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What is the importance of getting pre-approved for a mortgage? How do you go about getting pre-approved? When you’re ready to find a home, the last thing you want to do is limit your possibilities. Dream big, right? But you’d be totally bummed if you found a perfect pad, only to learn you don’t qualify for the home of your dreams. If you don’t earn a loan pre-approval before you start looking, you might actually prevent yourself from finding—and buying—your dream home. Here’s why. Streamlined Hunting With Pre-Approval Most homeowners start out by browsing homes to buy online to get an idea of what neighborhoods and housing styles they like. If you don’t know what you can afford, you may be looking out of your price range and wasting your time without seeing results. You may also be looking below what you would have qualified for and not getting the right home for you. If you start off by getting a pre-approval, you can sort by price, identify the right neighborhoods, and find your dream home much faster. Better Results From a REALTOR® The bottom line is this: REALTORS® prefer to work with home buyers who have a pre-approval in hand for two reasons. First, a REALTOR® knows the deal isn’t likely to fall through, and second, when they know what you, a buyer, wants and what you can afford, REALTORS® are able to do a better job of finding your dream home. For example, you told a REALTOR® your interested in buying a historic home, but the asking price for these homes varies widely. If they don’t know what you can afford, they can only do a general search across several price ranges and may miss hidden gems. On the other hand, if you have pre-approval, a REALTOR® would know what exactly what to focus on and would be able to suggest different neighborhoods, sizes and conditions of homes to match your needs—making it easier to get you, the buyer, exactly what you want. Higher Acceptance Rate for Buyers With Pre-Approval Once you find the perfect home, the next step can go two different ways depending on a pre-approval. If you’re not pre-approved and you find a home you want to make an offer on, you’re taking a gamble. Sellers are less willing to accept offers from a buyer without a pre-approval. Odds are, they’ll go on to the next offer—and you’ll miss out. However, if you are pre-approved, you have more room to haggle. Sellers may be more willing to lower the asking price, include appliances, cover closing costs or make other allowances to work with a pre-approved buyer. Less Stress With Pre-Approval Finally, skipping this step can wreak havoc on your stress level. If you aren’t pre-approved, you’ll spend longer looking for homes. You may not feel like you’re getting great service from a REALTOR®. You may get turned down once you’re ready to make an offer. All of this adds more time and stress to what should be a very exciting time in your life. On the other hand, if you’re pre-approved, you have less to worry about: you know you’re a qualified buyer, you know there are lenders willing to work with you, and you can feel pretty confident when you make an offer. source:http://www.realtor.com/advice/pre-approval-crucial-home-search/ What is an Escrow? An escrow is a deposit of funds, a deed or other instrument by one party for the delivery to another party upon completion of a specific condition or event. It is an independent neutral account by which the interests of all parties to the transaction are protected. When opening an escrow, the buyer and seller of a piece of property establish terms and conditions for the transfer of ownership of that property. These terms and conditions are given to a third, impartial party known as the escrow holder. The escrow holder has the responsibility of seeing that the terms are carried out. The escrow is a “storehouse” for all monies, instructions and documents necessary for the sale of your home. This includes the buyer providing funds for a down payment, and the seller depositing the deed and any other necessary papers. Why Do I Need an Escrow? How does the Escrow Process Work? Prior to close of escrow, the buyer deposits the funds required with the escrow holder. The buyer instructs the escrow holder to release the money to the seller when: The escrow holder acts for both parties and protects the interests of each within the power of the escrow instructions. Escrow cannot be completed until the instructions have been fully satisfied and all parties have signed escrow documents. The escrow holder takes instructions based on the terms of the purchase agreement and the lender’s requirements. The duties of the escrow holder include: How Do I Open an Escrow? Generally, the buyer or seller’s real estate agent will open the escrow. As soon as you complete the purchase agreement, the agent will place the buyer’s initial deposit, if any, into the escrow account at a title company or into the real estate broker’s account. What Do I Need to Do Before My Appointment to Sign Escrow Papers? All parties signing the documents must bring proper identification. Bring either a valid driver’s license, state identification card or current passport with you to the title company. This item is needed to verify your identity by a notary public. This is a routine, but necessary step for your protection. What’s the Next Step After I’ve Signed the Closing Escrow Papers? After both parties have signed all the necessary instructions and documents, the escrow officer will return the buyer’s loan documents to the lender for final review. After the review is completed, the lender is ready to fund the buyer’s loan and informs the escrow officer. How Long is an Escrow? The length is determined by the terms of the purchase agreement and can range from a few days to several months. What is an “Escrow Closing”? An escrow closing is the climax of the transaction. It signifies legal transfer of title from the seller to the buyer. Generally, the Grant Deed is recorded within one working day of the escrow holder’s receipt of loan funds. This completes the transaction and signifies the “close of escrow.” Once all the conditions of the escrow have been satisfied, the escrow officer informs you or your agent of the date escrow will close and takes care of the technical and financial details. The final closing papers are disbursed upon close of escrow, when the escrow officer verifies with the County Records Office that the documents have recorded and legal transfer has occurred. source:https://www.titleonecorp.com/buyerseller/whatisescrow.aspx
Homes For Sale
Pre-Approval
Escrow and Closing Costs
An escrow will provide you with a guarantee that no funds or property will change hands until ALL of the terms and conditions have been followed. The escrow holder has the responsibility to watch over the funds and/or documents and then pay out the funds and/or transfer the title only when all requirements of the escrow have been completed.
The buyer, seller, lender and/or borrower cause escrow instructions to be created, signed and delivered to the escrow officer. The escrow officer will then process the escrow, in accordance with the escrow instructions. When all conditions required in the escrow are met, the escrow is “closed”.
Closing Cost
Closing costs typically amount to 3% to 6% of the purchase price. Why the broad range?
Taxes. Buying a house means paying taxes and sometimes transfer fees upfront, at the closing. While there are settlement costs that go to your attorney, title insurance company, and lender, the biggest beneficiary is the government—city, county, and state.
Need some salt in that wound? Closing costs increased 6% last year and now average $2,539 on a $200,000 loan, according to Bankrate.com. Likewise, Bankrate.com says origination fees (i.e., lender commissions) also increased 9% to $1,877, while appraisal fees rose 1% to $662. (Bankrate.com did not factor real estate taxes and transfer fees into its analysis, which accounts for the discrepancy between its estimate and the more general 3% to 6% estimate.)
In every real estate transaction, there are closing costs. Everyone and anyone who had anything to do with the transaction has their hand out at the closing. That means the title company prints multiple checks to pay the brokers, the surveyor, the attorneys, the courier, and anyone else who can stake a claim against the property or its owner. So if you had your property staged and asked that the decorators be paid at closing, then they too get a check. If you had the bathroom remodeled and told the contractor you would pay them when the house sold, it’s now payday.
Texas has the highest closing costs in the country, according to Bankrate.com. Nevada has the lowest.
Some closing costs are negotiable: attorney fees, commission rates, recording costs, and messenger fees. Check your lender’s good-faith estimate for an itemized list of fees. Then use your GFE to comparison shop with other lenders.
But don’t despair, there are ways to circumvent the added expenses:
1. Look for a loyalty program. Some banks offer customers help with their closing costs, if they use the bank to finance their purchase. Bank of America, for instance, offers reduced origination fees for preferred reward members. It’s the bank’s way of offering a reward for being a customer.
2. Close at the end the month. One of the simplest ways to reduce closing costs is to schedule your closing at the end of the month. If you close at the beginning of the month, say March 6, you have to pay the per diem interest from the 5th to the 30th. But if you close on the 29th, you pay for only one day of interest.
3. Get the seller to pay. Most loans allow sellers to contribute up to 6% of the sale price to the buyer as a closing cost credit. It’s a way to seal the deal—and a tax-deductible expense for the seller. Don’t expect this to happen much in hot markets where inventory is scarce (which is almost everywhere these days).
4. Wrap the closing costs into the loan. You’re already borrowing probably hundreds of thousands of dollars—why not tack on a few thousand more? Lenders charge more for this, but if you don’t have the cash, it’s a way to get into the house with less cash upfront.
5. Join the army. Military members have closing-cost benefits that are often overlooked. Service members and veterans may qualify for funds to help them purchase a home. These benefits are not limited to the VA loan. The key is to do the necessary research to make sure you get everything you are entitled to.
6. Join a union. AFL-CIO members get closing-cost discounts and rebates of up to $2,500 on real estate transactions when they get a mortgage through Chase. But only if they live in New York.
source:http://www.realtor.com/advice/reduce-closing-costs/
Home Warranty
The last thing a home buyer wants to worry about after closing is what could possibly break or malfunction in her new home. Since that can cover a multitude of items and systems, for peace of mind, it’s a good idea to get a home protection plan. It’s especially a good idea to obtain a home warranty if you’re a first-time home buyer with no experience maintaining a home.
Who Pays for the Home Warranty?
Now, whether the seller pays for the home protection plan and home warranty coverage or whether the buyer pays for it, will depend on your local customs. It varies. In many locales, it’s normal for a seller to pay for the coverage because it’s a seller benefit. Why? Because then the buyer won’t be calling the seller after closing if something breaks
How Much does a Home Warranty Cost?
They are fairly inexpensive, typically ranging from $250 to $400, depending on coverage. Home warranty companies sometimes run special sales and either discount policy prices or offer additional coverage for the same price. The policies are prepaid for a year in advance, at which time they expire or can be renewed.
How Do They Work?
Although specific plans provide for specific types of coverage, most operate the same way.
- If a home system or appliance breaks or stops working, the home owner calls the home warranty company.
- The home warranty company calls a provider with which it has a business arrangement.
- The specific provider calls the home owner to make an appointment.
- The provider fixes the problem. If an appliance is malfunctioning and cannot be repaired, depending on contract coverage, the home warranty company will pay to replace and install the appliance.
- The home owner pays a small trade service fee (less than $100).
Types of Coverage
Because all plans differ, you will want to ask specifically what is covered. Ask your real estate agent if upgrades are available. Pay close attention to whether the home warranty company will pay for repairs to make certain types of systems or appliances compliant with new regulations.
What If I Disagree With the Diagnosis?
Sometimes a service provider will deny a claim. (See below.) If that happens or if you are unhappy with the service provided, call your real estate agent and complain. Your real estate agent, if she has a good working relationship with the representative from the home warranty company that is covering your home, well, she can seek resolution for you. Agents all over the country are going to be very upset at this suggestion, but it works. If my buyer calls me with a problem, I call my rep, and she eventually finds a way to work out a solution acceptable to all the parties involved.
In short, don’t take “no” for an answer! Call your real estate agent.
What is Not Covered?
- Outdoor items such as sprinklers
- Faucet repairs are not covered under all plans
- Not all plans pay for refrigerators, washers & dryers or garage door openers
- Spa or pools, unless specific coverage requested
- Permit fees
- Haul aways
What Can Cause Denial of Payment?
- Improper maintenance
- Code violations
- Unusual wear and tear
- Improper installation
General Coverage
- Air conditioning
- Dishwashers
- Doorbells
- Furnace / heating
- Water heater
- Ductwork
- Garbage disposal
- Inside plumbing stoppages
- Ceiling fans
- Electrical systems
- Range and oven
- Telephone wiring
Because coverages vary from state to state and from policy to policy, ask to see a sample copy of a policy before you commit.
source:http://homebuying.about.com/od/buyingahome/qt/HomeWarranty.htm
Inspections
Before you buy a home, one of the things you should do is to have the home checked out by a professional home inspector. Buying a home is expensive enough as it is – why would you choose to fork over another $400 if you’re not required to? In this article, we’ll delve into what a home inspection can reveal and why you shouldn’t forgo this optional procedure.
The Home Inspection Contingency
Your first clue that a home inspection is important is that it can be used as a contingency in your purchase offer. This contingency provides that if significant defects are revealed by a home inspection, you can back out of your offer, free of penalty, within a certain timeframe. The potential problems a home can have must be pretty serious if they could allow you to walk away from such a significant contract.
What a Home Inspection Examines
Inspectors vary in experience, ability and thoroughness, but a good inspector should examine certain components of the home you want to purchase and then produce a report covering his or her findings. The typical inspection lasts two to three hours and you should be present for the inspection to get a firsthand explanation of the inspector’s findings and, if necessary, ask questions. Also, any problems the inspector uncovers will make more sense if you see them in person instead of relying solely on the snapshot photos in the report.
The inspector should note:
- whether each problem is a safety issue, major defect, or minor defect
- which items need replacement and which should be repaired or serviced
- items that are suitable for now but that should be monitored closely
A really great inspector will even tell you about routine maintenance that should be performed, which can be a great help if you are a first-time homebuyer.
While it is impossible to list everything an inspector could possibly check for, the following list will give you a general idea of what to expect.
Exterior
- Exterior walls – The inspector will check for damaged or missing siding, cracks and whether the soil is in excessively close contact with the bottom of the house, which can invite wood-destroying insects. However, the pest inspector, not the home inspector, will check for actual damage from these insects. The inspector will let you know which problems are cosmetic and which could be more serious.
- Foundation – If the foundation is not visible, and it usually is not, the inspector will not be able to examine it directly, but they can check for secondary evidence of foundation issues, like cracks or settling.
- Grading – The inspector will let you know whether the grading slopes away from the house as it should. If it doesn’t, water could get into the house and cause damage, and you will need to either change the slope of the yard or install a drainage system.
- Garage or carport – The inspector will test the garage door for proper opening and closing, check the garage framing if it is visible and determine if the garage is properly ventilated (to prevent accidental carbon monoxide poisoning). If the water heater is in the garage, the inspector will make sure it is installed high enough off the ground to minimize the risk of explosion from gasoline fumes mingling with the heater’s flame.
- Roof – The inspector will check for areas where roof damage or poor installation could allow water to enter the home, such as loose, missing or improperly secured shingles and cracked or damaged mastic around vents. He or she will also check the condition of the gutters.
Interior
- Plumbing – The home inspector will check all faucets and showers, look for visible leaks, such as under sinks and test the water pressure. He or she will also identify the kind of pipes the house has, if any pipes are visible. The inspector may recommend a secondary inspection if the pipes are old to determine if or when they might need to be replaced and how much the work would cost. The inspector will also identify the location of the home’s main water shutoff valve.
- Electrical – The inspector will identify the kind of wiring the home has, test all the outlets and make sure there are functional ground fault circuit interrupters (which can protect you from electrocution, electric shock and electrical burns) installed in areas like the bathrooms, kitchen, garage and outdoors. They will also check your electrical panel for any safety issues and check your electrical outlets to make sure they do not present a fire hazard.
- Heating, ventilation and air conditioning (HVAC) – The insulation contractor will look at your HVAC system to estimate the age of the furnace and air conditioner, determine if they function properly and recommend repairs or maintenance. An inspector can also give you an idea of the age of the home’s ducting, whether it might have leaks, if your home has sufficient insulation to minimize your energy bills and whether there is any asbestos insulation.
- Water heater – The home inspector will identify the age of the heater and determine if it is properly installed and secured. The inspector will also let you know what kind of condition it is in and give you a general idea of how many years it has left.
- Kitchen appliances – The inspector will sometimes check kitchen appliances that come with the home to make sure they work, but these are not always part of the inspection. Be sure to ask the inspector which appliances are not included so that you can check them yourself.
- Laundry room – The inspector will make sure the laundry room is properly vented. A poorly maintained dryer-exhaust system can be a serious fire hazard.
- Fire safety – If the home has an attached garage, the inspector will make sure the wall has the proper fire rating and that it hasn’t been damaged in any way that would compromise its fire rating. They will also test the home’s smoke detectors.
- Bathrooms – The inspector will check for visible leaks, properly secured toilets, adequate ventilation and other issues. If the bathroom does not have a window and/or a ventilation fan, mold and mildew can become problems and moisture can warp wood cabinets over time.
After the Inspection
Once you have the results of your home inspection, you have several options.
- If the problems are too significant or too expensive to fix, you can choose to walk away from the purchase, as long as the purchase contract has an inspection contingency.
- For problems large or small, you can ask the seller to fix them, reduce the purchase price, or to give you a cash credit at closing to fix the problems yourself – this is where a home inspection can pay for itself several times over.
- If these options aren’t viable in your situation (for example, if the property is bank-owned and being sold as-is), you can get estimates to fix the problems yourself and come up with a plan for repairs in order of their importance and affordability once you own the property.
The Bottom Line
A home inspection will cost you a little bit of time and money, but in the long run you’ll be glad you did it. The inspection can reveal problems that you may be able to get the current owners to fix before you move in, saving you time and money. If you are a first-time homebuyer, an inspection can give you a crash course in home maintenance and a checklist of items that need attention to make your home as safe and sound as possible. Don’t skip this important step in the home-buying process – it’s worth every penny.
Why you should have other inspections, not just a home inspection
A home inspection can’t identify everything that might be wrong with the property – it only checks for visual cues to problems. For example, if the home’s doors do not close properly or the floors are slanted, the foundation might have a crack – but if the crack can’t be seen without pulling up all the flooring in the house, a home inspector can’t tell you for sure if it’s there.
Furthermore, most home inspectors are generalists – that is, they can tell you that the plumbing might have a problem, but then they will recommend that you hire an expert to verify the problem and give you an estimate of the cost to fix it. Of course, hiring additional inspectors will cost extra money. So if you’re a little short on your budget, sites like VT markets France are your ally.
Home inspectors also do not check for issues like termite damage, site contamination, mold, engineering problems and other specialized issues.
Other suggested Inspections (but not limited to)
Pest Inspection
Septic Inspection
Well Inspection
Roof Inspection
Pool Inspection
Source:http://www.investopedia.com/articles/mortgages-real-estate/08/home-inspection.asp
