Buyers' Guide

Decide Whether You Want a Realtor 

During the casual browsing phase, decide whether you want a buyer’s agent. Some buyers initially want to buy a home without a realtor but quickly discover that finding homes that fit your criteria can be very time consuming. You can spend hours each week browsing for homes online and setting up appointments to look at them. A professional realtor can facilitate the whole process by finding out your likes and dislikes and alert you each time an appropriate property becomes available. When you see something that interests you, the realtor can set up appointments for you to visit them. That process can save you a tremendous amount of time and beats driving around the neighborhood. It will also be nice having someone hold your hand and guide you through a completely foreign process. Now you may be thinking “will I have to pay for the services of a buyer’s agent?” It is actually the seller and not the buyer who pays the commission for both the buyer's and seller's agents' services in a purchase transaction.

Determine If Buying Is Right for You 

Before you start attending open houses, you need to determine if buying a home is even the right move for you. When figuring out whether buying makes sense right now, consider not only your financial situation but include your current and future priorities. For example, if you have children, the educational opportunities available to them, the make-up of the community you will live in – does it provide you with the essentials that complement your lifestyle, is the commute time to your workplace reasonable, are the neighborhoods safe and secure. These are samples of the endless criteria to evaluate.

Gather Financial Documents 

When you apply for a home mortgage, your financial situation will be evaluated thoroughly. You willl have to provide enough documentation to prove that you are financially capable of paying back a large loan. Preparation is always the best advice. Below are the documents you will potentially need to submit to the lender when applying for a mortgage:

 • W2 statements and 1099 income statements if applicable.
 • Two years federal tax returns.
 • Two to three month's bank statements.
 • Recent pay stubs and proof of any other income.
 • Proof of investment income if any.
 • Verify cash available for the down payment and closing costs.
 • Provide gift letter if applicable.

 Get Pre-Approved For a Loan 

Call up your bank / lender and ask to get pre-approved for a residential mortgage loan. This will give you a good idea as to how much of a home purchase price you could afford. Getting pre-approved can be done over the phone or in front of a loan officer by responding to questions regarding details of your employment and financial situation. The pre-approval letter is part of the documents supplied by the buyer when making a purchase offer. When you are pre-approved for a loan, the lender has evaluated your credit worthiness and your ability to service a loan up to a specified amount. When a mortgage loan application is finally submitted, there will be other criteria that will be considered and verified by the lender before a requested loan amount is finally approved.

What Type of Mortgage is Right for You 

You have several choices when it comes to deciding on a mortgage loan. Each type has their pros and cons. Fixed-Rate vs. Adjustable-Rate Loans. The most common type of mortgage is the conventional or fixed rate mortgage. With a conventional loan, the rate stays the same over the life of the loan. The big plus with fixed rate loans is the peace of mind that comes with knowing that your monthly mortgage payments won’t fluctuate year to year. On the other hand, adjustable rate mortgages or ARMs as they are often called, have a shorter period of fixed interest rates (such as 3, 5, 7 or 10 year terms) and then changes yearly thereafter based on the going rate at the end of the fixed term. When it is time for the rate to adjust and rates are low, your monthly mortgage payment could be reduced. If they are higher, your payment will increase. ARMs are tempting for first-time home buyers because their initial rates are lower than conventional loans. With the lower initial monthly payments on ARMs, they can also be easier to qualify for. 30-Year vs. 15-Year Loan. This refers to the number of years it takes to pay off the mortgage. A 30-year mortgage are the most common. 15-year mortgages are much harder to qualify for and have higher monthly payments because you’re paying off the home in half the time. The obvious benefit is that you pay off the loan and build equity faster than you would with a 30-year mortgage. If you have a goal to pay off your home mortgage as quickly as possible, just get a 30-year loan and make additional monthly payments to principal. Making even one extra payment per year on a 30-year mortgage will reduce the repayment period of the loan. If cash flow becomes an issue, you can always resort to the regular payment amount only. You should also verify that your 30-year mortgage allows for prepayments to avoid penalties. Look Into FHA Loans. An FHA loan is a home loan insured and backed by the federal government. FHA loans offer low down payments than traditional home loans. They are geared towards first-time homeowners and other buyers who might not have the cash to put 20% of the purchase price as a down payment. To apply for a FHA loan, you will need to find a FHA-approved lender and meet all the program requirements. There are some downsides to FHA loans. First, your closing costs will include an upfront mortgage insurance premium based on the total loan amount. You will also pay a modest fee with each monthly payment for the life of the loan.

 Begin Your Search and Attend Open Houses 

Most buyers initiate their home search by browsing the internet. Seeing homes in-person can help you develop your preferences. Make a list of features you want in your ideal home and also a list of features you do not want in your home. This will help narrow your choices and simplify your decision making process.

Make an Offer 

Once you’ve found the home of your dreams, it’s time to make an offer. Your realtor should be very aware of the current market cycle. When the market is down, the buyer may have the negotiating edge versus an up cycle when properties may receive multiple offers and submitted prices can go above the asking price. When you make an offer, the seller can either accept, decline or counter offer any terms and conditions that they want to change. The negotiating skills of the realtor can play a big part in working with you to prepare your best possible offer that has the best chance of being accepted. When an offer is accepted, there are three primary contingencies that can impact the continuation of the transaction. The first has to do with the buyer performing any appropriate inspections to the home. The usual ones include are the home, pest, roof and chimney inspections. Be aware there are dozens of other inspections that can be performed. It is up to the buyer. If there are any discreptancies or substantial repairs determined in the report(s), there is a process that the buyer can follow to withdraw their offer. The second is the appraisal contingency and that appraisal will be ordered by your mortgage lender. The home's value must be equal to or more than the accepted purchase price. If the value is less, the buyer may withdraw their offer, renegotiate the purchase price or consider other possible options. The last is the loan contingency which basically says that should the lender determine that you do not qualify for the mortgage loan, you may cancel your offer.

Close of Escrow 

Closings typically take place at a title and escrow company’s office. Escrow provides a very important service as the neutral third party. Their responsibility is to collect from the buyer all the funds necessary to pay for the purchase of the home to give the seller and to receive from the seller clear title to the home to transfer to the buyer. Once this signing process is completed and all required documents are recorded with the county, the home is now yours.