First, we need to get you pre-approved by a lender to see what kind of budget we have to work with. The lender is going to want to see 3-6 months of pay stubs, the past 2 years of taxes, and they will run your credit to determine you debt to income ratio.
Mortgage loans are packaged on a case by case basis, meaning that each transaction is unique to the clients involved. The lender will be able to look at your entire portfolio to tell you what the best strategy is for you as far as down payment amounts and which loan to go with. This keeps all of your personal financial info with the lender. As your agent, I don’t need to know every detail of your financial situation, I just need the lender to tell me how much you qualify for and what terms work best for your particular situation.
You will want to tell your lender right away that you will be receiving a gift for downpayment or no down payment. It is somewhat common that when money is gifted, it has to be “seasoned” in the account. Seasoning money is the simple act of depositing into your account and holding it there for 30, sometimes 60 days. So, if that is something we will have to do, then we need to get the day counter ticking, depending upon how quick you’re looking to get into a new place.
Also, you’ll want the lender to estimate your closing costs for you. Each side of the transaction will have their own set of closing costs. The sellers costs include their portion of prorated taxes and insurance for the amount of time they lived in the residence, and commission for all agents involved. The buyers costs will include loan origination fees, appraisal fees, underwriting fees, and then your side of taxes and insurance. It can be common that buyers ask the sellers to pay closing costs for them, but it does take away some of your bargaining leverage if you go that route. Typically, that happens in situations when the buyer has no money to bring to the table, so its the only option available to them. We will talk more about this when we start getting to the offer stage, just know that I will need an estimate of your closing costs from the lender.
After all of that is taken care of, then the shopping begins. Be thinking of items that are “must haves” for you vs things that would just be nice if they fit in the budget. I will need to know what areas of town you’re interested in, and what kind of timeframe we are working with. It typically takes 30-45 days to get from offer to the closing table, so that can help you gauge the timing. I feel like I already have a pretty good feel for what style you guys will like, but if there are specific things you want me to look for, just let me know.
As I mentioned earlier, the market is competitive and fast paced. Quality homes that are priced right, go quick. So, if we see something you guys fall in love with, we need to act quickly. We haven’t made it to the point where sellers are taking advantage of buyers by inflating prices, but inventory is definitely low. It is important to lead with your best foot forward.
After we find the house, we will compose an offer. Some sellers will require Earnest Money (EM) with offers. EM is 500-$1000 that is attached to an offer to show your good faith in making the deal work. If everything goes as planned and we make it to the closing table, the amount of money you had in EM will be credited back to you. If the deal falls apart for reasons other than those allowed by the contract, then the seller would retain those monies. Reasons that are allowable for the deal to not come together are: Inspection, Appraisal, and Financing.
The offer will contain 7 pages of legal speak, but there are a few main points to focus on. The first is inspection. Inspection is a right, not a requirement, so it is up to you whether you want one or not. Of course, I highly recommend that you do, they run around $350, due whether the home closes or not. You will have a named number of days, typically 10, to have the inspection performed, receive and evaluate the report, and submit requests to the seller. Something to keep in mind during the inspection phase, unless we are buying a new build, then any home is going to have natural wear and tear. The purpose of the inspection is to find items that aren’t easily noticeable by us or even the seller. Safety items will definitely need to be addressed, if any, but wear and tear items should be looked at as a “to-do” list of updates to take on as you can during your ownership. We will submit a list of requests to the sellers, and then basically re-enter negotiations. Sometimes sellers are firm and wont fix anything, some fix all, and some want to alter price in lieu of repairs. If we come to an agreement, we move forward. If not, then we vacate and you get your EM back.
Next is appraisal. The bank will want to verify that the property is worth what they are lending out for it. So they will order an appraisal to verify that the deal will be properly leveraged. The appraiser will personally inspect the property for any noticeable defects that they feel would be a safety hazard or would greatly devalue the home. If any said items are found, then they will be “conditioned”. This just means that they will have to be repaired for the bank to sign off and ultimately fund the loan. More on that as we get closer to it.
Once we are past inspection, appraisal has been performed and acceptable, then your file will be sent to the lenders underwriter to verify that all Ts are crossed and all I’s are dotted. They will investigate to make sure your credit standing is the same as it was when you prequalified for the loan. So, do not open any new lines of credit until you’re already in the new house. Don’t buy appliances at Best Buy, don’t get a new car, change cell phone providers, get a new cable company, anything that requires someone to run your credit. Im sure you know Inquiries hurt, so the fewer the better. If the underwriter reviews and approves the file, then we will have the clear to close.
That is exactly what it sounds like, we are clear to sign all of the paperwork and finish the deal. At closing, you will each need 2 IDs and whatever you are bringing as downpayment in the form of a cashiers check made payable to the title company. There will be a huge stack of papers to sign at close, but I will be there and many times the lender comes as well. The title processor will fully explain each document you are signing and detail any areas of confusion. You will leave closing with keys to the new place, and copies of everything signed.