Buying your first home is something so exciting, something to celebrate… don’t let it be something daunting! Here are my tips to keep you as prepared and knowledgable on the process as possible for a smooth transaction:
Before you do anything else, your first step is to speak to a lender. Find out all the different options you may have in order to purchase a home.
1. Figure out 3 different shopping prices. Being able to confidently know the range you can afford is key.
1st - to purchase a single family home (No HOA dues)
2nd - to purchase a condo/town home with HOA dues. This will bring your shopping prices down, as you will need to have enough extra money to pay for the monthly HOA dues
3rd - to purchase a duplex, triplex or 4-plex, as that will make your shopping price go up if you live in one unit and rent out the other units. Renting the other unit(s) would bring income that would help pay for the mortgage.
2. Then get the pre-approval letter from your lender.
3. Keep extra money for buyer closing closing costs. (When the buyer is making an offer, they will need to put a minimum of 3% down as a security deposit.)
5. Call me to help you find your dream home and submit an offer for you.
3 Major Contingency Periods to Think About:
1. Inspection Contingency (defaults to 17 days but could be shorter or longer depending on the circumstance)
You have the option to waive this contingency. This allows the buyer to do all their do diligence in making sure the home is what they think it is. This also includes going to the city to check on possible permits if there were any additions done to the home. A buyer can purchase a home that has had an addition to it without permits, but that is a risk the buyer is taking knowingly. They buyer may also request a list of repairs or a monetary settlement from the seller based on their inspections. The seller can also refuse or counter.
2. Appraisal Contingency (defaults to 17 days but could be shorter or longer depending on the circumstance)
You can always waive this contingency as well. The bank calls out for an appraiser anytime someone is getting a loan. If the appraisal comes in lower that what the buyer offered, there are several options, 1) the buyer asks the seller to drop the price (which you are not seeing in today's market), 2) the buyer has to come up with the difference in order to get the loan, 3) the buyer can back out and cancel the escrow (as long as it is within the contingency period)
3. Loan Contingency (defaults to 21 days but could be shorter or longer depending on the circumstance)
You have the option to waive this contingency as well. The buyer may cancel escrow and receive their full security deposit back as long as it is during the contingency periods. Should there be another type of contingency period (waiting for the seller to get documents/permits, etc.) you can always request a contingency based on the circumstance.
Sometimes buyers get caught up in the frenzy of multiple offers and comes in extremely high, just to get their offer accepted. After then thinking about it and get cold feet, they back out. It is a waste of everyone's time. It is important to make sure you really wants the house and are happy with what you are offering and ultimately, paying for it. Take time to consider the decision from all sides before submitting your offer.