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Buying a Home? Here’s How the Process Works

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1) Plan ahead — From the moment you think about buying a home, start
planning. Home buying is a time-consuming and demanding process, and it
behooves you to utilize your management skills early on.

Start by requesting a copy of your credit report. Carefully examine it for
errors, and clean it up before you talk to a lender. Are you currently
renting? Check your lease for an early release clause. If you’ll be subject to
penalties, try to time your closing with the expiration of the lease.

During this planning phase, consider your life over the next five to seven
years. Do you plan to start or grow a family? Will an in-law eventually move
in with you? Will you be working from home? The number and layout of the rooms
you require will depend on your answers.

If you qualify for financing based on a dual income, will you be able to
survive on one salary in order to fulfill a long-range plan, such as one
parent staying home to raise a child? Once you’ve answered these questions,
establish a plan. Then direct the process with reference to the plan. Don’t
let the process dictate to you.

2) Understand the home buying process. Homebuyers need to ask questions. Lots
of questions. So choose a real estate agent who has experience and is willing
to explain the entire home buying process-from viewing homes to negotiating,
to financing, to escrow and closing-in detail.

3) Stay within your budget when searching for a home. What can you do to avoid
becoming enamored with homes that are out of your price range? Monitor your
expenses for a couple of months. Then, based on your findings, develop a
budget that truly reflects your lifestyle. Talk to a real estate agent who can
provide insight into new home expenses and taxes. Then revise your budget.

It’s smart to ask your lender to pre-approve, rather than pre-qualify, you for
a mortgage. Pre-qualification only tells how much you can afford. Pre-approval
goes a step further. Your lender will thoroughly evaluate your
application-including verifying employment information and financial
disposition-then clear you for a loan of a determined amount. Having your loan
pre-approved gives you a sizeable advantage: Your new status as a cash buyer
makes you more attractive to the seller.

Once you learn how much of a home you can afford, stay within your budget.
Just because you’ve been approved for a certain amount, doesn’t mean you’ll
feel comfortable with monthly payments at the high end of the range. Ask
yourself if you can live with these payments. Do they fit your established
budget? If not, rethink your spending limit. Your new home should give you
great pleasure, not hold you hostage.

When you relay your price range to a real estate agent, ask to view properties
within that range only. By restricting yourself, you’ll avoid disappointment
later on.

4) During the home search think with your head, not your heart. Curb appeal
can be a powerful force. It’s the buyer’s kryptonite. By disengaging the
mental faculties, it leaves the homebuyer emotionally vulnerable. To counter
its effect, you must be objective. Brutally objective.

Look at many homes, including an assortment of types of homes. When you view a
property, list the positives and the negatives. Make certain your furniture
will comfortably fit into the space. Visit at various times of day to see how
much natural light floods the rooms and check for changes in traffic patterns,
especially at local rush hours. Have an inspector or engineer pick apart the
property. And recruit a friend to view the home and provide you with objective
feedback. Ask if he or she can picture your family living there and discuss
the whys and why nots. Jot down the points for later review.

Also, think about how long you plan to own the house. Would it be difficult to
resell? List the negatives. Could you eliminate or reduce them?

5) Investigate the area in which you are thinking of buying. Don’t stop your
inspection at the property line. Examine the surrounding area. Is it safe,
well maintained and moderately quiet? Is it convenient to work, schools and
shops? Ask about zoning and that lovely forest of vacant land across the
street. Could the highway nearby be widened in a couple of years? How far is
the train? Within ear shot? If you’re not familiar with the area, ask friends
and colleagues about it. Do your research.

6) Understand the financing. Here’s where it helps to be a quick study.
Homebuyers have to contend with an assortment of mortgage types and the
associated jargon. Your real estate agent can be a great resource.

Get every detail in writing, in particular, the lock-in rate, points and fees.
And request a copy for your file. You should also request an estimate of your
closing costs, which generally run between 3% and 6% of your loan. Inquire
about prepayment penalties. Have the lender attach an addendum to your
contract that specifies that no penalties will be imposed for prepaying the
loan. This step could save you a good deal of money.

Before you get to the table, read all the documents related to the purchase of
the property, and have a professional review them. You’re signing a binding,
legal document. Make certain you understand the conditions of the loan.

Most of all, remember to use your Prudential Northwest Properties agent as a
resource. Ask him or her to explain anything you aren’t clear on. Your agent
is there to educate & guide you, and protect your interests.

Selecting an Agent

·Ask family, friends, and business associates for referrals.
·Attend open houses. If the agent or broker impresses you, ask for a business
card.
·Drive through neighborhoods that interest you and look for yard signs to see
what company handles most of the sales.
·Search local newspapers and real estate publications.
·Call the local Prudential Real Estate Network member office for a referral
to an office in another town
Now you’re ready for the interview. Whether you’re buying or selling, the
agent should explain the entire process up front. Sellers can use the “listing
presentation” to compare agents on their preparation and professionalism. Ask
questions that get at the agent’s experience, knowledge and motivation to help
you:
·Do you work full time or part time?
·How long have you been selling homes in this area?
·Are you familiar with the areas I’m considering?
·What type of homes do you usually handle?
·What percentage of your business comes from referrals and repeat clients?
·How many sales have you closed?
·How many homes did you sell last year?
·What percentage of your listings sold during the listing period?
·Did they sell close to the asking price?
·On average, how many days does a home stay on the market?
·Will you guide us as we prepare the house to be shown?
·Will we receive a copy of the marketing plan?
·How will you advertise our home? In what publications and when will ads run?
Will you employ an Internet marketing program?
·When do you plan to hold open houses? How will you advertise an open house?
·Do you plan to do anything else to get the word out?
·How often can we expect to be updated, even if there’s nothing to report?
A word to the wise: Sellers should not select a real estate professional based
on selling price or commission. It’s probably best to avoid working with
someone who promises you the moon-in this case, an unrealistically high
price-then has to make price reductions until the property sells. Instead,
focus on marketing plans, service and past results. Also, don’t be persuaded
by low commissions. A seller could actually net more than with a discount
broker when a winning marketing plan combined with proper pricing results in a
faster sale and at a better price.

Aim to select someone who is knowledgeable and with whom you feel comfortable.
It almost ensures a productive and mutually rewarding relationship. To begin
your search for a great real estate professional, make the call to Prudential
Northwest Properties or click here for E-mail and mailing addresses for
Prudential Northwest Properties.

About Agent

What you should know about agents representing seller

If you are the type of buyer who enjoys doing the legwork of the homefinding
process, you will most likely visit an open house, builder’s model home or
Parade of Homes. Or, you may make phone calls to listing agents or builders’
representatives to see a particular property.

You should be aware that in order to have independent representation, you
should avoid direct contact with builders’ representatives or listing agents.
This includes registering at a new home neighborhood or attending an open
house. In the case that you desire independent representation, you should
choose an independent buyer’s agent as one of your first steps in your home
search. You would then want to sign a buyer’s agency agreement and keep your
real estate professional closely involved with all aspects of the home search.
Failure to do this may result in your preferred real estate agent being unable
to represent you in the transaction.

WHY? Procuring Cause — A confusing term meaning that whoever introduces a
buyer to the property he or she elects to buy is entitled to compensation for
the sale. For example, if you were to find the home you want to buy while
attending an open housei hosted by the listing agent, and you were not
previously involved with or introduced to the listing by another agent, the
listing agent of the home is entitled to both the listing and selling side of
the sale, to be paid by the seller. You would only be able to have independent
representation in this case if you chose to pay a buyer’s agent his or her fee
for representing you.

How to preserve your right to independent representation

There are two things you must tell a listing agent or builder representative
to retain your right to independent representation:
1. You already have an agent. Give his or her name and phone number to the
seller’s or builder’s agent.
2. Your agent told you about the property. Have the date and method by which
you were told about the property (i.e., by phone, in person, e-mail).

Mortgage Pre-Qualification
Should you get pre-qualified or pre-approved

That depends on whom you ask. It seems that definitions can vary from lender
to lender and individual to individual. While most discussion, written and
verbal, compares pre-qualification to pre-approval, lenders actually offer
three levels of services to qualify a borrower for a
mortgage-pre-qualification, pre-approval and final commitment (”Pre-Qualified
or Pre-Approved: What’s the Difference?” posted June 12, 2000, at the
Cincinnati Board of REALTORS®, cbor.org)

Pre-Qualification
Usually, in just a 15-minute phone call, a lender can pre-qualify you for a
mortgage. Because underwriters do not validate credit history or employment
information for pre-qualification, this preliminary review results in a
non-binding opinion regarding how much of a mortgage a borrower can afford. By
seeking pre-qualification, you’ll come away with an estimated monthly payment
and a price range to shop based on the loan size. This information, however,
is intended to be a guide as you begin the home buying process. It does not
guarantee that you’ll be approved for a mortgage.

Pre-Approval
The closest thing to a guaranteed loan comes with pre-approval. After
completing a formal application and providing all the necessary documentation
related to employment and financial disposition, the file, along with a full
credit report, will be thoroughly evaluated and verified by the lender’s
underwriters. If everything meets to their satisfaction, you will be cleared
for a loan of a determined amount. This in no way means you have a firm
commitment though. The loan is subject to a fully executed sales contract and
an acceptable appraisal.

But being pre-approved can give you a sizeable advantage. Many lenders present
borrowers with a letter, which may give you more leverage with a seller.

Firm Commitment
The lender can issue a firm commitment once the seller accepts your offer, the
home has received a satisfactory appraisal, and your credit has been
rechecked. If all checks out, you’ve got a mortgage!

To help eliminate unwanted surprises, keep these tips in mind:
·Don’t divulge to a seller how much you’ve been approved for.
·Be alert. If your lender hasn’t requested documentation, it’s a good bet
that you’ve been pre-qualified rather than pre-approved.
Contact your lender if your financial circumstances change prior to closing.
The pre-qualified or pre-approved status may no longer be valid

Home buyer FAQs

A great home in pristine condition may get scooped up hours after being
listed. So when competition is fierce, you need to make your offer stand out
from your competitors’ offers. To increase the likelihood that a seller
accepts your offer, consider adopting one or more of these strategies:

Price. Obviously, price tends to be the primary consideration for sellers. In
a hot market, when buyers outnumber inventory, offers often come in at full
price or above. When you’re competing for a home, to get an edge, think about
adding a clause stating that you will beat the highest offer by “x” dollars up
to “x” amount. Cash offers can be more attractive to sellers as well. Although
sellers will receive their money at closing whether buyers pay with cash or
take out a loan, cash offers don’t require lender approval. And loan approval
is never a certainty-it may delay closing.

Financing. It’s not enough to be pre-qualified. Pre-qualification only tells
how much you can afford. Pre-approval goes a step further. Your lender will
thoroughly evaluate your application-including verifying employment
information and financial disposition-then clear you for a loan of a
determined amount. Having your loan pre-approved gives you a sizeable
advantage by putting you on equal footing with cash buyers.

Good Faith Deposit. Buyers offering a larger-than-customary amount of “earnest
money,” a deposit that accompanies an offer, may get a seller’s attention. By
committing more money up front, buyers demonstrate greater sincerity and
motivation to close the transaction. Your real estate professional can guide
you as to the appropriate sum for your specific transaction.

Contingencies. Consider minimizing contingencies, those clauses that allow
buyers to back out of a contract if certain conditions are not met. For
example, it’s common for buyers to make the purchase contingent upon their
securing satisfactory financing. Obviously, offers with the fewest conditions
tend to be more attractive to sellers.

From a contingency standpoint, first-time buyers are often better prospects
for a seller’s home than move-up buyers. Here’s why: Very often, buyers’
offers are contingent upon the sale of their present home. Even if a move-up
buyer has an offer in hand, that buyer’s offer may be contingent on another
contingency, and so on down the line. If one transaction derails, they all
might.

Relationship. Help the seller get to know and identify with you by looking for
ways to connect. For instance, it may be through a shared appreciation of a
certain style of architecture. Let’s say that you’re fortunate enough to find
yourself competing for an original Frank Lloyd Wright-designed home. After
hearing about your visit to Taliesin West, Wright’s desert home, and your
collection of Wright-inspired furniture, the seller might be persuaded that
you should be the next custodian of this national treasure. Of course, the
connection could be something more conventional such as a shared love of
gardening. You’ll want to persuade the seller that his prize roses will be
well tended.

Naturally, sellers would like to receive top dollar for their home, but
remember, they also want an easy, trouble-free transaction. Thus, as a rule,
the fewer the contingencies and the greater the commitment, the more
attractive your offer may look.

To obtain the most professional representation available, contact an agent at
your local Prudential Northwest Properties office today.

My Credit Is Less than Perfect. Can I Still Buy a Home?
Perhaps in recent years, you’ve had financial difficulties that caused you to
make a few late payments to creditors or even possibly not pay some bills at
all. You may have even had to file for bankruptcy. Now your difficulties are
over and you want to buy a home. Will it be possible to get a home loan with a
blemished credit history? Although it may be a little harder than if you had
A+ credit, the answer is yes.

One of the first things you want to do is order a credit report. There are
three main credit reporting agencies: Equifax (800-685-1111), Experian
(888-397-3742), and Trans Union (800-888-4213). [Because not all creditors
report information to the same agencies, you may want to request a report from
all three.] Once you have the report in hand, study it to make sure that the
information is accurate. If there are discrepancies, make sure you follow the
steps provided by the credit reporting agency to dispute the information and
get it changed. In addition, you may want to add a consumer statement on your
credit report to explain any late or non-payment to creditors.

Depending on how damaged your credit is, you may want to put off buying a home
for another year. Use that time to repair your credit by paying off creditors
and create a history of paying your bills on time and consistently.

When you are ready to apply for a loan, realize that your previous credit
history may limit your eligibility for prime loans and low interest rates.
When lenders are deciding on whether to issue a potential borrower a loan,
they use various criteria in addition to payment history to evaluate the
borrower such as employment, income, assets and liabilities. Based on this
evaluation, borrowers are offered loans rated on a scale from A to D. The more
damaged your credit history, the higher of a risk you are to lenders.

Because of your blemished credit history, you will more than likely have to
get a “sub-prime” loan. These types of loans come with higher interest rates
and more points. Don’t assume that just because a lender offers sub-prime
loans, that you will automatically be embraced. Be prepared to explain to the
lender why you had credit problems and what you have done to prevent the
situation from occurring in the future.

Remember your past financial problems don’t have to stop you from experiencing
the joys of homeownership.

To learn more about home financing, contact Columbia Mortgage. For more
information on the home buying process, contact a Prudential Northwest
Properties office near you. To find an office in your area, click here. >>
Want to Invest in Real Estate But Not Live In It?
Turn on any financial news program and at some point you’ll hear the experts
extolling the virtues of diversification. Real estate has long been considered
a conservative, long-term strategy to growing wealth. While some seasoned real
estate investors make it look easy, to be successful, beginners should follow
some basic principles.
·Learn all you can. Before committing your cash, you should have a
fundamental understanding of real estate. For example, be aware that, in
general, investment properties are not liquid investments. Barring exceptional
circumstances, real estate does not sell at a moment’s notice. It could take
days or months to sell a property, depending on the strength of the market in
a particular region.
·Consider cash flow. You’ll need to have enough capital on hand to cover any
short-term losses due to vacancies between tenants.
·Start small. Look into buying a single family home or a duplex. Leave large
apartment buildings and commercial properties to the pros.
·Inquire at the local Chamber of Commerce about companies relocating into or
out of the area. Company movement is one indicator of demand for rental and/or
office space.
·Find a property that will be in demand. Look for a moderately priced home
with three or four bedrooms, two bathrooms, and a garage that sits on a quiet
street.
·Research the property. The most common way first-time investors lose is by
failing to investigate a property thoroughly. Look beyond the front door.
Investigate the reputation of the school district, the crime rate, and plans
for expanding a nearby highway or developing vacant land. Ask a Prudential
Northwest Properties associate about the area, its history, and how fast (or
slow) properties are moving.
·Inspect the home you’re considering for signs of water damage, such as
stains on the ceiling and crinkling or gathering wallpaper; open and close
every door and window; and check all electrical sockets by plugging in an
appliance. Get an independent home inspection, roof inspection and termite
inspection. Unexpected repair costs can eat away resale profit. Because even
the best inspection can’t always predict problems, try to set aside some of
the rental income for unexpected repairs.
·Spend time driving the streets of the neighborhood noting the condition of
other properties. Are lawns maintained? Are roofs in good shape? Are homes
kept up?
Be ready to make fixes quickly and respond to the renter’s needs. If you’re
not prepared to be a hands-on landlord, consider hiring a property management
firm. Remember, investing in a property is much different than living in one,
and while emotion and attachment can be prime motivators when it comes to
homes, it is return on investment that counts when investing in real estate.

Are There Any Questions I Should Be Sure to Ask Before Making An Offer?
When you are buying a home, there are many problems that the seller is
obligated to disclose. For example, in most states, it is illegal to withhold
information about major physical defects on the property, and according to the
Residential Lead-Based Paint Hazard Reduction Act (U.S. Code §4852d), anyone
selling a house built prior to 1978 must disclose all known lead-based paint
and hazards in the house. But, these disclosures don’t always paint the entire
picture of the home. Here are six questions you may want to ask that can offer
additional insight about the prospective home before you make a final
decision.

1) Why is the seller selling the house?
This question may help you evaluate the “real value” of the property. Is there
something about the house the seller does not like? If so, you may be able to
adjust the purchase offer accordingly.

2) How much did the seller pay for the home?
This question can, in some instances, help the buyer negotiate a better
deal-maybe even get the seller to carry part of the loan. However, it is
important to remember that the purchase price is influenced by several
factors, like the current market value and any improvements the seller may
have made to the home. The original purchase price might not have anything to
do with the current value of the house.

3) What does the seller like most and least about the property?
By asking the seller what he or she likes most and least about the property,
you might get some interesting information. In a few cases, what a seller
likes the most about a home might actually be something the buyer is looking
to avoid. For example, if the seller describes his house as being in a
“happening neighborhood,” the buyer might consider this a negative factor
because the area may be too noisy or busy for his or her taste.

4) Has the seller had any problems with the home in the past?
It is also a good idea to ask the seller if he or she has had any problems
with the home while living there. Has the seller had problems with a leakage
from the upstairs bedroom in the past? If so, even if the leak has been
corrected, the floor and walls around the bathroom might have been damaged.
You should also check that these items were repaired properly.

5) Are there any nuisances or problem neighbors?
Use this answer to find out about any noisy neighbors, barking dogs, heavy
airplane traffic or even planned changes to the neighborhood, such as a
planned street widening. This may give you insight on why the seller is really
moving.

6) How are the public schools in the area?
Because the value of a neighborhood is usually greatly influenced by the
public schools in the area, finding out the buyer’s perception can give you
some insight about the quality of the area’s schools.

Knowing all you can about a prospective home, not only helps you decide if
it’s the home of your dreams, but what offer to make as well. Your Prudential
Northwest Properties real estate professional can help you get your key
questions answered and give you advice on how to evaluate your findings. Click
here to find a Prudential Northwest Properties office near you.

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