Are you ready to buy your first home?
Purchasing a property may be the biggest financial decision and one of the biggest investment you will ever have to make. Being prepared and understanding the process involved are the most important factors that can help you achieve your goal of purchasing a new home. Before you start shopping and actively looking for your dream home, it is a good idea to make some preparations and start building your file.
This should be the first step you work on. This “file” is a compilation of all your important financial documents that will be necessary when you go through your lender to secure financing.
Typically the lender will require disclosure of financial statements such as:
- Bank Accounts
- Investments Documents
- Credit Cards
- Auto Loan
- Most recent pay stubs
- Tax returns for the last two years
- Copies of leases for other investment properties (if applicable)
- 401K statements, life insurance, bonds and mutual account information
The second step is to start checking and monitoring your credit rating. Credit Karma is a free service you can sign up for to start monitoring and taking control of your credit. Your credit score will have a huge impact and ultimately determine what price range you qualify to purchase and can actually afford.
Your first stop should be to choose a lender that can work with you and determine how much house you can afford. I will be happy to recommend knowledgeable and experienced mortgage brokers who specialize in the residential, construction, commercial and investment loans.
It is very important to be careful with your finances. Financial lenders like to see stability. Be wary of making drastic career changes or big purchases when considering to purchase a property because it could affect your purchasing power. It is super important to communicate these issues and seek advice from your mortgage broker before engaging.
Another point I would like to emphasize is that saving as much money as you can is a smart and necessary plan. You will incur out of pocket expenses such as the down payment, closing cost which can include a home inspection and or environmental tests (termite, C appraisal, escrow, title insurance as well as homeowner insurance depending on the type of loan and the lender requirements). For your convenience, I have included a mortgage calculator below, to give you a good idea of what your average monthly payments will be.
The Process of getting a contract accepted to close
Escrow and Closing Agent-After an executive contract has been signed there is three (3 days) to submit the escrow to the closing agent (title company or attorney). The closing agent is responsible for holding escrow and will research the complete recorded history of the property to ensure that the title is free and clear of encumbrances by the date of closing.
Once your offer is accepted by the seller the clock starts ticking and there is a timeline to mark every stage of the process. Meeting these deadlines on time prevents any breach of the agreements negotiated. A licensed property inspector is hired to inspect the roof, electrical, plumbing, structure, appliances, air condition, pool equipment etc.
After the report is presented to the buyer one of two things can happen:
– Everything is good with the inspection and the buyer wants to proceed with the closing of the property. All contingencies will be removed and you are one step closer to closing.
– After reviewing the report the buyer requests to renegotiate the terms of the contract to have the seller repair or give credit in the price.
Appraisal and Lending
It is imperative to keep in close communication with your lender. They will more than likely require additional information and can prevent setbacks for meeting the closing date. The appraisal is scheduled directly through the lender.
Associations & Approvals
Make sure if you are closing in a community with a Home Owners Association HOA to get their requirements to fill the applications and background check, master homeowners if applicable. Some applications take 30 plus days for approval. Usually, the estoppel is ordered through the closing agent. Following up with the association is crucial to have a smooth closing. Note that all these fees are out of pocket as well.