First off I do not want to bore you with the numbers but pending home sales were slightly down this month from last month. 5.6% to be exact. However home prices still continue to climb. What does this mean. All this means is there is not a whole lot of inventory available, and there is still a demand. Pending home sales are still rising in areas of Colorado and Texas. For the most part, those two states have the biggest gains in the entire country right now.
If you are still in the market to buy a home great.. Congratulations again...
1. Frequently the first person you consult about buying a home is a Realtor, or Broker. This is a good way to go because Real Estate Agents and Brokers will give you great advice, but they will direct there service to help the sellers, and not necessarily help you the buyer. It might be best to find an agent that specializes in buyers. A little something to think about is this.. In California we have what is called "Duel Agency".. Where the listing agent can also represent the buyer at the same time. This is most beneficial to the Realtor because he/she will receive commissions on both sides of the transaction. So if you get in a multiple bidding, or competing situation it might be best to use the listing agent. That way even if your offer is not the highest, if the Realtor is going to get a huge commission, he/she might still put your contract ahead of the line.
2. Before you sign an agreement you might want to talk with an Attorney to see how you can get your interest protected. California is not an Attorney State, but a lot of states in the Mid-West and East Coast are. In attorney states not only will the attorney protect your interest, they will also be working as closing/settlement agents. Basically they are Escrow officers. I am not an attorney, but my simplest advice would be, not to have a loan contingency date on the purchase contract. Your Realtor will know what I am talking about. Remove the loan contingency the day the loan funds and the property records. That way if the loan does fall apart, you will still get your deposit back.
3. Terms of the agreement of sale. Here are some important points to consider. The Real Estate Agent should give you a pre-printed contract. Please read each item in the contract. Make any changes you want on the contract. List all the appliances, and personal items if any you want to stay in the home. You must also agree with the seller as to when you want to move in.
4. The Mortgage Clause is kind of what I talked about earlier. It's an agreement that is if the deal falls through because the loan was denied you as a buyer get your deposit back.
5. Pest. Yes it is advisable to get a Pest Report on the subject property before buying the home. Yes you as a buyer has the right to cancel a transaction if the house as termite damage, or rodent damage, and the seller refuses to fix/repair the damage. A pest report is about $125.00, money well spent if you plan on making a $400,000.00 investment.
6. Home Inspection. Again it is advisable to get a home inspection. Like a pest report a home inspection will list the condition of the entire house, ie the plumbing, the structure itself, the roof, electrical, floors, air conditioner, heater, and finally is the lot graded so water flows away from the house, and not in it. A good home inspection cost about $350.00. Again it's worth it when making a huge purchase.
7. If you are looking at a house built before 1978, then you might want to consider the possibility that the house has lead based paint. There are disclosures provided in the listing packet that explain this.
8. Environmental Concerns. This is also in the disclosure packet. If the house was built near or around oil tanks, or if the soil is contaminated, then have the seller pay to clean it up, or don't buy the house. If you absolutely love the place, then you could offer to split the cost to do any clean up. Or ask for a huge discount.
9. Sharing of expenses. The seller should cover all fees for taxes, HOA dues, and utilities until the day the property records and you the new owner moves in. There should be no sharing of expenses, unless you purchase a foreclosed property, or a state lien property. In those cases you might have to pay back taxes, or pay for repairs, or pay for delinquent HOA dues.
10. In California the seller pays the Closing Settlement Cost, because the seller chooses who to use. If you have your favorite Escrow Company then you can pay to use him/her.
11. Shopping for a loan! This should actually be the first thing you do before looking at properties. Most Realtors will not even take you out on tour unless you are already pre-approved with a lender. With that said find out what product best fits your needs. Then shop around for the lowest rate, least amount of closing cost, and the fastest closings, with the least amount of paperwork. Mortgage brokers might offer you a great rate but their fees can be awfully high.
11a. Government programs are great if you don't have a lot of money to put down, your credit is not so great, or you have higher deb to income levels. Yes government programs are easier to get approved for and the rates are very low, with minimal closing cost, but you have mortgage insurance/funding fees. And that my friend can be expensive. But FHA, VA, and USDA are all great tools to get into a home, then if the value increases, refinance out of it.
11b. CLO's Computer Loan Origination is probably the most commonly used way to apply for a mortgage today, a few years ago not so much. In the past clients were charged a fee to apply online for a home loan, not anymore. It is illegal to charge a fee for the application, unless the applicant has made prior arraignment with the Lender. For example the applicant might have really bad credit, but still wants to apply. The lender might charge $200.00 upfront for the application, but if the loan funds that applicant will get his/her money back at closing.
11c.Types of Loans: Well you have Fixed Rate Loans and Adjustable Rate Loans. Conforming Loans and High Balance/Jumbo Loans, Government Backed Loans, and Interest Only loans, yes those still exist. My advice is for you to shop around and pick which one best suits your needs.
11d. Locking, or pricing your loan. After you find a Lender and a loan product that best fits your needs, the next step is to lock, or price your loan. There are several options when it comes to pricing. The first option is "Buy Down" the rate meaning get a really low interest rate and pay for it in the terms of an added point to the loan. A "point" is 1% of the loan amount. If you want the Lender to help cover some if not all the closing cost you can opt for a No Point, No Fee Loan" the rate is about .500% higher than the lowest rate but it will offer anywhere from 1.500% to 2.200% "points" back in the form of "Lender Credit" which you can use to help pay some if not all of the loan cost.
12. Escrow Expenses. I know I am skipping some steps but after you found a home and your loan is approved, you will want to look at the Escrow or Settlement fees. When you locked your loan hopefully you got some lender credit to cover the closing cost. If not you can ask the Seller if he/she will kick down a few bucks to help out, if that does not work out, then ask the Realtor to help out. If not be prepared to come in with some cash to close CTC's. The exact amount will be on the Good Faith Estimate.
If you have questions please contact:
Mike Brown
Clear Lending
Mortgage Loan Officer
NMLS 333411
415-962-1521
mibrown@clrloans.com
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