The Home Buying Process

PRE-QUALIFY

The first step is to get Pre-Qualified with an experienced lender.  You can do this over the telephone and no cost is involved.  You will be asked for the information regarding your income, present and past work history, your current monthly debt payments and related information.

A Credit Report will be processed to determine your qualification profile for obtaining the mortgage for the purchase of your new home.  This information is confidential and will be provided to you through your lender.  We are happy to recommend several experienced lenders that have competitive rates and superior service.

LOAN APPLICATION

First, a Preliminary Application Form is completed with a loan originator.  The loan originator’s goal is to expedite all the necessary paperwork and information as quickly as possible, including ordering a credit report and appraisal of the property.  You will need to furnish the lender with the following information:

1.	Account numbers of creditors and outstanding balances as well as names and addresses.
2.	Bank account numbers (both checking and savings) as well as names and addresses.
3.	Source of down payment or closing costs; the lender will verify this amount. If there has been a noticeable change in your balance during the past six months, the lender will require a letter of explanation. If using the following as a source for down payment or closing costs:
	a.	Present life insurance cash value
	b.	Two months of each checking & savings account monthly statements
	c.	Most recent broker(s) statements of stock, bond, and mutual fund portfolio
	d.	Gift letter
4.	Employment history (2 years minimum); Name and address(es) of employer(s)
5.	Annual income. If self-employed, special information will be required, such as business and personal federal tax returns for the past two years, year to date financial statements ( balance sheet & profit and loss statement). In other cases, the lender may require recent pay stubs as well as W-2’s and copies of tax returns.
6.	If divorced, copy of divorce decree.
7.	Residential and mailing address(es) for last two years.
8.	Lease and rental agreements for investment properties, if applicable.
9.	Book value of automobile(s).
10.	If a veteran, VA Certificate of Eligibility.
11.	Social security number of each borrower.

he information you provide the lender is strictly confidential. The application generally takes place at the lender’s office or, on occasion over the internet. The application normally takes about one hour and you will be required to pay in advance for you credit report and appraisal. The credit report is ordered through a credit reporting agency and will cost between $50.00 and $75.00. The appraisal is required by the lender to determine that the appraised value of the home is sufficient for the amount of loan requested. The appraisal costs range from $300.00 to $500.00. These are the only two charges required by the lender prior to closing.

Your lender understands your concerns and is there to help with the approval of your loan.  Feel free to ask questions at the loan application about anything you do not understand.  You will receive a Good Faith Estimate at the time of the loan application so you will not have any “surprises” at the time of closing.

MAKING THE OFFER

When you find the home for you, we will call the listing agent and ask for as much information as we can get for you; terms regarding the sale, multiple offers, date of possession, etc.  You will then be able to determine what you are up against in the competition to purchase the property.

We will write the contract with you and explain the terms and conditions.  You will need to write out an Earnest Money check which will be typically one percent of the purchase price of the home.

EARNEST MONEY DEPOSIT

Your understanding of the earnest money deposit is of the utmost importance.  At the time a  written offer is initiated , you will be required by the Seller to include a personal check or cashier’s check with your offer. Earnest Money is deposited with either the Listing Broker or Title Company upon acceptance of the contract and 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, the earnest money is returned to you.  Also, in the event that you do not qualify with a lender for a new loan, the earnest money is refunded to you provided the sellers are given notice regarding the lender’s disapproval.  The amount of earnest money can vary, depending upon the price of the home.  You should anticipate the amount to be at least 1% of the purchase price.

HOME INSPECTION

If you are purchasing a re-sale property, we recommend having a Home Inspection. A Home Inspector is an individual who will prepare an inspection on the home you wish to purchase. This inspection will determine the condition of the roof, furnace, water heater, electrical outlets, appliances and much much more. Home Inspectors seek to identify observable defects effecting quality of construction, general maintenance, and overall safety of buildings and surrounding areas. Inspectors are expected to identify all observable defects in a property, to report them accurately, and to recommend the most appropriate ways of addressing these conditions. The purpose of a home inspection is NOT to produce a mandatory repair list for the seller. It is to inform the buyer of all observable defects; even those, which are routine in nature, so that the buyer will know what he is getting before he buys it. A common mistake among homebuyers is to serve the Seller with an inspection report, as though it were a legal notice. This does not mean that the buyer can't make reasonable repair requests of a seller. However, many conditions found by home inspectors involve routine maintenance, not requiring immediate attention. We recommend asking the Sellers for any items that may be a health or safety hazard. Your cost for this service will range from $150.00 to $500.00, depending upon the size of the home

STRUCTURAL INSPECTION OR ENGINEER’S REPORT

If after your home inpsection, the Home Inspector recommends a Structural and/or Engineer’s Inspection, there are several companies from which you can choose and I will be happy to give you this information.  This inspection will determine the condition of the structure and foundation and any defects that may need to be corrected. 

APPRAISAL

Appraisal, as you know, is the market analysis of real estate. Its purpose is to measure the dollar value of property, based upon size, quality, location, supply, and demand. The appraisal process does not include a technical analysis of construction, a determination of structural stability, or compliance with building requirements. Most appraisers have professional backgrounds in business, not construction and therefore not to be confused with a Home Inspector or Structural Engineer.  Your Lender will appoint the Appraiser.  The appraisal will cost approximately $300 to $500 dollars and will be included in your closing costs.

 

WHY TITLE INSURANCE?

1.	It is a corporate indemnity, which cannot escape liability by dying.
2.	It is regulated in each state by the Commission of Insurance or other governmental agency.
3.	It is a means of providing the knowledge required to close a real estate transaction.
4.	It is a protection against past events as opposed to future ones.
5.	It is inexpensive.
6.	It is becoming necessary in every location.
7.	A title insurance policy satisfies any valid claim against the insured title without a lawsuit.
8.	The title insurance company pays the costs of any legal fees for attorneys and court costs to defend the title.
	Title risks include:
	a.	Fraud
	b.	Forgery
	c.	Clerical Errors
	d.	Mental Incompetence
	e.	Defective Deeds
	f.	Name Confusion
	g.	Marital Rights
	h.	Execution by a Minor
	i.	Legal Interpretations

 

HOME WARRANTY SERVICE

Either the purchasers or the sellers may buy a Home Warranty Policy.  As a homeowner, you can’t help but worry about the exorbitant costs associated with the upkeep, repair and replacement of your home’s major mechanical systems and appliances.   A home warranty repairs or replaces an existing home’s covered mechanical system and major built-in appliances that break down due to normal wear and tear.  The types of breakdowns that are covered, the duration of the policy, cost of the policy, and the limitations and exclusions of coverage vary with each company.

IMPROVEMENT LOCATION CERTIFICATE

Many Mortgage and Title Insurance Companies REQUIRE an “I.L.C.” to be sure there are no boundary or encroachment problems associated with the property, before they provide a loan or insurance. In some cases, more extensive surveying may be required to clariy or resolve problems discovered when surveying for an “I.L.C.”

1.	An “I.L.C.” locates improvements and their relationship to a parcel of land. Examples of improvements would be: residence, sheds, patio, decks, overhangs, driveways, walks, wells, retaining walls, etc.
2.	An “I.L.C” shows the size and shape of a parcel of land according to the description provided in the deed.
3.	An “I.L.C.” shows types of easements that are found within the parcel being certified. For example, portions of land reserved for utility, water, sewer, electric, telephone, gas, drainage, or access.
4.	An “I.L.C.” is an official document that MUST be signed and sealed by a professional land surveyor registered in the State of Colorado.
5.	An “I.L.C.” shows encroachments, such as a building built partially or totally within an easement, a driveway built partially or totally on a neighboring parcel of land, or a neighbor’s building constructed totally or partially on the land shown in the “I.L.C.”
6.	An “I.L.C.” IS NOT a complete survey which determines the exact location of boundary lines.
7.	An “I.L.C.” DOES NOT establish property corners, nor does it replace them.
8.	An “I.L.C.” IS NOT to be used to establish property lines, nor should be relied upon to locate future improvements.

 

TAKING INTEREST IN LAND

Although an estate or interest in land is probably more often owned by one person, it is possible that two or more persons may own real property concurrently or simultaneously.  The two most important type of co-ownership are joint tenancy and tenancies in common, below are their descriptions.  Please consult an attorney on which interest you should take in your property.

Joint Tenancy:  A type of co-ownership of real property, held by two or more persons with all co-owners being equally entitled to the use, enjoyment, control and possession of the land and with right of survivorship.

Tenancy in Common:  A type of co-ownership of real property; a holding of an estate in land by two or more persons, each being entitled to possession of the property according to their proportionate share; distinct from joint tenancy in that there is no right of survivorship in a tenancy in common.

CLOSING

Closing is the term used in the real estate industry to describe the process of transferring the deed to the property and securing the financing.  The Closing is usually done at a Title Company’s office where their Title Officer acts as a scribe for the transaction.  This process completes and finalizes the entire real estate transaction between all parties.  Usually keys, garage door openers and any other items related to the property will be presented from the Seller to the Buyer.

POSSESSION

Possession is the process of the Buyer (now Owner) taking possession of the property they have purchased.  Possession can be in the range of Immediate to 72 hours.