GETTING READY FOR HOME AND MORTGAGE

Before jumping into an offer, let's ensure you are in the best possible place.

PREPARING YOUR CREDIT

Your credit score will not just determine your eligibility to get a loan, but the price you pay for it. I can help you get out in front of it.

The rate and the corresponding price (or lender credit) is based upon the down payment and your credit score. The less you put down, the more the loan will cost. The credit score basically determines how steep of a slope the increase in cost is relative to the down payment.

If your credit score is very good to excellent, there is not much of an increase cost if you want to put down less.

If you don't have a recent credit report, go the the CREDIT REPORT PAGE.

I do not recommend a credit repair service. Most of the time they tie-up your ability to get a loan and can actually undermine it completely. But, I would like to see if there is a way to improve your score that puts your score above a price break.

Go To Credit Report Page

PREPARE FOR THE DOWN PAYMENT OR CASH-TO-CLOSE

The more you can save, the more choices you'll have.... Let me explain.....

So many of my home buyers are amazed by how little is required in up front money to buy a home. But in spite of this, please keep saving. This will give us more ideas to choose from.

The Money You Need to Buy the Home

Seller Credit and Lender Credit

Sometimes my clients will spend their savings to pay down debt or old collections when it would have been better to wait for a full analysis to decide on the best course of action.

After settlement when you have moved in, paying down liabilities or old collections, is probably the wisest thing, but it may not be prior to obtaining a mortgage.

Two types of costs are required for a home purchase, the down payment and closing costs. The down payment depends on each individual mortgage program. There are some that don't require a down payment and others only require 3%. The other cost, closing costs, are not cheap and can add up to several thousands. We can lessen them a few ways. We do this by working or negotiating with the seller and by using lender credits. Here is a link to a related article, "Seller and Lender Credit."

Your required down payment can not come from seller or lender credits, they must come from you. The down payment can come from many sources besides your own savings. It's important to understand how to use these by consulting with me. Some of them are:

Gifts
IRAs
Selling of other assets
Grants

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MAKING YOUR OFFER

When you buy a house, it’s a jungle out there. The contracting process is complex, and neither buyers nor sellers are likely to be experts in the field. For that reason, it's good to engage a real estate agent and/or an attorney (which I can recommend) to help with offers and counteroffers. Be sure to ask about contingencies – and be sure they reflect what you really want to say.

Offer, counter-offers and into acceptance

Before you take title, you have to "transact" which requires negotiation and preparation of a contract.
This agreement sets the terms and remedies if either you or the seller fail on what was agreed to.
When the contract is ratified, you and the seller have agreed to the same thing, referred to as "meeting of the minds."
Your agreement was created by your most recent offer or promise to buy. You can still withdraw this promise but once the seller accepts it, you are now under a legally enforceable agreement.
In your offer you can include an escalation clause when you and realtor deem the home may have other competitive offers.

Contingencies: conditions that must be met

This is a precedent in your agreement that must be resolved before you will perform your obligation to purchase. The seller may have contingencies as well. Virtually anything can be a condition. I have outlined the most common ones below:

Sale of your current home - See blog.
Financing and Appraisal Contingency - See More.
Home Inspection - See below
Others are: Home Owners Association, Re-zoning, permits, issues related to title, etc.

In creating these, certain standards by which you and the seller can determine when and if the condition has been met must be provided. There is also the requirement that one use due diligence, good faith and abide by "time being of the essence."

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HOME INSPECTION CONTINGENCY

The main contingency

A home inspection is not the same as a property appraisal. An appraisal is an estimate of value that is prepared by a professional appraiser. A home inspection is an examination of a property to determine the condition of the structural and mechanical systems, done by a professional home inspector.

Your home inspector should be a qualified professional who has training and experience in a field such as engineering, architecture or construction.

I can help you locate one or you can go to the American Society of Home Inspectors (ASHI) or InspectorSEEK.com which claims to have a more qualified list than merely licensed inspectors.

Be cautious when hiring a home inspector even more than you do with selecting a realtor. If the home inspector gives you a bad inspection and doesn’t find those hidden defects, it could cost you.

Some recommend finding a home inspector that is affiliated with a franchise because they are held to a higher standard. Also ask if they do this full-time. The guy that dabbles in it or is a painter the rest of the week may not be there in the business when you need them again. Also make sure they are insured because you do have retribution if they miss something in the inspection, and you end up paying for it later on.

Inspectors judge the condition of a number of structural and mechanical components of your pending home and give a written report to you. These structures include:

Central heating and air conditioning systems
Interior electrical and plumbing systems
Interior walls, ceilings, floors and stairs
Visible insulation
Ventilation systems
Foundation, basement, attic and roof
Exterior wall coverings, flashing and trim, gutters and downspouts
Windows and doors
Surface grading and drainage
Insist that each of these items be covered in a detailed report.

You should absolutely go with the home inspector when he or she conducts the inspection. You’ll be able to ask questions about anything the inspection covers, as well as general home maintenance, and get an estimate of the cost for repairing any issues with the home.

What you do with the results depends on the findings and how you structure your home purchase agreement. Here’s what to look for in a home inspection.

Minor items can be fixed or ignored. While it’s tempting to start nickel-and-diming the sellers so that your new home can be as pristine as possible when you move in, you may want to concentrate your time and attention on structural issues, rather than cosmetic ones. Remember they can cancel the deal too which is more likely in a "seller's market."
Major problems should require the seller to make repairs before closing, drop the price or contribute more to closing costs (if allowed by the lender).
Extreme problems may kill the deal. The seller either can’t afford or is unwilling to fix the problem. The lender may also get word through the appraisal of problems and condition the funding upon repairs and replacements. Here their may be a possibility to qualify for a renovation mortgage.

A major caveat: remember that the seller is moving, so that any repairs and replacements may not be ideal. For any fixes that require skill of workmanship, expect corners to be cut with the cheapest materials. A removal of an encroaching tree is different than re-tiling a bathroom. Because the seller no longer has a vested interest in ensuring the job will be done right, you can request a closing cost credit instead.

Cosmetic issues may not matter much, but a crooked foundation, bad roof or toxic mold can ruin your home ownership experience and possibly your health and finances.

Whether the inspector's findings actually break the deal will depend on your seller’s willingness to fix the problem or compensate you for the cost of repairs. It might also depend on how much you love the home and how high your personal tolerance for risk is.