Free Buyers Guide

1ST  Time Buyers Tips

                                                                        

Here are some things to keep in mind when in the market for a new home.

·         Stop Looking for the “Ideal” Home

One of the biggest mistakes a home buyer can make is to continue to look for their "ideal" house while passing up perfectly good houses in the process. If this is your first house, chances are it will not be the last one that you will buy.
As you delay your purchase, home prices will probably continue to rise and quite possibly, interest rates will too.

·         Planning and Careful Consideration

Having stated that, you should not rush into the biggest financial transaction of your life without careful consideration.  For this reason, we have highlighted most of the major items that you need to consider when looking to buy. With good planning, you can join the millions of other families who own their own homes and are taking advantage of the many benefits that are available to home owners.

·         Location, Location, Location

Start with the obvious: LOCATION, LOCATION, LOCATION. What kinds of things are important to you? Where do you prefer to shop? What places do you visit on a regular basis? Do you want to be near stores, schools, parks, restaurants, theaters, supermarkets? Do you mind being on a busy street or would you rather be on a quiet cul-de-sac? Is the house near public transportation? How far is it to work?

·         Determine What Your Needs Are

Look at the list of items below and rate each of the following as:
A - must have, B - high priority, C - medium priority, D - low priority.

LIST OF PREFERENCES:

Rate each of the following as:
___ Style of house - one story, two story, split level, etc.
___ Size of yard
___ Number of bedrooms
___ Number of baths
___ Bath in master bedroom
___ Eat-in kitchen
___ Separate dining room
___ Basement (Do you want a finished basement?)
___ Fireplace
___ Garage (1 car, 2 car)
___ Windows in the kitchen
___ Windows in the bathrooms
___ Plenty of sunlight in the other rooms
___ Maintenance free windows, gutters, trim, siding
___ Lots of closet space (walk-in closets)
___ Adequate storage (attic, crawl space, etc.)
___ Trees on the property and in the neighborhood
___ Children in the neighborhood
___ Air-conditioning
___ Type of heating system
___ Porch or deck
___ Dishwasher, garbage disposal
___ City water or well water
___ Septic system or sewers
___ Fuse Box or Circuit Breakers

·         Examine the Inside of the Home

What is the floor plan like? Is it suitable for your family? How about the room sizes? Are they big enough ... or too big?

___ Check the water pressure by turning on several faucets at the same time, and flushing the toilet.
___ Check under the sinks for water leakage.
___ Check for signs of water on the ceiling and walls (stains and peeled paint).
___ Check the number and location of electric outlets.
___ Ask about insulation in the house.
___ Are there stains in the tub or sinks?
___ How old are the appliances and utilities (hot water heater, furnace, dishwasher, washer, dryer, stove, refrigerator, air-conditioner)? A furnace can last from 25 to 30 years. An air-conditioner will last for about 15 years. A hot water heater will last about 10 years. These are just estimates. The life span of any appliance depends on how well it was made and whether it has received proper maintenance.

·         Examine the Outside of the Home

Do not just rely on your impression upon seeing the home for the first time. In looking beyond the "curb" appeal, you may be able to get a great deal on a home that can be enhanced with just a few improvements. Things like bushes
that aren't trimmed or an unkempt lawn are two examples of improvements that can be made with a minor investment of time and money.

Request the services of a professional home inspector. Although an inspection is usually done AFTER an offer is made on the home, it is a good idea to make a preliminary examination of the following items:

___ Ask the age of the roof and whether it leaks. An old roof or one that has several layers of shingles can mean an expensive repair in the near future. A properly ventilated attic or crawl space will extend the life of a roof. (A roof can usually have 2 to 3 layers of shingles before it needs to be completely replaced.)
___ Check the gutters. Are they pulling away from the house?
___ Check the foundation. Look for signs of water or wetness in the basement. Vertical or diagonal cracks in the foundation are not usually serious, but horizontal cracks can be.
___ Windows and doors should open and shut easily.
___ Check the caulk around the windows and doors.
___ What's the condition of the siding? Will it need to be replaced soon?
___ Are the outside steps pulling away from the house?
___ How is the driveway? (Unless they are new, blacktop driveways will usually    have some cracks.  Look for major cracks and large pieces of missing blacktop.)
___ Is the landscaping in good condition?

·         A Professional Home Inspection Can Save You Money

There is no such thing as a perfect house. Something is always in need of fixing or upgrading. What you want to do is protect yourself from any unexpected large expenses. Before you decide to purchase an older home, you should arrange for a home inspection. A professional Home Inspector can tell you the over-all condition of the home and what areas, if any, need to be addressed. Knowing how much repairs are needed prior to your purchase will help you decide whether the house is a good buy for you.  (The home inspector is normally contacted after an offer is made.)

·         What are the Financial Requirements for the Home?

When examining the home, there are some financial questions you should ask the home owner. These questions include:

1. What are the average monthly utility bills? (water, gas and electric)

2. How much are the real estate taxes? Has there been an increase lately or is the area due for a reassessment?

3. Are there any major repairs needed in the near future?

Based on the information you learn from the seller, determine whether you can you afford the monthly payments.

·         Negotiate!

If any of the items you found during your examination of the house are unacceptable, it doesn’t necessarily mean that you should not buy the house. You can negotiate the cost of the repairs and/or negotiate the price. Don't just walk away from a potentially good buy.

·         Pre-Qualifying is a Good Thing!

You should know before you look for a home how much you will be able to afford. Having a mortgage company or other financial institution “pre-qualify” you will take a lot of stress out of your home search. Knowing how much you can afford ahead of time will help you be more successful in your purchase as you can narrow your search to locating the best home for you.

·         Miscellaneous Items to Inquire About

Ask your realtor about a home warranty program. This will protect you, the buyer, if any of the major appliances breaks down within a given period of time.

Also, if you have small children who will be attending public schools, ask your realtor (or the seller) for a "report card" of the local schools.

The Buying Process

Here is a summary of the steps that you will take from your home search to closing. If you are a first-time home buyer, don’t be overwhelmed by the number of items listed or their complexity. Your real estate agent, escrow officer, and loan officer will guide you through this process. Many of the tasks are handled directly by these three parties. They will instruct you as to what you must do. They will answer any questions that you might have. They will do what they can to ensure you become a homeowner.

Step One: Determine how much house you can afford?
Step Two: Make an offer to purchase.
Step Three: Get a professional Home Inspector to examine the home.
Step Four: Apply for a Mortgage.
Step Five: The Good-Faith Estimate.
Step Six: Title Search and Insurance.
Step Seven: Estimate Closing Costs.
Step Eight: Request an Exact Account of Costs.
Step Nine: Set the Closing Date.
Step Ten: Set the Walk-through Date.
Step Eleven: Closing Day - Sign the Papers.

Step One: Determine how much house you can afford

Using a loan officer, determine the price range of the home you can afford. Discuss this with your real estate agent or financial advisor. Ask your agent to show you houses in this range in the communities that you would like to live in. Your agent is a good source for inside information on the benefits of the communities in his or her area. For the most part, you should count on spending 2 to 4 weeks looking at homes with your real estate agent. This will give you enough time to look at plenty of homes and make your decision. If you take longer than a month, you risk the chance of loosing a home that you would have liked to make an offer on, and you'll have to start the process again.

During this time period, it is also a good idea to get "pre-approved" for a loan. This is different than a pre-qualification. The bank or mortgage company actually does a credit check for a pre-approval. Having a pre-approved loan gives you an advantage when making an offer in step 2. Ask your real estate agent to recommend a loan officer if you don't already have one.

Step Two: Make an offer to purchase.

When you find a home that you want to purchase, make a bid through your real estate agent. Your agent will provide you with a standard residential sales contract. He or she can also recommend a good real estate attorney. An attorney may or may not be necessary at this point, (most sales contracts are fairly standard) but will be required later in the process. However, you may decide that you want an attorney to review the contract.

The sales contract will most likely contain some contingencies on riders attached to the contract. Examples of some contingencies are: your obtaining financing for a specified rate and term, selling your current home, obtaining a satisfactory (to you) home inspection. Your real estate agent or attorney may include other items.

This offer to purchase a home will be accompanied by earnest money of $1,000 or more, depending on the price of the home. This indicates to the seller that you are making a serious offer. The earnest money is normally in the form of a check made out to the real estate broker (not the seller). It is deposited in an escrow account and will be applied to your down payment. If the sale is not finalized for a reason beyond your control (i.e. due to one of the contingencies), the earnest money will be returned to you.

Subsequent offers and counter offers may take place until all terms are agreed upon by both parties.

Step Three: Get a professional Home Inspector to examine the home.

Have the home inspected by a professional, bonded inspector. (NOTE: The buyer normally pays for the home inspection - It will run somewhere in the area of $200 - $500.) The home inspection usually takes place within 5 days after signing the contract. If there are any major flaws in the home, they can be dealt with before you apply for the mortgage. If these issues can not be dealt with to the satisfaction of the buyer, your contract should allow you to back out at this time.

Step Four: Apply for a mortgage.

Apply for a mortgage. (NOTE: Check the loan/mortgage and mortgage prequalification functions provided in the software.) You will probably have to pay a loan application fee of $100 to $300. Some lenders also charge you prepaid points. (One point refers to 1% of the loan amount. Points are paid to the lender or mortgage company to cover their cost for the up front processing of the loan.) You may decide to “lock in” the rate at this time, or the lender may allow you to do it at a later point in time. (If you have been pre-approved for a loan, some of the steps in this process will have already been completed.)

When you apply for a mortgage, what are some of the items that are needed? (These may vary depending on the lender.)

- Social Security cards & drivers licenses
- Residence addresses for the past 2 - 5 years
- Your landlord's name and address
- Names and addresses of each employer (past 2 - 5 years)
- Your most recent pay stubs
- Two years signed tax returns & W2’s
- Names, addresses, account numbers, and balances of all checking, savings, credit cards, and installment loans
- Two most recent bank statements on all accounts
- Information on any stocks or bonds you own
- Details of all real estate owned
- Copy of fully executed sales contract, riders, and listing sheet for your current home (if applicable)
- Divorce decree & child support agreements
- Application fee

Step Five: The Good-Faith Estimate.

When your loan is pre-approved, you will receive a "good faith" estimate of the closing costs from the lender. This is called a "RESPA Statement". It includes the costs for: points, appraisal, title search, title insurance, survey, recording of deeds and the bank’s attorney fees. Some of these items may be included in the points that they charge.

Step Six: Title Search and Insurance.

Before a lender gives final approval, there are other items that may need to be done. These items include:

• Title Search - This is usually required by the lender. It should be stated in the sales contract that the seller provide you with clear title (one without any liens against it). This may cost you about $200. Check with your real estate agent for the standard charges in your area.
• Title Insurance - The lender will also require this for their own protection. It’s an insurance policy that covers any problems with the title even though the title company stated it was clear.
• Buyer’s Title Insurance - This covers you, the buyer, in the event that the title is not clear. This is usually optional, but recommended.
• Private Mortgage Insurance - Again, this is something that most lenders require if your down payment is less than 20% of the purchase price. It is a protection for the lender in case you default on the loan.
• Homeowner’s Insurance - This is an insurance policy that covers the cost of repairing or rebuilding your home in the event of a natural disaster. Obviously, this is beneficial to both you and the lender. This is something that you will shop around for on your own. You can start with your auto insurance company.
• Other - Your realtor may also have some suggestions.

With the exception of the homeowner’s insurance, all of the above costs (plus any additional ones such as the appraisal, survey, recording of deeds and the bank’s attorney fees) will be included in the RESPA provided by the lender. The entire cost to you, the buyer, will usually be in the range of $1,000 to $1,500 excluding points. (The actual amount may be higher or lower than these limits.) The amount of points that you will have to pay depends on the lender’s policies, the amount of your down payment, the term and the amount of the mortgage.

This means that you should count on having cash available besides the amount of your down payment and the amount of points paid to the lender. The down payment is usually a minimum of 5% to 10% of the selling price.

Step Seven: Estimate Closing Costs

So, how much will this cost? Let's take an example of a $350,000 home. Suppose your lender allows you to put a 5% down payment on the house, and your closing costs will be between $1,000 and $1,500, and the amount of points paid is 1.5% (of the loan). This would come to:

Down payment $17,500
Closing costs $1,000 to $1,500
Points (1.5%) $4,988
------------------
Total $23,488 to $23,988

Step Eight: Request an Exact Account of Costs.

When your mortgage is approved, the lender will send you a letter of committment. If the information is not provided, you will need to request an exact accounting of the closing or settlement costs and the required documents that you need to bring to the closing.

Step Nine: Set the Closing Date.

All of the parties will agree on a closing date. For the closing, here is a list of some of the items that the three parties are responsible to bring.

The lender: RESPA, Truth in Lending Disclosure Statement, the mortgage, the mortgage note, application for any escrow accounts required for the buyer, and the check for the seller.

The seller: property deed, final utility bills, final tax bills, any documents required to clear the title, and keys to the house.

The buyer: cashier’s check for the remainder of the down payment plus the balance due for any other payments (you will be informed of the amount), any documents required by the lender, you may need your check book for small dollar amounts, and you should have your lawyer present.

Step Ten: Set the Walk-through Date.

You will select a walk through date. This is your opportunity to inspect the home one last time before closing. It is usually scheduled a day or two before the closing date.

Step Eleven: Closing Day - Sign the Papers

CONGRATULATIONS!!!!! Closing day has arrived. After signing numerous documents and taking care of final payments, you are now the proud owners of your own home.

 
To Do List For Moving

This list will help you as you plan to move from your current residence to your new residence. You can print this out and use it as a check list.

·         KEEP TRACK OF YOUR EXPENSES.

Keep track of your moving expenses. Some may be tax deductible!

·         PREPARE FOR THE MOVE.

These items are listed in the general order that you should do them. Begin about 6 to 8 weeks before moving.

__ Find a moving company. Have them give you a written estimate.
__ Start discarding items that you will not be moving.
__ Inform your company of the address change for their mailings - especially your W2 form.
__ Request a transcript of your children's school records. Contact the new school.
__ Begin looking into churches or synagogues to transfer membership.
__ Start collecting cardboard boxes and other containers for moving. Begin packing out of season clothes and other items.
__ If you are going to be taking draperies and/or carpets, have them cleaned before you move and then pack them for protection.

·         NOTIFY UTILITY COMPANIES AND OTHER BUSINESSES.

Notify the following companies/agencies/people of your move. When applicable, contact new ones in the area you're moving to.

__ Electric company
__ Gas company
__ Water
__ Telephone - Keep your current phone in service through moving day. You may need it that day.
__ Trash removal
__ Auto insurance
__ Other insurance (life, health)
__ Stock broker
__ Accountant
__ Lawyer
__ Banks
__ Credit card companies
__ Stores where you have charge accounts.
__ Doctors/Dentists - ask for referrals in the new area. Transfer records.
__ Motor vehicle department for your driver's license.
__ Governmental agencies like the Social Security Office (if you are receiving benefits), Veterans Administration, federal and state
     tax offices.
__ Newspapers, magazines, other publications you might be receiving.
__ Family, friends, business contacts - put together a letter to be sent to these people.
__ Book or record clubs.
__ Cable T.V.
__ Post Office - leave a forwarding address.

·         AFTER YOU MOVE IN.

When you get to your new home:

__ Check the telephone, gas, electricity, water.
__ Check the pilot lights in your stove, furnace, hot water heater.
__ Register to vote.
__ Register your car with a new state within 5 days.
__ Get a new driver's license.
__ Purchase a new city or village sticker for your car.
__ Go through your check list above - make sure each item has been completed.

Do you Know...?

·         What is the busiest moving season of the year?

As you might have guessed, the busiest moving season is the summer.

·         At what time of the month do most people move?

Most people move on the first and last days of the month.

Using these two facts you can plan accordingly. For instance, if you're planning to move in the summer, make your arrangements
far enough in advance.

Contact us for more details!
Mary Elton
19021 Beach Blvd., #A
Huntington Beach, CA  92648
(714) 474-6400
Fax (714) 963-5440