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An Overview of the Purchase Process

Real Estate Agent with Coldwell Banker Bain - Kirkland 88013

Purchasing a home for the first time can be a little intimidating. Even when it's not the first time, I for one understand it can be one of the biggest decisions and largest purchases one will make in their lifetime. If you are a first time buyer, or it's been a while since you've purchased (or sold) a property, hopefully the information below will be of value to you. Unless a purchaser intends to pay cash, financing is necessary in order to complete the process. It will be necessary to find a good loan officer who is good at informing buyers of their options - first step involve providing initial information (from the borrower) to determine credit status; income of course is the other piece of information used to qualify a purchaser for a loan. Debt to income ratios and credit scores determine what a borrower can afford. This is an early step which needs to be taken in pursuing a purchase. A buyer will learn what type of loans they qualify for and should receive an estimate of what monthly payments will be on a specific loan amount. For most, these ‘good faith' estimates should also include property tax payments and insurance costs, not solely principal and interest. A good loan officer will take the time to meet in person w/ a buyer and explain options and details. Even after the mortgage industry meltdown in the fall of 2007, if a person has good credit and income, getting a loan for a purchase is not difficult. Today, one of the best loans for first time home buyers is an FHA loan, which usually has a lower interest rate and requires 3% down - 97% of the purchase price is financed. There is still one awesome 100% financing program through the US Dept of Agricuture called a rural housing loan. Many Realtors and loan officers are unfamiliar w/ this program. With this loan, a borrower needs to have a credit score in the mid 600's. Areas of eligibility are limited to more rural areas. Manufactured homes are ineligible. Sellers in Washington (and Hawaii - where I started in this business) ordinarily expect to see an earnest $ deposit in an amount of at least $1,000, but I have had offers accepted w/ as little as $500. Personally, I do not ask for a check for the earnest money deposit until AFTER an offer is accepted; then I will need to include it when opening up escrow. At the close of escrow or completion of property transfer, buyers need to be aware that there are charges associated w/ the transfer of property, called 'settlement' or 'closing costs.' Both buyer and seller typically EACH pay 3%. As a Realtor, I commonly write and see offers accepted where the seller AGREES to pay the buyers closing costs (so 6% from the seller and little or possibly nothing from the buyer at closing). In this type of scenario where the buyer asks the seller to pay their closing costs, the buyers should take this into consideration when determining an offering price. With condominiums, keep in mind there are monthly maintenance fees in addition to a mortgage payment. These help with up keeping the exterior, landscaping, pools, etc. - those things that are shared by or benefit all unit owners, otherwise known as "common elements." The other fees associated with a purchase a buyer has to be prepared for involves the home inspection. An inspection is not required, but advised to make sure there are no surprises after purchasing regarding plumbing, foundation, roof, electrical, pests, etc. (and if issues of concern are discovered, a buyer can back out of or "rescind" the deal within a certain time frame and not lose their earnest $ deposit). The cost of the inspection is determined by the dwellings square footage; to give you an idea of a home w/ less than 1500 sq ft, up to 3000 sq ft, an inspection will run in Washington from $350 - $500. Realtors are not to hire an inspector for the client, but can provide a buyer w/ a list of names and numbers and some questions to ask to assist with the decision making process. *A common time frame for the completion of a transfer of property is 30 days, depending on terms of the contract. It is possible however for it to go longer (especially with vacant land) or shorter. After finding a home and submitting an offer and receiving acceptance, the next thing to be arranged is obtaining a homeowner's insurance binder, usually within 5 days after acceptance. My suggestion to a client would be to either contact the insurance company who issued their automobile insurance policy and see if they provide homeowners as well (Progressive does not). Some companies offer a discount if one uses them for all their insurance needs; or one can seek an insurance broker who will shop different companies and inform one of the best rate they can get and let the purchaser decide from there. Typically, an insurance broker will be looking out for the clients interests more so than going through the company directly and should inform one of what is necessary and what is not required, thus possibly saving $. Some lenders I've worked w/ don't feel it's necessary to take care of this piece of business in the early stages, but I like to see as much as possible taken care of up front, thus minimizing the potential for unpleasant surprises further in the process. * A Form 17 or Sellers Real Property Disclosure Statement is usually provided to the buyer within 3 days of acceptance and then typically, the buyer has 3 days to review and accept or reject based on the information disclosed. *The inspection period needs to be completed or satisfied typically within 10 days of acceptance. * A good Realtor will review, understand and explain some things found on the Title report and other documents received such as CC&Rs (Covenants, Conditions and Restricitions - pertaining to home and neighborhood) or Condo Association docs. This is imperative since sometimes there will be findings which raise a red flag. More than once, I've heard stories about buyers completing a purchase, not knowing what was on the title report and or other documents....I have some really good examples I could site which may discourage anyone from going the For Sale By Owner route, without at least hiring a Real Estate Attorney to review everything. I am grieved when I hear about people who have had these experiences. Of course, Title and Escrow can be questioned directly as well and this is encouraged. * LOAN approval is typically the last thing that needs to happen prior to the closing of the transaction and an appraisal of the property needs to occur. A Buyer should be advised NOT TO MAKE ANY LARGE PURCHASES during the home purchase process as it may result in denial of the loan and loss of the property. All credit card purchases should be kept to a minimum. * Some other issues with inspections and documentation that may possibly pertain to a specific property could be the following: Septic, Well's, Feasibility Study (investigation of specific details regarding vision for a property), and as mentioned earlier, approval of CC&R's and other Home Owner Association Documents (HOA's are common w/ condo's). * At closing, a buyer will either need to go to the escrow company - or it may be possible that an escrow officer may come to the clients home or meet them somewhere convenient. Obtaining signatures for all the required documentation is necessary to complete the process and this usually takes an hour. Expect a sore wrist when it's all over since the stack of paperwork it ordinarily more than an inch thick. If there is any reason a purchaser may not approve of the inspection, title, sellers disclosure, etc, (or receive loan approval, through no fault of their own), most times, the earnest $ deposit will not be forfeited. Notification however must be given during the specified contingency time frames. Make sure you as the buyer, find a knowledgeable, diligent and ethical Realtor who will facilitate what needs to occur when it needs to. A good Realtor will also be in regular communication w/ their client and provide required documentation to all parties (client, lender, escrow, listing agent).