Buy A Home With A Mortgage

You have been looking for the perfect house and you finally found it, now it is time to write an offer and try to secure your new home! One of the first steps in writing an offer is choosing a price. How do we choose a price? The answer is we look to recently sold homes in the area that are very similar and comparable to our target property. We factor square footage of living space, bedrooms, bathrooms, upgrades, quality of upgrades, garage space, any recent improvements and age of home when comparing to other homes to distinguish our offer price. Another very important thing to consider is market status of the area you are looking in. How long are homes sitting on market? If it is a very fast moving market with low inventory levels or slower moving market? It may be in your best interest to consider market condition when writing your offer. If it is a slow moving market and plenty of inventory with not too much buyer competition then you may get an offer accepted at a lower than list price offer. The other way around and it is a very fast moving market, put your best foot forward and expect to compete with other offers. Making full list price offers and over list are not uncommon in fast moving markets. Sometimes the “deal” when buying a home is not price, it is getting your offer accepted on your dream home.

After we have arrived at a price considering market conditions, market values (recently solds) and condition of the home we still have the terms and contingencies to factor. Due diligence, appraisal, and loan contingencies are the main terms. The due diligence period or inspections period is when we will conduct all inspections of the home, area, nearby amenities, schools, churches, locality to freeways, airports and shopping. The inspection of the home will be a non-intrusive inspection by a licensed Home Inspection company. This time frame is typically 10-12 days depending on how quickly we can conduct all inspections and if we need to hire other licensed professionals for further inspections (roof, A/C & heating, pool, septic).

The appraisal contingency is a big part of the contract. An appraisal is a valuation done by a third party appraisal company ordered by the lender when you are getting a mortgage. The lender will lend on the appraised value only. For example, if your offer was accepted at a price of $500,000 and the appraisal comes in at $480,000 the lender will only consider the lower price for the mortgage (what they will let you borrow). What that means for the buyer and seller is either the seller can come down from $500,000 to $480,000 (appraised value), the buyer can come up $20,000 out of pocket ($480,000 + $20,000 = $500,000) or there can be a price negotiated to meet somewhere in the middle. All of this has to be negotiated within the appraisal contingency time-frame or the buyer’s earnest money could be at risk should negotiations have to ensue after the days for this period have lapsed. This is where having a great agent comes into play and will always keep you updated as to where we stand in regards to the days remaining and status of the appraisal.

The loan contingency is typically the longest time-frame because if you are working with a lender to approve you for a loan there can be many steps, documents and verification to occur within these days. If you have been working with a rockstar agent, such as myself, I would always recommend getting pre-approved for a loan before you even start looking at homes. There can be many loan products out there and the only way to really know what works best for your finances, price point, liquid assests (down payment and closing cost funds) is to apply for a loan with a great lender. There are many steps from pre-approval to final loan approval that you will take before being able to get funding from a lender. These steps can take many days because of the various documents, employment verification, income verification, underwriting standards, appraisal process and closing preparation needed to execute a loan approval.

After you have been approved for your loan the deal will be very close to completion. The lender will send their closing figures to the title company and we can schedule an appointment to sign closing documents. The final walk through also takes place towards the final few days of closing. The walk through is basically to ensure the home is in the same condition as to when we did our inspections. After we sign closing docs at title they will forward the documents for a final review to the lender, the lender will fund the loan and title will send the file for recording at the county recorder’s office. Once we have received confirmation of recording, the new owner’s name is on title and the house has passed to the new owner, welcome home!!