The following article is from OCRegister:
Homebuying involves dozens of decisions. How much can you afford? Where do you want to live? Do you want a one-story or two-story home? Attached or detached? Pool, or not? There are school districts to consider, parking, commutes and access to shopping and amenities. You’ve got to pick an agent — or decide to go solo, find a home inspector, termite inspector, escrow service and a lender.
For a first-time buyer, this process is daunting – but doable.
“These days, don’t be surprised if the bank pulls a fast one at the last minute and you don’t have a loan,” said Ilona Bray, an attorney and co-author of “Nolo’s Essential Guide to Buying Your First Home.”
But relax, Bray advises. “Everything works out in the end.”
For those willing to brave a choppy housing market and the challenges of buying and financing a home in this nervous era, the Register collected expert advice on how a novice shopper can best navigate the process …
We’ll assume a first-timer isn’t paying cash, so a mortgage will be required. And with lenders an extremely nervous bunch these days, you better have your financing in place before you start shopping in earnest. Here’s loan-shopping advice from Dennis C. Smith, co-owner of Stratis Financial in Huntington Beach:
•Be prepared. You will be asked for the amount and source of your income; the same for funds for down payment and closing costs; your credit and debt obligations; and permission to run a credit report. Gather your most recent federal tax returns; W2s or 1099s, depending on how you are paid; most recent pay stubs, if salaried; and your most recent statements for bank, investment or retirement accounts. If there are recent large and unusual deposits, be ready to explain where the money came from.
•Don’t incur new credit or debt. Until you meet with your mortgage professional, do not open any new credit cards, purchase a car or otherwise incur new credit or debt. Do not make any large and/or unusual deposits. More transactions are delayed because of inability to verify gift funds or other large deposits than almost any other issue.
•Do not box yourself in by assuming how much of a loan you can afford or what type of financing you have to use. Present your financial information to your mortgage professional and be open to different options for you within your abilities of downpayment, income-to-debt ratios and credit history.
•If you think of a question, ask it. If you are not getting your questions answered or feel your questions are resented then ask of family, friends, neighbors and your real estate professional, “Do you know a mortgage professional who will answer my questions and work with me?”
Once you’ve figured out your financing – how much you can affordably borrow – then you can seriously shop. Real estate agent Donna Pfanner with Coldwell Banker in Laguna Beach offers this tactical help:
•You might not ever plan on moving, but things change in life that might necessitate a move. When you are looking at a home as a buyer, put on your seller hat and choose a property that will appeal to most buyers. Location, location, location.
•Do as much advanced research as you can before going out with a real estate agent. Choose an area that makes sense for your daily lifestyle.
•Be open-minded about different neighborhoods within your price range. Your real estate agent may introduce you to a neighborhood you had not considered or didn’t know about.
•Visit a home during different times of day. See how the sunshine affects the rooms that are important to you and even your outdoor living space. You might want a home with a pool and discover that it only gets morning sun and is completely shaded in the afternoon.
Many first-time buyers target the condo market for its relative affordability. But condos aren’t simple to buy. Veronica Hicks of CondosEtc.com offers help on surviving the condo-buying maze – starting with learning the condition and management of the Homeowner’s Association (HOA.) Look out for:
•Percentage of condos in a project you’re considering that are non-owner occupied. Many lenders today won’t finance a sale unless 70 percent or more of the condos are occupied by their owner. Why? Owners care more for their homes and communities than renters.
•Percentage of the homeowner’s late on their association dues. Lenders watch this and it may help a buyer understand potential future financial assessments to meet HOA budget shortfalls.
•How much of the HOA budget goes toward replacement reserves? Loan giant Freddie Mac guidelines require 10%.
•Ask to see HOA board-meeting minutes and then ask if there is litigation in the community. Even if there isn’t litigation, minutes of HOA meetings will send up red flags if there is pending litigation.
•Ask about maintenance. Has maintenance budget been cut? In fact, observe the condition of the community. Ask if there are costly mechanical issues with repairs that have been postponed.
The trick to getting a condo financed:
•Have a lender who has multiple loan options that are designed to meet your needs and make sure your lender has your interest in mind.
•Although you may be able to get away with less, expect to put down 30 percent — and document where you got the money. If you have to put down less, then you will be pleasantly surprised.
Once you’ve got financing and made an offer – and it’s been accepted – then the hard work begins!
Debi Peters, certified senior escrow officer at Tiempo Escrow II of Laguna Niguel and Elaine Janks, vice president of sales for Chicago Title’s Irvine office, guide you to a successful closing …
•Most escrows generate a mountain of paperwork. Set up some filing system early on, and separate the documents into categories so that you can find them easily. You will be responsible for having read all of it. Your team of professionals can help you understand, but only if you read and ask questions.
•Good, solid buyers are having trouble getting loans and switch lenders, so the earlier you start your loan application, the better. Lenders are taking so long and digging so deep and asking for so much documentation, that it’s taking the full 45-day to 60-day escrow period to get loans approved.
•Be aware of deadlines to respond to reports and inspections. Act in a timely manner on the home inspection, termite inspection, seller disclosures and preliminary title report so you don’t miss your chance to opt out of a purchase if an irreparable problem arises.
•Leaving town while you’re in escrow isn’t advised. If it can’t be avoided, consult with your lender and escrow company to explore appointing an attorney-in-fact and signing a power of attorney for use while you’re away. The lender and title company will require a very specific type of power of attorney and certain people may not be allowed to sign for you in your absence.
•If you’re looking to purchase a property in a short sale, be prepared to wait, wait, wait — and then hurry up, hurry up, hurry up. Short sale approval (“SSA”) letters include an expiration date, and if escrow can’t close by that date, there’s no guarantee that an extension will be given. And if one of your team of professionals asks you to jump, the best response is, “How high?” Plus, no news is not necessarily good news. Come up with an agreeable “follow up” schedule, and check in with your agent and lender regularly to make sure everything is in place so when the “SSA” comes through, you’re ready to close quickly.
•Escrow will provide you with an estimated closing statement itemizing your costs for your closing day. You will need to pay all the costs allocated to you including any impound account set-up deposits, and pro-rations for property taxes, homeowners association dues and prepaid interest on your new loan. Due to fraud, many escrow companies are not accepting cashier’s checks for buyers’ final deposits. You may be required to wire transfer your funds.
•Escrow isn’t closed until it’s closed. Keep your credit score clean at least until the day after escrow closes. Don’t get new credit cards. Do not charge up for furniture and flooring, definitely don’t buy a new car or do anything else that affects your credit score while your escrow is pending. Your lender will in all likelihood run one last credit check before they fund your loan, and if your ratios were perfect four weeks ago but terrible on that day, you’ve got big trouble.
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