★ TOP 5 HOME BUYER TIPS ★
Here are the top 5 home buying tips to make sure you have a smooth ride towards home ownership!
TIP#1 GET PRE-APPROVED.
So you found the perfect home, submitted an offer, and it was accepted! Woohoo! Congratulations! 🎉Break out the tequila and champagne, it’s time to party! You call your parents or friends and tell them the good news and you guys start crying over the phone together! “Yesss! Success! I’ve never been so happy!”
You start buying furniture for your new house, making life changing decisions. You change your kids schools and start talking to neighbors how you wish you could have talked to them this entire time since you will never see them again! Yess! Life is great! The seller purchased their new home and entered escrow! Everything is going great and life couldn’t be better. You placed your ‘earnest money deposit’ (typically $1,000 or more) and after patiently waiting 25 to 30 days your loan officer frantically calls you and tells you… The bank denied you for your home loan!
OHHH NOOO! You start panicking! You call the furniture place to try and get a refund! You take your kids back out of school again! You try to apologize to your neighbors and find out your car was keyed and then your Realtor tells you that the seller will be keeping your $1,000 deposit! And on top of that the seller can possibly sue you for damages! NOOOO!
What a nightmare!
DO NOT LET THIS HAPPEN TO YOU!
Get pre-approved, get pre-approved, get pre-approved! By getting pre-approved before you even begin viewing homes, you are making sure that the nightmare scenario above will never happen to you! Purchasing a home is not an easy task and the last thing you need is to make it more stressful on yourself. Take the stress out of home buying and make the process as easy and enjoyable as possible, Besides, any good listing agent won’t even let their seller entertain an offer from a buyer that isn’t pre-approved yet. 9 homes for sale out of 10 will ask for buyers to submit a pre-approval letter, proof of cash to close, and proof of their fico scores along with their offer. A majority of listing agents even require the buyer to get ‘cross qualified’ with their personal lender.
The reason they do this is to ensure that their seller is not wasting any time taking an offer that is just going to fall out in the future. Just as much as you don’t want to waste 30 days in escrow just to lose out on your deposit and create a world of trouble, the seller does not want to waste 30 days just to find out that they have to start the listing process all over again. The deposit isn’t worth the struggle of having to relist the property and deal with showings again. Especially if they were already in the process of moving and found the perfect replacement home or rental.
Secure your financing and get pre-approved before hand! Get the hardest step done in the beginning and now all you have to focus on is the appraisal (A report that provides you with the fair market value of the home), the inspections, and asking for repairs.
TIP#2 GET A HOME INSPECTION.
A home inspection is basically like getting an x-ray for your home. When ordering a home inspection, the inspector will inspect the interior and exterior of the home as well as run multiple tests to check the functionality of the; roof, basement, heating system, water heater, air-conditioning unit, plumbing, electrical, foundation, and many other aspects of buildings. The inspector prepares a written report of their findings and recommendations. If the home inspector finds possible evidence of termites, water damage, mold, structural damage, electrical hazards, or any other areas of concern they include it in their report and recommend that you have a specialized contractor come and make a further assessment.
As a buyer you will use the home inspection findings when requesting repairs. When the Request for Repairs is sent to the seller, the home inspection will be attached. Depending on what the inspection recommends, the seller may agree to all, some, or none of the repairs. If they agree to any repairs, they will either agree to having the repairs completed before the close of escrow, provide you with a fixed amount of funds to have the repairs completed after the close of escrow, or reduce the price of the home to cover the requested repairs. 85% of the time sellers will fix what is requested by the buyer or will agree to fix the biggest issue. The reason being is that if they do not agree, you have the option to cancel escrow with full entitlement to your deposit (as long as you did not remove contingencies) and they will have to not only relist the property, but disclose the issues that were found by the home inspector to any future buyer.
A home inspection can also protect you in the long run! Lets say that the inspector stated that the roof was in perfect condition and 6 months after your purchase, you find out that the roof has a leak. If it is found that the leak has accrued over a long period of time, including the day that the inspector inspected the home, the home inspection company can be found liable for these damages and will have to repair the roof. Getting a home inspection is optional unlike the appraisal report but it is always recommended that you get one so you can verify the condition of the property before you make your purchase.
TIP#3 HAVE A MORTGAGE BROKER RAISE YOUR SCORE IF NEEDED.
So you find out that the qualifying fico/credit score for an FHA loan is 580 and your score is 550! Whatever you do! DO NOT GO TO A CREDIT REPAIR AGENCY! Now I don’t have anything against credit repair companies but the reason I say this is because credit repair agencies tend to charge a monthly premium for their services. If you are being charged a monthly premium, than what is the motivation to get your credit score raised quickly?
A mortgage broker can raise your score in as fast as 3 to 5 business day and for free! The service is called a Rapid Rescore or Credit Stimulator. It will give you exact instruction on what you will need to do to get your score over the qualifying score required. The projected increase is almost exact and the instructions will be things like; paying down or paying off an existing credit line or collection or opening a new credit card or secure line. Once done the mortgage broker will be able to have the results recorded in 3 to 5 business days and your score will be at qualifying.
Credit repair companies also tend to go the ‘dispute’ route when boosting credit scores. They typically open disputes on any account that they are trying to close or get rid of which is REALLY BAD if you are trying to qualify for a mortgage. Mortgages have guidelines as to how many open disputes you can have at any given time. If you have too many open disputes when trying to qualify for a mortgage, you can actually get denied. You really want to make sure you watch out for this!
We have had various clients that have come to us wanting to purchase a home or refinance that have said that they were working with a credit repair agency. Often times they had to place an initial deposit and were paying monthly premiums for the service, so they said they wanted to wait until the agency was done to apply for their mortgage since they were already paying. Once I explained the Rapid Rescore process and showed them how we can achieve the exact same results by next week, they were in absolute shock! Before you begin working with a credit repair agency, make sure that you reach out to a mortgage broker and have the conversation with them first. You might be shocked to find how much time and money you can save yourself by doing so!
TIP#4 SHOP FOR YOUR MORTGAGE LENDER.
A majority of home buyers go with whatever lender is referred to them by their agent. Let me tell you why this might not be the best idea. The lender that was referred to you might be a “direct lender” which means that they only originate home loans for that one specific lender. This type of lender can only provide one size fits all type of loans and they provide their customers with retail rates.
A better option would be to go with a mortgage broker. A mortgage broker will be approved with more than one bank and provides their customers wholesale rates rather than retail rates. Another great thing about mortgage brokers is that you can shop for your mortgage with multiple lenders and you only have to run your credit once. This not only saves you money on multiple credit reports, but it also allows you to avoid multiple credit inquiries which will lower your credit score. Very important if you are wanting to apply for a mortgage.
By shopping for your mortgage with multiple lenders, you will be able to compare the different programs they offer like down payment assistance, occupational specific loans for peace officers, fire fighters, teachers, and more. You will also be able to compare the terms and interest rate between them all to make sure you are getting the best mortgage you can!
As a mortgage brokerage we are approved with over 40 different lenders which allows us to provide our customers with the widest variety of home loans available. We have home loans for customers with credit scores as low as 500, to the most elite of home loans for our customers with 700+ credit scores that provide the absolute best wholesale interest rates and pricing. We even have home loans that come with free appraisals!
Whomever you choose to go with, make sure to shop for your mortgage with multiple lenders and stay informed!
TIP#2 DON’T BE TOO PICKY.
This is a very important home buying tip! After you get pre-approved, your lender will provide you with a designated amount that you are qualified for. After you are given that amount, it will be up to your Realtor® or real estate agent to help you find the perfect home within that range. When searching for homes, understand that all of these homes are in the designated range that you qualify for and getting a home that hits absolutely all of your needs is going to probably be impossible in most markets, unless you go up in price. If you are unable to go up in price, we suggest making a list with all of the things that you absolutely need in a home. When viewing homes, you want to refer back to your list and see which homes have all or nearly all of your absolute must needs in a home. These are going to be your top picks.
We suggest submitting an offer an all of these homes since it isn’t guaranteed that your offer will be accepted. Submitting an offer is kind of like placing a bid. You won’t be contractually obligated to continue with any of the offers you placed unless you absolutely wanted to. If your offer is accepted but you are waiting for another offer to respond, you have up to 3 days to place your earnest money deposit in order to officially be in escrow. We’ve been able to stretch those 3 days to 6 days before but this all really depends on the patience of the seller/listing agent. Once your deposit is placed, in California you have 21 days until your last contingency must be removed. So before that 21st day you can practically cancel escrow for any reason, and still be within your right to be entitled to your full deposit.
Understand the market you are in and what is available within your designated range. Find the home that is closest to all of your absolute needs and go for it! Remember that you might not find a home that fits your entire list but that’s okay, you can always add those features within time and really make the home your own! :)
Whatever you do, make sure you don’t just wait for the market to produce the perfect home that fits all of your needs! Markets are competitive and if you haven’t found a surplus of homes just like your perfect home, within your range, than chances are that if that home pops up on the market within that range, the price is going to get driven up because of the competition. I’ve seen clients of ours lose out on awesome opportunities because of this. Don’t isolate yourself from the market!