The Key Players
Realtor: Full-time agent experienced with first time buyers in the area you would like
Lender: Mortgage broker who works with first time buyers and who is
knowledgable about low down payment and creative financing
Home Inspector: Inspects all the systems of the home
Termite Inspector: Inspects for termite infestation and dry rot
Appraiser: Appraises the home for the lender
Escrow Officer: Manages money and transfer of ownership
Who Much Can You Afford?
The first step is to figure out how much you can afford. Meet with your Lender to get pre-qualifed. Some Realtors, like Robin & Les Wrigley, can do this for you.
You tell them:
1. Your earnings: how much do you make? Variable pay(commissions, bonuses)?
2. Your Savings: how much do you have for down payment,closing costs,reserves?
3. Your Credit: any current debts? what is your credit score (FICO score).
They tell you:
1. Maximum monthly debt payments, including your other debts.
2. Maximum housing payment* (mortgage, property taxes, insurance, condo dues).
3. Maximum mortgage**.
4. Maximum home price.
*The housing payment is NOT equivalent to rent. You also get income tax deductions for mortgage interest and property taxes.Your income taxes will drop by an amount rougly equal on one third of your housing payment.
**The size of the loan depends on the type of loan you get. The lower the monthly payment or interest rate, the bigger the loan you can afford. Variable rate and interest only loans will give you the biggest possible loan. What type of loan to choose varies depends on your future income prospects and how long you plan in the home.
What do you want in your new home?
1. How big? # bedrooms, # bathrooms, other rooms
2. What type of property? house, townhome, condo, and how much land
3. Where do you want to live? general region, close to work, quiet area
4. What condition is acceptable? remodeled, updated, dated, fixer upper
Figure out what you can get for the money
1. Meet with the Realtor to find out what homes and neighborhoods you can afford.
2. The Realtor searches MLS (Multiple Listing Service) for good matches for you.
3. Drive by different areas and homes to narrow down what you like and don't like.
4. Go out with the Realtor to see the interiors of selected homes.
Making Your Offer to Purchase a Home
1. Count on your Realtor to gather some intelligence ahead of time for you.
a. the motivation of the seller and desired terms.
b. any other offers coming in on the home?
c. what have comparable homes sold for in the area?
2. Meet with Realtor to structure the purchase offer.
a. Evaluate necessary repairs to the home.
b. Contingencies for inspections and loan approval.
3. Realtor meets with the seller and seller's agent to present the offer.
a. Seller may accept it, reject it, and give you a counter-offer.
b. You can then decide whether to accept, reject, or counter the counter-offer.
c. When both parties finally agree, then you are in contract on the home,
subject to contingencies.
How Escrow Works
1. Once the buyer and seller come to agreement (in contract), escrow is opened.
2. You submit a good faith deposit into escrow (3% of price).
3. Contingency period for home inspections and financing approval (0-14 days).
4. If there is anything you do not like, you may negotiate it with the seller.
5. If the seller refuses, you can decide not to purchase the home and get your deposit returned.
6. Your Lender will have an appraiser come out to evaluate the market value of the home. If the appraisal comes in too low, or if you cannot get the loan terms you wanted, you can choose not to purchase the home and get your deposit returned.
7. Once you are satisfied with the inspections and the loan approval, you then officially remove contingencies on the escrow. Your deposit now becomes non-refundable and goes toward the down payment and closing costs.
8. One week before close of escrow, you will sign all the loan documents.
9. One day before close of escrow, you will submit the rest of your down payment.
10. A few days before escrow closes, you also have an opportunity to do a final walk-through of the property to make sure that any negotiated repairs have been completed, everything included in the sale is still at the property, and seller's personal property has been removed.
11. On the day that escrow closes, your deposits in escrow are transferred to the seller, and the ownership deed and keys are transferred to you. Congratulations, you are now a home owner!