A Buyer's Guide
What Should You Expect to Know
and do When Buying a Home?
Before you start to look, call a lender
and get "pre-qualified," or better yet
"pre-approved" for your new loan. This is a free
service that can be invaluable to you for three
important reasons:
- It will establish what price house you can
afford and what the monthly payments will be.
- You can ask your lender what to expect, and
have them review the amount of money you will
need to purchase at this price range (how much
will be required for both the down payment and
closing costs).
- When you first find the home you wish to
buy, it will put you in a stronger position when
your contract is presented - the lender can let
the Sellers know that you are "pre-qualified,"
which provides them a better comfort zone
related to your upcoming financing requirements,
as well as a competitive edge with relation to
other competing offers.
Possible Lenders
We have several lenders to introduce you to. Based
on your situation, we can narrow it down to a few.
You will be receiving a packet with names and
numbers for various services in the next week or so.
These suggestions are based merely on
recommendations made by my satisfied clients,
however, you may contact any lender of your choice.
Ongoing Search
Should you see a house "For Sale By Owner" that
looks interesting, or find something you love at an
"Open House," call me and we will work out the
details of the contract. When you see homes of
interest while driving neighborhoods, make sure to
call us at 303.437.1314 and ask questions.
Typically, we can answer your questions on the spot
or even arrange for a showing at that time.
When writing an offer you will decide on a price and
determine what your down payment will be. A check
will be needed at this time for the earnest money.
Earnest Money Deposit
So you will not be placed in an uncomfortable
position when you purchase a home, an understanding
of the earnest money deposit is of the utmost
importance. At the time a written offer on a
property is initiated, you will generally be
required by the Seller to include a personal or
cashier's check as earnest money. The amount
deposited into the listing broker's escrow account
upon acceptance of the contract will remain in
escrow until the time of closing.
This amount is credited to the Buyer as partial down
payment and represents your intent to purchase the
property. If the offer is not accepted, this amount
will be returned to you.
Depending on the price of the property, you should
anticipate a minimum of $1,000.00 and up to 3% of
the purchase price. Also, in the event that your
loan is not approved, the earnest money is refunded
to you, provided the Sellers are given written
notice regarding the lender's disapproval.
Counter-Proposal
Chances are the Sellers will "counter" your
offer with changes made on the original offer. You
then have the choice of accepting their proposal,
declining their offer and the contract is cancelled;
or submitting a "counter" to their "counter," until
you get the home officially "under contract."
Loan Application
Once the Buyer and the Seller have agreed on
price and terms of the contract, the next step is
the loan application.
First, a preliminary information form is completed
with a loan originator. This will expedite all the
necessary paperwork and information as quickly as
possible, including ordering a credit report and
appraisal of the property.
The information you provide the lender is strictly
confidential. The application generally takes place
at the lender's office, or on occasion at your
Realtor's office. Each person who will be on the
title should be present. The application normally
takes about one hour and you will be required to
pay, in advance, for your credit report and the
appraisal. The credit report will cost generally
between $60 - $100. The appraisal is required by the
lender to determine that the amount of the loan does
not exceed the appraised value of the property and
normally ranges from $250 - $300. These are the only
charges required by the lender prior to the closing.
Your lender understands your concerns and is there
to help with the approval of your loan. Feel free to
ask any questions about specific concerns or
anything you do not fully understand. You will
receive an "estimate of closing costs" (sometimes
called a "good faith estimate") from the lender so
you won't have any "surprises" at the time of
closing.
Home Inspection
If you are purchasing a resale property, you
should consider having a "Home Inspection." Included
in this type of inspection are: appliances,
plumbing, electrical, heating/ventilating,
bath/kitchen fixtures, basements/crawl spaces,
garage, roof, attic and general maintenance of the
home. The cost of a home inspection generally runs
from $175 - $225. Payment is due upon completion of
the inspection. You should plan to be at the
inspection; however, a written copy of the report
will follow a few days after the inspection.
A radon test is optional at the time of inspection.
This is an additional charge and usually runs from
$50 - $200. You may also elect to inspect the sewer
line for an additional cost of $100-$250.
Possible Inspectors
Based on your home and your concerns, we can suggest
specific inspectors.
Title Insurance
When property is being sold or refinanced, the
lender and the Buyer need a preliminary title
commitment that will indicate exactly what recorded
liens, encumbrances, and recorded easements are
currently in effect on the property. The title
commitment will also indicate the vested owner of
record and any restrictions on use of the subject
property.
Title insurance is required on all property in
Colorado and is a Seller's cost. However, the Buyer
is also required to furnish the lender with a
lender's policy showing that the lender is a lien
holder on that property. These charges will be
incurred at the time of settlement as part of your
closing costs. When the sale of the property is
final, the title company records the necessary
documents and then will issue a title insurance
policy to the new Buyer and the lender showing clear
title to the subject property. Title work is ordered
by the Listing Agent; I will review the title work
with you when it is received.
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