Friday, February 24, 2006
By knowing these 10 tips for buying a home, you'll help create a successful and more enjoyable experience. It's also important to research, ask questions and study the process carefully as it applies to you.
1. Get educated. Know terms associated with real estate transactions such as pre-qualified, home inspection, commissions, duel-agent, mortgage rates, good faith estimate, escrow and more.
2. Meet with a mortgage broker or lender. As a potential buyer competing for a property, you'll have a better chance of getting your offer accepted by being as prepared as possible. There are three levels of being prepared ranging from not prepared at all to fully prepared. The benefits available at each level can be more easily understood when you put yourself in the seller's shoes.
Pre-qualified, not pre-approved: This buyer provides a letter that they can afford to purchase your property.
Pre-qualified: This buyer has met with a mortgage broker (or lender) and discussed their situation. The buyer has informed the broker regarding their income, expenses, assets, liabilities and credit. The buyer provides you with a letter from the broker stating an opinion of what the buyer can afford.
Pre-approved: This buyer has provided a broker written evidence of income, expenses, assets, liabilities and credit. All information has been verified by a lender. As a result, much of the paperwork for this buyer's loan has been completed. They provide you with a pre-approval letter from the lender. You're as certain as possible that this buyer can close.
3. Choose the correct lender. Think about the rate, total cost of your loan including the annual percentage rate, loan fees, discount and origination points. When receiving a quote from a lender or broker, ask that the discount points (charged by the lender to reduce the interest rate) be distinguished from origination points (charged for services rendered in originating the loan).
It is important to have confidence that the company you select is reputable and will deliver the loan with the terms and costs they promised. Ask family, friends and your real estate agent for names of lenders that have worked with and always interview prospective mortgage companies.
4. Allow for delays in the transaction. In a perfect world, all real estate transactions would close on time. Transactions are often delayed a week or more. Plan and allow for delays.
5. Get a good-faith estimate. Within three business days after your loan application is received, you must receive a written statement of fees associated with the transaction. This is both the law and the best way to determine what you'll pay for the loan. Bring the good-faith estimate with you when you sign loan documents.
When a mortgage company tells you they have locked your rate, get a written statement detailing the interest rate, the length of the rate lock and program details.
6. Use caution if using a dual agent - i.e., an agent who represents the buyer and the seller in the same transaction. The simple fact is that buyers and sellers have opposing interests. Sellers want to receive the highest price, buyers want to pay the lowest price.
In a standard real estate transaction, the seller pays the commission. When an agent represents both buyer and seller, the agent can tend to negotiate more on behalf of the seller.
7. Get professional inspections. Unless you're buying a new home with warranties on most equipment, a home inspection is recommended. This way you'll know what you are buying. Inspection reports are also negotiating tools when asking the seller to make needed repairs. When a professional inspector recommends repairs, the seller is more likely to agree to do them. If the seller agrees to make repairs, you and your inspector should verify that they are done prior to close of escrow.
8. Shop for home insurance early. Start shopping for insurance as soon as you have an accepted offer. Many buyers wait until the last minute to get insurance and do not have time to shop around.
9. Don't sign documents without reading them. You are spending a considerable amount of money. Read and understand what you read and what you sign. If you don't understand something, ask questions and review document ahead of closing. You will not have time to read the documents sufficiently at closing.
10. Use caution with making verbal agreements. Don't make them. But, if you do, double check to make sure that anything you agreed to verbally is in writing.
Elizabeth Guarino is a Realtor with ERA Today Realty in West Falmouth. She can be reached at elizabeth.guarino@era.com or www.yourmainemove.com
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