Purchasing a home is most likely the biggest financial decision in your life (except from buying a new Ferrari or “monster yacht”). Therefore, this decision must be made carefully. Whether you are looking for a vacation home (second home) or a rental/investment property, real estate used to be – and still is – an excellent investment if done right. However, there is a little homework to do before you want to spin your wheels. This Buyers Resource page is meant to give you a bit more background information. If you are a seasoned home-buyer, somebody who has bought and sold several properties in his lifetime, you can probably skip this page.
Prepare before you go shopping for a home
- If you want or can pay cash that is excellent. When making an offer you may need to show “proof of funds,” but that is already the only “obstacle.”
- If you need financing, it will get a little more difficult. The bank requests certain documents before they give you their money. Okay, what do they typically want from you?
- They like to read financial statements, so, they want to see them.
- They want to see recent pay stubs or any income verification. That makes sense.
- They want to see all your bank accounts. Okay, show them you account on the Cayman Islands.
- They want to see your credit card statements. Well, if they are in good standing – why not.
- Yes, they like your tax returns. That’s an easy one.
- You cannot hide Auto, boat or student loans. They will impact your debt to income ratio.
- Investments? Do you have investments? If you have them, bring copies of lease agreements, etc.
- Do you have assets? 401k, life insurances, stocks, bonds? Assets can only improve your situation.
Do yourself a favor and get all the documents together before you apply for a loan. The loan officer will ask for the documents anyway.
Credit Scores and Ratings
Be prepared that your credit rating will have a huge impact. The score clearly defines the amount of money you will get from the lender – and it will also determine the conditions of your loan. Typically the bank will research your credit ratings from all three credit agencies: Trans Union, Experian and Equifax.
Getting Pre- approved
When applying for a loan be very careful with the purchase of big-ticket items or with career changes. Such a move will most likely bring the loan process to a screeching halt.
It is also always a good idea to start the home search with a pre-approval letter in your pocket. If you find the right property and want to make an offer, this document puts you in the driver’s seat. Nowadays many home sellers ask you to include a pre-approval letter included with your offer.
Narrow the Search
It is not easy with so many choices, but you need to narrow the search. Make a list and write down what is important for you. The more information you can give us – the better we can define the search. Of course, you will change some priorities in the process. Some home buyers end up with a completely different property than they were looking for at the very beginning. There is nothing wrong about that. Searching on the internet is one thing, but looking at the homes in reality is another one. You need to give us as much information as possible before we go on tour. We can not read your mind and nothing is more frustrating than wasting time looking at properties you are not even remotely interested in.
Making an Offer
Once you have picked “Dream Home” we will write the offer for you. You tell us the price and the conditions and we will draft a copy. We will present the offer to the seller’s agent and will make sure that all the terms are understood. The seller will get a timeline for the inspections, appraisal, and closing. If re-negotiations are necessary, we will change the provisions accordingly.
In most instances “As-Is” contracts are used. Those contracts minimize the risk of a lawsuit, and the Board of Realtors highly recommends the use of those forms. The seller puts his property on the market and does not offer any repairs. The buyer has the right to inspect the property and rescind his offer if he doesn’t like what the inspector reports. He gets his escrow money back and can resume his home search.
He cannot demand that the seller does repairs, but he can still ask. In many cases, the seller will do certain repairs to keep the deal together. There are no stupid questions, only stupid answers, right?
The Closing Agent
Who pays for the Title Insurance can determine the closing agent. Only when dealing with bank owned properties the bank may pick the closing agent and pay for the title. The buyer has actually two choices: he can use a title company or a real estate attorney. In terms of costs there is no difference. If you don’t know a closing agent we will give you options. Is the closing agent really that important or is he only doing paperwork? He will actually make sure that the title is free and clear of encumbrances and he is responsible for the correct payments to all parties involved. Therefore, a good closing agent is a blessing.
The inspection is the most important part of the transaction. This is the step where a licensed inspector crawls through every cranny of the property in order to reveal any costly repairs. In some cases a different expert needs to be hired, too. If the integrity of the roof is in doubt, a licensed roofer needs to cross-check. Same applies to A/C, plumbing, electrical problems or structural problems. Starting the new home ownership with a hefty repair bill is no fun.
After inspection one of two things will happen:
- If the inspection reveals “substantial” problems the buyer can rescind his offer and demand his deposit back or he can re- negotiate a lower price, or he can ask for repairs.
- If the inspector finds the property in excellent condition, he may accept the property and continue with the timeline set forth.
When the buyer needs money from the bank but doesn’t have a 100% watertight loan approval (which is a rare event), he wants a financing contingency in his contract. Should the bank in a last-minute decision rule not to grant the loan, the buyer can get his deposit back and continue with his life.
Things to do Before Closing
Certain things need to be in place to complete the closing.: Without insurance, the bank will not clear the payment of the mortgage, and in some areas the bank will demand the purchase of a flood insurance as well. When closing during the summer months, the buyer should keep in mind that while a tropical storm is approaching Florida’s coastline insurances will not be issued. Soon after the event insurance companies will write policies again.
Home Owner Association Approval
Some communities want to be asked first. They want to see who is going to be their next door neighbor. Can they decline a buyer? Yes, they can, but it doesn’t happen very often. The closing agent will usually request a copy of the application from the homeowners association. If not, we can help with that as well. Usually, they ask for names and addresses, but some communities do a thorough background check, included credit history.
Home Service and Utilities
It is also time to make arrangements for the water, power, and cable account transfers. On the day of closing the account needs to be transferred to the new owner. The seller usually provides the names and phone numbers of the lawn and pool services he was using. It is a good start, and you can always change your horses later.
Now, everything is in place, and the closing can take place.
Question about your home buying process?? Feel free to contact us anytime!