sellers are obligated to disclose anything that may affect the property’s value and desirability. Some disclosure documents include: Seller property questionnaire, transfer disclosure statement, carbon monoxide detector notice, natural hazards disclosure, water heater and smoke detector compliance, mold advisory, natural hazards to name a few.

10.Who is involved? In addition to your agent, there is several other parties involved working to complete a real estate transaction on your behalf. As your realtor we are responsible for coordinating, communicating and ensuring that all parties are completing their job in timely manner as well to insure your best interest! As a buyer you will have interaction with our transaction coordinator that we hire and pay for on your behalf to insure all documents are precisely in order, signed and deadlines are met, your loan officer and the home inspector. All parties involved:

  1. Buyer’s Agent

  2. Seller’s Agent

  3. Loan Officer

  4. Escrow Officer

  5. Transaction Coordinator (Buyers and Sellers)

  6. Title Agent

  7. Home Inspector

  8. Termite/Pest Inspector

  9. Insurance Agent

11. Final walk through/close of escrow: During this final stage together we will inspect the property to make sure it is in the same condition as when you agreed to buy it. Also to ensure the seller has repaired all repairs requested by the buyer if any. If we find an issue we will address the issue before closing and signing off on the verification of property document. Escrow will close typically the next day, upon closing keys will be handed over.

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Do’s & Don'ts

Purchasing a home is one of the most exciting and important decisions someone can make. Making a mistake in the process can be devastating. However, most first-time home buyer mistakes are easily avoidable with a little bit of research and guidance from a real estate professional. Here are a few do’s and don’ts to help prepare first-time buyers.

Don’t assume you are able to buy a home just because you have saved for the down payment. There will be other pre-buying expenses related to purchasing the home that you need to anticipate. Anticipating these costs and investing up front will make the loan process much easier. Make sure you check your credit score as well, because this will determine your interest rates and insurance costs.

Don’t make any huge purchases before you close. Lenders will re-check your debt load just before closing. If they see large additions to that load, they may back out on you, even at the last minute. Hold off on getting that new car, new furniture, new appliances, etc., until after you have closed.

Don’t underestimate the cost of home improvements. If you decide to purchase a fixer-upper, assume that any updates you plan to do will cost more and take more time than you budget. This may be true for smaller home projects, too, such as remodeling a bathroom or refinishing hardwood floors.

Don’t make an emotional purchase. You want to find a house that you love, but don’t let attachments to details fog your vision when it comes to making a smart financial investment.

Do take a long term outlook on your purchase. Things like the kind of neighborhood or quality of local schools may not matter to you if you don’t have a family. Extra bedrooms might also not seem too important. Your ability to resell your home, though, is. Think through how your home may work if your circumstances change or how easily you might be able to resell it if that is what is necessary.

Do choose the right lender. Look for one who is creative has experience with a good reputation who delivers on their promises, especially in regard to the rate they offer and the timeliness of getting the loan in place.

Do work with a REALTOR®. Representation is FREE, MFCU customers get a 25% rebate! There are a lot of complex avenues to navigate as you purchase a home, and a REALTOR® will be able to offer you guidance and resources to manage it well. Everything from finding the right house, to negotiating the deal, to walking you through closing costs, a REALTOR® is the most helpful asset to your investment.

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Homeowner Benefits

1. Homeownership is an investment. Unlike a car and many other purchases that decrease in value, a home is a purchase that appreciates over time. While each local market has its own unique factors, the national median home price goes up each year, even in times of recession. As you pay your mortgage each month, your debt amount goes down, while the value of your home continues to rise. This creates the buying and reinvestment power better known as equity.

 

2. Gain equity. When it comes to homeownership, investment and equity are directly related. As you make mortgage payments each month, part of the payment goes toward the interest, while the rest pays down the principal balance. Equity can be better defined as the part of the principal balance you’ve already paid, or the percentage of your home you already own. Paying the principal is like depositing money in the bank, because that money becomes available for reinvestment in the home itself or a new home.

 

3. Take advantage of tax benefits. The federal government encourages homeownership (which in turn encourages economic growth) by offering tax incentives for homeowners. The biggest one is the option to deduct interest from mortgage payments on your income tax return, especially at the start of a mortgage when most of the payment is applied to the interest. Payments on private mortgage insurance (PMI) and certain home-related purchases also qualify for tax benefits.

 

4. Stabilize your housing costs. A fixed-rate mortgage means you’ll have the same mortgage payment for the term of the loan (usually 30 years), while monthly rental payments will continue to climb. And even adjustable-rate mortgages (ARM) have a fixed cap on them. Homeownership also stabilizes other home-related expenses like utilities and gives you more control over your ability to make investments in your property that keep those expenses down.

5. Gain control over your living space. Renting doesn’t usually come with a lot of options for modifying your living space to better suit your needs. Renters with changing needs must also deal with changing residences. Homeownership means you can make improvements to your home, and home improvements usually lead to increased home value, both financially and in daily home life. The power of equity can give homeowners the extra financing they need to reinvest in their homes when cash funds aren’t an option.

 

6. Increase your own sustainability. Homeownership can help you create a sustainable future in many different ways. Long-term renters lack sustainability because a high percentage of their income usually goes toward housing expenses that are constantly increasing. Locking yourself into a mortgage payment helps level out living expenses, so when income goes up it can be budgeted elsewhere. Paying off a mortgage allows homeowners a long-term plan to significantly reduce their living expenses as they move toward a retirement budget.

 

7. Stop moving. Homeownership increases sustainability and stability. Moving from rental to rental is a major inconvenience and a financial and emotional burden. Renting can mean that you never really know where you’ll be living next or what your expenses will be. Staying in the same home allows a financial and emotional investment in both your living space and your community.

 

8. Use your investment to make another investment. The equity that comes from paying a mortgage is what allows many individuals and families to make future investments in the same home, a higher-valued home, or second home.

 

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Documents typically required from a lender:

1. Application: Full name / social security number / birth date / married or single?

2. Current address for a 2yr period

3. Employment information (need 2yr history): name / address/ phone # / title or position / approx annual income / length employed:

4. List of all liquid assets: 401k, Cd’s, IRA account etc. Lenders typically only need name of institution and approx balance. Some may require actual statement.  

Copies required:

 

  1. 2 yrs most recent W-2/1099’s

  2. Most recent pay stubs - 30 days

  3. Most recent bank statement 1-2 months

  4. Copy of driver’s license

  5. 2 yrs tax returns

Home Buying Procedure

Bruce Palizban, CMRS

REALTOR®

Buyer Specialist

CA BRE# 01807369

RE/MAX Home Center

D: (760) 415.7007

Bpalizban@remax.net

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Bruce Palizban BRE#01807369

Bruce is a business professional with a strong work ethic with an extensive background in customer service as he spent years of his youth managing a well known established family business, Rocco’s P....

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