Wednesday, June 25, 2014

BUYERS...Beware and Prepare!

School's out, and summer's here, which means that buyers are going to be hitting the market hard.  There will be lots of competition out there and if you want to buy a house you'll need to be ready.  

Buyers love to browse the web for homes and then call agents asking about the properties--thinking this is the way to get started.  Remember, Buyers, you're buying a HOUSE: the most important financial decision of your life--gotta get your ducks in a row.  Lots of times, because buyers aren't really prepared to buy when they call an agent about a property, the conversation ends quickly - but it doesn't have to! Here's a tip - being ready is better than having to get ready and ultimately it protects you from missing out on the perfect opportunity!

So, before you start your home search, there a few things you'll need to do first.  In making an offer to purchase a home you'll need what I call "PEP-C"... or Pepsi, if that helps you remember it better:



Your financing is the foundation for the whole transaction. Simply put--NO MONEY; NO HOUSE.  You must get pre-approved first if you want Realtors to take you seriously and to get them to agree to actually show you homes. Your pre-approval is a verification of your employment, income and your credit history, which will determine how much you will qualify for.  Once you're done, you'll get a pre-approval letter which tells realtors how much house you can afford.

You can get  pre-approved directly with a Bank, like Wells Fargo or from a Loan Broker, who has  access to a bunch of different lenders and can help you shop for the best interest rate.  Choosing the right loan officer is crucial to a smooth, successful purchase. So, chose wisely! I recommend meeting face to face with your loan officer to get a detailed explanation of the loan process and to see if he or she is the right person to get the job done for you. This stuff is complicated, so make sure that you're loan officer is patient and willing to address all your concerns.  Here is what the pre-approval letter looks like:

Earnest Money Deposit

This is a copy of a personal check that serves as a "Dummy Check" for your Earnest Money Deposit (EMD)--it shows the sellers that you're committed to the deal--or as I like to say--"now you've got skin in the game".  Your EMD is usually in the amount of 3% of your purchase price.  No one will actually cash this check, it's simply a place holder and a show of good faith.  Once your offer is accepted, then you will have 3 business days to actually put this money into an escrow account and this is done by wire transfer.  Sounds more complicated than it is.   Don't worry, I will walk you though all of this when the time comes! Here's an example EMD check:

Purchase price is $166,000 for a condo.  3% of that is about $5000.

Proof Of Funds

"Proof of Funds" put simply, it's proof you have enough money to cover your down payment and your closing costs.  Bank statements, investment accounts, or gift letters are examples of acceptable proof that you have enough money to actually close the transaction.  Don't worry, account numbers can be blacked out for your security, but you'll need something with your name/institution's name on it and your full balance.

Handing over the money is always a source of anxiety for buyers, so best to plan ahead and have a $2,000 cushion just in case there are some unforeseen expenses along the way.  If you don't use it then you'll have a little extra after you close to get those curtains or new dishes you wanted!

Credit Scores

Credit scores reflect your financial responsibility and whether or not you pay your bills on time.  If you have low credit scores due to collections, late payments or  judgements, you may not be ready to purchase a home right now...BUT you should still meet with a loan officer to advise you on how to correct these issues and help you come up with a game plan to purchase in the future.  One way or another, you gotta deal with the elephant in the room if you want to make progress on your dream.

Credit scores are also a big source of anxiety for first timers, but the truth is that you gotta stop dipping your toe in the pool and just jump in!  You can't change your credit unless you know what it is!  And you can't get a loan unless you have at least a 580 score.  Either way, you still can get in the game, now or in the future---it's up to you!! 

Free credit reports can be obtained HERE

After you have all these things in place, then I'd love to see you in my home office to review the "Buyer's To Do List"--38 minutes of what to expect before, during and after the purchase of your home.  Snacks and cold drinks are provided.  :  )

THEN you'll be ready to go shopping for a home with complete confidence!

Call me if you need a referral for a loan officer, or if you're already approved, call me for a Buyer's Consultation. Or if you just have any questions about this or anything related to real estate--call me---I'm always here to help!


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