Home buying tricks

Procedures:

(Disclaimer: These outlines are mere suggestions and opinion only. Please trust your own judgment or consult a professional)

Home buying is a long and lengthy process which involves several steps. So you should understand it before hand. If you have a realtor/agent, s/he can also walk through with this.

1. Loan pre-approval:

   • This is the first step. Try to get the preapproval on how much can you afford, what kind of down payment money you have.

   • Talk to as many brokers/lenders as possible. Do this during the same one month span of time as each lender may put an inquiry to your credit history.

   • For 100% financing/loan, most of the lender (if they do 100% loan) require at least 680 FICO credit score. So if possible, try to check and maintain your credit score accordingly. Though, recently many lenders don't give 100% loan due to decreasing market values of the property and foreclosures.

   • Otherwise, if possible, put 10 to 20 % down payment.

     • If not, there would be Insurance on the Mortgage. This is called PMI (Private Mortgage Insurance) - PMI link1, PMI link2. Perhaps, your PMI comes under tax deduction. Here is a link. Though, need to confirm from formal agencies.

     • Ideally, you should look for 20% downpayment and 80% loan (+ 2% approx reserves) - See more in Step2

   • Try to get maximum amount pre-approved which suits your budgets/affordability

     • Not more than 30 to 33% of your monthly income including taxes. This includes:

       • Includes Principal and Interest monthly

       • Includes HOA monthly fee (if any, to say for a condo)

       • Includes PMI (Private Mortgage Insurance)

       • Includes Property taxes (Normally < 1.25% of the property sale price)

   • Send the letter of pre-approval to the Realtor.

     • This will prove that you are a serious buyer.

     • Now you can start searching the homes.

• 1. Estimate for Closing cost money:

     • How much money you must have in your account before shopping for the house?

     • The down payment which is required for the loan (You will know when your loan is pre-approved) in a GFE (Good Faith Estimate) given by the broker/lender.

     • Almost, 5K to 10K for the closing cost depending on lender. Closing cost is the money which you pay to the lender, title company fee (the company which transfer title - ownership - to your name), pre-paid property taxes and any other misc. including home inspection etc.

       • Almost 3 to 6 months of reservoir to satisfy the lender that even w/o any monthly income for next several months, you can pay your monthly mortgage.

2. Search for the dream Home:

   • Find a realtor - either by a reference from a friend or from one of the realtors website.

   • Go to MLS Listing. Search for the houses in particular area

     • In almost all cases, a property owner will have a listing agent who helps him sell his house. These listing agents put the information on MLS.

   • You can also find realtor's websites which will be helpful for your search. They search the house information fromMLS. E.g.

     • • ZipRealy, Zillow, Redfin, Movoto, etc.

       • Also, website like PropertyShark, BlockShopper provide neighbourers information as well.

   • On realtor's website, try finding the property matching your criteria e.g. your price range, good school district, neighborhood etc.

   • Once you find your interesting/dream houses, find either the listing agent on MLS or choose the Realtor from other websites (or you may already have an agent, you can send the property information)

   • Work no more than a single (or max two) good Realtor, be it the listing agent or other

   • In case, you found your dream house, which you would love to live, you can consider directly talking to listing agent if s/he can represent you the as buyer. In many cases, though may not negotiate the price, you can be sure that s/he will help on getting the house certainly.

3. Find your dream house: (In continuation to Step3)

• • Keep all the aspects in mind including the location, public school districts, neighborhood, distance from your work, accessibility to the shops, grocery stores etc.

    • For family with kids, a good school district is a good locations

    • For investors, appraisals in the property value will be major criteria

  • School district - to make sure the property address definitely belong to the good school district, do call the respective school to confirm

  • Find the neighborhood - from the Realtor's website. Check the crime rates etc.

  • Ask your realtor to show you the property. See the house more than 2 or 3 times at different times. Your realtor wouldn't mind if you are seriously looking for the house.

4. Price to offer:

   • Judge the market rate for current price by looking at similarly sold homes in the neighborhood.

   • Use Zillow or Cyberhomes to know current value. Though, in hot areas where the school district is very good, the price to offer is many time upto 5% more than the listing price. Your agent can give you comparable sales info or from different website.

   • Also, find the property value from County property ownership type (Santa Clara County or Alameda county) and paid taxes (Santa Clara or Alameda)

     • You can also go to city development office to find details. They have self service centers where you can look history, construction/modification permits etc.

5. Make an offer: (Don't delay if you like the house)

   • Find how many other offers are already with the listing agents.

   • Your initial offer price should be based on number of coming offers and the research in Step5

   • Be prepared for negotiations/counter-offers

   • While making the offer, you might want to have connection/link with the seller. This becomes very important if there are several competing offer. A seller/owner may choose that offer, whose buyer s/he has perhaps met, known. To establish this connection, you can sent a cover (love) letter to seller with your offer stating how much you liked the house, and you are serious. I did this and were able to get the house.

6. Escrow Period:

   • Once you and the seller are in agreement to the offer/counter-offer (i.e. offer is accepted), you sign and accept the offer. This is the contract to buy the house. Now, theoretically you are in escrow period. The length of the escrow period is typically from 30 days to 60 days including the contingency periods, close of loan, and any other requirements. Again, it's mentioned in your offer/counter offer.

7. Contingency period:

   • Typical contingency period gives you 7 to 17 days depending to the offer. During this period, you can cancel your offer (again depending on the offer) if you have some concerns on one of following:

     • HOA (Home owners association)

     • Home inspection related

     • Loan underwriters approval which ensures that your lender will lend you the loan.

     • Appraisal related issue

8. HOA Verification (If buying condo/apt)

   • Read the HOA (Home Owners Association) thoughtfully to make sure there is no existing litigation on HOA.

   • Also, HOA has enough budget.

   • Whether you can rent the house.

9. Home Inspection:

   • During your contingency period, get the house inspected thoroughly. Check the roofs, plumbings, wiring etc. Get the detailed report as in how much work, maintenance it may incur once you buy.

   • You can request seller to repair the work. However, he may not agree.

   • This costs you from 350 to 400 USD from your pocket but must be done.

   • You can take help from your agent to find home inspectors.

10. Loan underwriters approval:

    • You need to make sure if your pre-approving lender finally approves you during the loan. This you need to make sure during the contingency period. See more on underwriters at www.mortgageunderwriters.com

    • Lock the loan interest rates, provide all the required documents to the lender for his verification for the final underwriters approval of the loan.

11. Appraisals:

    • Get the appraisal of the property done

    • This is required by the lender.

    • Lender wants to make sure you are not paying more than required money to the seller.

12. Title company:

    • Decide the Escrow company for title and closing formalities. Some seller choose their own title company and buyer doesn't have any option. In most cases your agent will help.

13. Also, get the home warranty insurance (May not be required by the lender but good to have)

14. Contingency Removal:

    • Once you are done with Home Inspection, loan underwriters approval, appraisal etc. i.e. you know you will get the loan, there is no other issue with the house etc. this is the time to remove the contingencies.

    • Go ahead and remove the contingencies

15. Sign Closing documents:

    • Soon a closing officer will call you for appointment to sign all the papers.

    • Now, wait for the final escrow close date.

16. Get the keys:

    • Before closing date, your lender will fund the loan

    • Title company will transfer the title, record it

    • The seller's agent removes the "For sale" tag from the house - may be put SOLD

    • And, your realtor will give you the keys

Welcome home!