For Home Buyers

Choosing Your New Home

When you are touring prospective new homes, it is critical to distinguish between a home’s “skin” and its “bones.” The “bones” are the aspects of the home that cannot be changed – location, lot size, physical configuration, environment (social & physical), schools and other fixed features.

The “skin” of the house, on the other hand, represents superficial qualities like carpet and paint color, wallpaper, landscaping and window coverings. While the skin can be readily changed, it is beneficial to your budget to keep in mind the related costs.

In evaluating your prospective new home, it is often more important to evaluate bones than skin of the house, because a propertie's skin can be changed to suit your particular needs and tastes. Along these same lines, don’t get too taken with a house’s decor if your own furnishings are radically different. To the fullest extent possible, try to imagine the house empty and “skinless.”

Creating Your Wish List

To help you choose the best real estate professional to represent you in the home buying process, it is important to understand what your personal objectives are, so you can present these to prospective agents and evaluate their ability to help you meet your goals.

One of your primary objectives will be to secure a home that will meet the needs of your family. Here are a few things to consider:

What is important to you? Proximity to employment? Proximity to schools? Is shopping or public transportation important? Do you prefer the peace and quiet of a rural or suburban community or the hustle and bustle of city life? Who are “your people” and where do they live?

Are schools an important consideration for your family? What do you want? Diversity? Proximity? Excellent testing scores?

It’s never too soon to contemplate your exit strategy from this new investment. Understanding your expected time horizon in this home impacts many issues, including mortgage alternatives, resale implications and the amount of space you need.

It is critical to understand what you can comfortably afford to pay for your home. Use our calculators to help you determine this number or tap into my personal expertise to help keep your home purchase within your budget.

Loan Application Check List

To help you gather the documentation needed for your loan pre-approval or approval, please use the following checklist:

General

.Pay stubs for the last 30 days
.Lender names, addresses, account numbers, balances and monthly payments for all current loans
.Estimated values for personal property and furniture.

For the last two years

.Signed federal income tax returns
.W-2 or 1099 forms.

For the last three months

.Bank statements
.Retirement account statements
.Mutual fund and stock account statements.

Copies of

.If you are selling another home, a copy of the listing agreement
.If you sold another home, the closing statement on that transaction
.Homeowners insurance information
.Current rental agreements, if you own rental property
.Gift letter and copy of check, if applicable
.Separation, divorce and child support documentation, as applicable
.Photo ID and proof of social security number
.Pension award letter, if you are retired
.Social security award letter, if you receive social security.

Explanation of

.Source of down payment and closing costs, including supporting documentation
.Late, slow or no payments on your credit report.

If you are self-employed

.Signed copies of last two years’ business tax returns with schedules
.Year-to-date profit & loss statement
.Personal financial statement

The Importance Of Mortgage Pre-Approval

Pre-Qualification

Pre-Qualification is an informal way to see how much you might be able to borrow for your new home. You can get “pre-qualified” over the phone with no paperwork by telling a lender your income, your long-term debts, and how large a down payment you can afford. The lender will not make a commitment to lend to you based on this unverified information, but you will have a ballpark figure for how much you can spend on a house.

Pre-Approval

Pre-approval is a lender’s actual commitment to lend to you. The process involves assembling our financial records (checklist) and going through a preliminary approval process that can take up to a couple of weeks.

Why Get Pre-Approved?

Pre-approval provides you a definite idea of what you can afford and shows sellers that you are serious about buying. In addition to documenting your financial ability to close on a transaction, pre-approval shortens the time needed to close on a loan, and makes you a more attractive buyer for sellers who want a quick and efficient escrow.

Escrow Baisics

Escrow is the process where a neutral, third party is hired to gather all the information needed by the parties to close the transaction, including receiving funds and documents, completing and filing required forms and obtaining release documents for any loans or liens that are paid off as part of the transaction.

Typical documentation collected by Escrow agent/holder includes:

.Loan documents
.Tax statements
.Fire and other insurance policies
.Title insurance policies
.Purchase agreement
.Documentation related to seller-financing
.Requests for services to be paid out of escrow funds

Upon completion of all escrow instructions, the closing can take place. All outstanding payments and fees are collected and paid, and title to the property is transferred and the title insurance issues, as dictated by the escrow instructions.

An Escrow Agent/Holder does the following

.Prepares escrow instructions
.Requests a title search
.Complies with lender instructions specified in the escrow agreement
.Receives funds from the buyer
.Prorates insurance, tax, interest and other payments according to instructions
.Records deeds and other documents as instructed
.Requests the title insurance policy
.Closes escrow when all instructions of the seller and buyer have been met
.Disburses funds and finalizes instructions.

An Escrow Agent/Holder does NOT do the following

.Give advice to either party – the escrow agent is a neutral, third party
.Offer opinions about tax implications

Understanding Closing Costs

There are certain standard costs associated with closing the sale of a house. These fees are split between the buyer and seller, as spelled out in the purchase contract. The cost split on these fees is, to an extent, negotiable. As I negotiate the purchase contract on your behalf, I will strive to achieve not only the selling price that you want, but to also limit the number and amount of closing costs for which you are responsible.

Buyers will receive a “Good Faith Estimate” of closing costs at the time the loan application is submitted to the lender. The estimate is based on the loan officer’s past experience and may not include all the closing costs. I am happy to review the Good Faith Estimate and provide comment based on my experience.

Loan-Related Costs:

.Loan origination fee
.Points (if applicable)
.Appraisal fee
.Credit report
.Interest payment
.Escrow fee.

Tax-Related Costs:

.Prorated property taxes
.Transfer taxes
.Recording fees.

Insurance-Related Costs:

.Homeowners insurance
.Flood or earthquake insurance
.Private mortgage insurance (“PMI”)
.Title insurance