We often receive requests for "HOW TO TIPS" from potential homebuyers. The following are tips from The League of American Homeowners garnered from various consumer information resources. We hope that this information is useful to you.
On Buying a Home:
- Obtain your own credit report. The Fair Credit Reporting Act guarantees you access to your credit report for free from each of the three nationwide credit reporting companies — Experian, Equifax, and TransUnion — every 12 months.To receive your free report you can visit AnnualCreditReport.com, or call 1-877-322-8228. The Federal Trade Commission states that this is the only authorized source for the free annual credit report that's yours by law. Once you know your credit worthiness you can then determine how much "house" you can afford.
- Start with a lender - not a real estate agent. After you have a credit report on yourself, obtain a "pre-qualification loan certificate" from a respected lender. This will help you to determine how much house you can afford to buy. Usually, the lender will lock-in a loan rate for 30 to 45 days on such certificates, thus guaranteeing the monthly payment schedule based upon the information you have provided. "Loan Certificates" give the buyer a much better idea of what you're getting into and they also put you in the category of being a "serious buyer."
- Shop carefully. Once you have a loan certificate you can visit as many real estate offices as you like. You're in the driver's seat! Agents will always attempt to direct you to their own listing's first and those homes do not always represent the entire market in any one area. So visit more than one real estate office.
- Inspections. Never agree to buy a home without a detailed termite inspection - and - a home inspection by a certified home inspector. Home inspectors are not licensed, so look for one that is a member of an association such as CREIA, ASHI or NAHI. Inspector who are members of these associations are throughly trained and have to pass a rigorous examination to become certified.
- Escrow. Once you find your home, you will open an escrow. Any special instructions on your part must be included in writing in the escrow document - or they don't count! You should wish to include such things as repair or replacement of any damaged areas of the home as identified by the home, roof or the termite inspector. Agreement to repair or replace can be either by the seller, or by the buyer based upon a price reduction to accommodate the expense of the repair.
- Energy Efficient Mortgage. Buying an older home? Get the EEM! You can borrow an additional $5,000 to $8,000 in extra money to make your older home energy efficient and this will not affect your credit worthiness for the principal loan. Most important, the EEM will usually save you more money through reduced energy bills than it will cost you. Call The League office for questions and help.
- Insurance. Shop your homeowners insurance early. California has suffered an insurance drought due to earthquake insurance requirements. Most buyers don't even bother to request earthquake insurance anymore - too expensive. That is up to you. But remember, finding regular homeowners insurance can take you a full 30 days. Call the League if you're having problems - we may be able to help.
- The Offer. When you make an offer, don't worry about the asking price - always offer less and expect to negotiate a price. Offers and counter offers are the norm these days. Buy shopping more than one house in a given area you should have a better idea of what might be fair. Remember: Real estate prices are still fluctuating and the asking price is always high!
- Terms You Should Know:
- ARM - Adjustable Rate Mortgage. A mortgage rate that can fluctuate periodically. Normally these are capped at 2 percent a year and are not more than 6 points above the starting point.
- Fixed-rate mortgage: a loan that carries an unchanging rate of interest over a specified term.
- Binder: an earthly agreement to buy a home from a seller, which is ensured with earnest money.
- Commitment letter: a written promise from the lender that you will receive a mortgage of a specified amount at a specified rate.
- Conditional offer: an offer to buy property under certain circumstances.
- Escrow: the process in which you deposit money with a third party who holds it until the deal is final.
- Point: a one-time only fee you pay up front to your lender, sometimes in exchanged for a lower mortgage rate.
Remember: It is always a good idea to visit your public library and check out a book on home buying. Several authors have prepared some very good resources on this activity and the day or two you spend reading their suggestions and tips can save you money, time and most importantly - buyer's remorse! The more time you spend planning, the less time you spend complaining.
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