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First time home buyers

Home Inspection (What it consists of)

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Home Inspection (What it consists of)

Inspecting the conditions of a house is a very important part of the home-buying process and should be included in the purchase contract as one of the conditions of closing a deal. The inspection clause in a purchase contract gives the buyer the right to have the property thoroughly inspected. The purpose of the inspection is to provide a current report of the overall assessment of physical conditions of the property. More than one professional inspectors should look for defects in the buildings structure, systems, and physical components, such as roof, plumbing, electrical, and heating/cooling systems, floor surfaces and paint, windows, doors, foundations, and detection of pest infestations or dry rot and other damages. The inspector should also examine the land around the house for issues concerning grading, drainage, retaining walls, and plants affecting the house. Even if the seller provides a report, it is always best to not rely on that alone and get your own professional opinion.

In most cases buyers get the inspection after they are in contract to purchase the property. It’s usually made contingent on the buyers approving the results of one or multiple inspections. The buyer arranges and schedules the inspections. Before getting a professional, you can also conduct your own informal inspection. Look out for issues like sloping floors or browning walls, signs of water damage, missing roof shingles or gutters coming loose, old or low quality appliances and fixtures, and signs of wear and tear that needs repair.

Hire a general contractor or a home inspector to perform a full inspection from top to bottom, including roof, plumbing, electrical, heating, foundation, and drainage. Typically this process takes anywhere from $200-$500, depending on location, size, and age of the home. As a buyer, you want to choose someone who will be thorough and tough. I can recommend 3 well qualified seasoned home inspectors. However I do not recommend you stop there, ask other home owners and friends for recommendations or check with the American Society of Home Inspectors (ASHI). Also get a pest report, it is wise to hire a licensed structural pest control inspector, who will create a special pest report. Some general contractors are also licensed pest inspectors, but will normally charge extra. It is important to have a written report of all inspections. 

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Financing Process

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Financing Process

The financing process works in a series of steps and sometimes it is very tedious. To make things easier, I've compiled a breakdown of steps to take for the financing process including:

1.    Rechecking Credit

a.     Make sure that your credit report is as accurate and up to date as possible.

b.    Get a credit score & report- obtainable by going to any of the 3 credit bureaus (Experian, Trans-union, and Equifax). You may go to www.equifax.com and click the option on the website for a one time purchase of your credit report and score for $15.

2.    Get prequalified

a.     When financing a home, it is a better idea to be pre-qualified. This allows a lender to calculate an estimate on how much you can afford using the information that you provide. Getting prequalified helps you make an informed application for the mortgage preapproval and is evidence that realtors know you will be able to get financing.

3.    Shop for loans

a.     Shop around for the right terms for you. There are a number of different kinds of loans you can shop for. The more terms on your mortgage, the higher the monthly payment. Mortgages are typically 15-30 years, and prepaid interest is called “discount points” or “points”. I can recommend 3 professional lenders for you to decide, but I wouldn’t stop there. Keep shopping around online or through friends and referrals to decide which terms offer the best rates.

4.    Get Preapproved

a.     Getting preapproved is a firm commitment from a lender to loan you up to a certain maximum amount without the specific property. This is a very positive step, it lets you go through the financing process before making your offer, which in turn saves you time and energy down the line. After you’re preapproved, closing the loan is quick depending on a good appraisal review and title report.

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Financing costs when buying a home

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Financing costs when buying a home

The costs of buying a house is heavy, and for those who think knowing mortgage rates, tax payments, and sticking within your budget will be sufficient will be in for a surprise. There are more expenses involved in the home buying process than just property costs, here are some things you should keep in mind when budgeting your expenses:

  • An appraisal to justify the fair market value.
  • Inspection costs.
  • Real Estate attorney to review contract.
  • Property taxes for example are another cost to look out for. The general mortgage rate is about 3.8%-4.2%.
  • Homeowners Association.
  • Moving costs: packing, storing, transporting.
  • Utilities: telephone, electricity, gas, and water.
  • Appliances or furniture.
  • Maintenance and Renovations: example is trees that fall on roofs, gutters need cleaning, driveways need repair, plumbing, and wiring. The rule of thumb is to budget at least 1% of your homes purchase price each year for home maintenance costs.
  • PMI and title insurance: if the down payment on your house is less than 20% of the purchase price, you will have to pay for Private Mortgage Insurance. PMI protects your lender in case of default. It’s standard and fees may vary. Title insurance offers protection for you and your lender if you discover someone else who could claim title of the house.

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Choosing a Real Estate Agent

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Choosing a Real Estate Agent

All real estate agents are regulated by law. Therefore their professional information is public, search their licensing information and look for any complaints or if the person is a real licensee. Check to see if they are a REALTOR and therefore adheres to the NAR’s code of ethics. Certain designations also represent their specifications. For example ABR means accredited buyer representative, and CIPS means certified international property specialist.

When selling a home, be careful of agents who “buy the listing.” Meaning some agents will agree to a high price in order to buy the listing. This could mean that the agent is either exceptionally good or he doesn’t truly understand the market. A good agent will help you set a price that reflects the market. To maximize your profit, but not set a price so high it scares off buyers. Allow us to show you the unique differences between Elliot Lee and the rest.

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Appraisal Process and Cost

During the home buying process after your offer has been accepted, the next step is to apply for a formal mortgage. A part of that includes an appraisal process where your lender will order a home appraisal. Typically during this time the borrowers are required to pay for the appraisal. The cost will be on the closing statement (HUD-1) as a closing cost. This appraisal is to assess the fair market value of the home from the eyes of a trained professional to make sure the home’s value supports the purchase price.

The appraisal is required to get a mortgage approved. Appraisers calculate by finding the comparable properties in the area that have recently sold with similarity to size and location to the home you are buying, this is the most important factor. They also include the general condition and age of the home, remarkable features, views, major structural improvements, amenities, and the numbers of bedrooms and bathrooms.

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10 steps before buying a home

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10 steps before buying a home

1.    Financial health- is your finances ready? Do you know what you want? Building a house requires foundations to be poured. As with this example, you need to know what you want and also have the stability to pay for it in order to begin the real estate search. In addition to down payment, there are also closing costs associated with the transaction. It’s important to know that there are some lending institutions that have programs where you put little to no down payments at all. However it’s important to keep in mind that the less you put down, the more the monthly payment for your loan. So if you are able, it’s better to put more down. Make sure you have good credit, and it’s important to have all payment in the past year to be paid on time.

2.    Shop for a mortgage- There are several reasons to go shopping for a mortgage. First you’ll find out how much money you can actually borrow. Which has a lot to do to with how much you can buy. Be careful not to let lenders push you into a monthly payment you do not feel comfortable with. Stay away from “alternative” loans, like interest only mortgages. This is because if the value of your house goes down after you purchase it (which is not unreasonable in this marketplace), you’ll end up owing to the bank more than what your house is worth. Shopping around will also get you the “pre-approved” for the amount you would like to borrow. Besides all of this, sellers like pre-approved buyers because there’s less risk of the deal falling apart. Try to come up with 15-20 percent of the down payment. You may not have to put much down in some cases some lenders will lend you 0% down. But these loans are more risky and usually more expensive. Besides without the down payment you don’t own any piece of the house, the bank owns the whole thing.

3.    Find a lawyer- Ask Around, check out lawyers on websites. Make sure to at least talk with them to see how they charge. This is typically a fixed fee. Ask a lawyer as many questions as you can, but know they will probably only give you 5-10 minutes. Lawyers get paid by the hour. So they don’t like to give time for free. Find someone who is honest, direct and takes time to explain things.

4.    Do your research- find out what houses are selling for in your area? Look for selling prices, not asking prices. You can get these from your realtor or online. After finding the house you want, ask your realtor for comparable of recent sale of housing around the area, or same subdivision- if applicable.

5.    Find a realtor- Having a realtor possesses many advantages. Realtor’s know the market conditions as well as the market price for your home, and can save you a lot of money down the line. It is true that you can find most of these online today and also finding the right home at the right price. However the basic rule in real estate is that no two properties are alike, even if they are on the same street. Because of this, homes differ from contracting terms, financing terms can be different, as well as inspections terms and closing costs. In the grand scheme of things, negotiating, inspections, financing, marketing, and pricing, it makes sense to use an expert who is experienced in dealing with all of these matters. Please feel free to reach out to me directly to ask me any questions you may have, 626.757.4484 | Elliot@Elliot-Lee.com.

6.    Finding your new home- When you have found your dream house, it is important that you don’t fall in love with the house, as you might not get it. You do not have to offer the full asking price, however you do not want to “lowball” an offer either or the seller may tell you to take a hike. Find out the sellers circumstance and the reason they want to sell. If they’ve been waiting for years and want the highest possible price then it will be tough to negotiate the offer. If they already have another home, then they would be inclined to be more flexible on the negotiation.

7.    Call your lawyer- send your contracts for your lawyer to review. Be sure to read it carefully yourself. There are certain “standard clauses”, but there is no such thing as a standard real estate contract. Understand what each clause is, even if you don’t follow the language. This is why it is important to have an attorney who takes his or her time explaining you the details.

8.    When offer is accepted, you will be asked to put a “binder” deposit. Let’s say the equivalent of 1% until the contract is signed. Depending on state, some states give you a grace period of a few days to change your mind with no fault.

9.    Submit your mortgage application along with its application fee. Try to get your lenders to lock your rate before closing date. By law, lenders are required to give you an estimate of closing costs which can run anywhere from 1,000-10,000 dollars. Review all of these fees before you sign the loan contract. Some common closing fees include: attorney fee, title insurance, appraisal fee, home inspection, partial property taxes (if closing in the middle of the month), courier fees, mortgage points, government recording fee, transfer taxes.

10.  Bring checks to closing- bring extra checks to the closing.

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