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Step 1: Initial Consultation
I go over the role of a Buyer’s Agent, and the representation it entails. I also cover what it takes to present an offer, such as having a Loan Status Report (LSR) to accompany it. In addition I will explain the main features of the purchase contract as well as important timelines along with it. If you are an out of state buyer, you may find AZ terminology & Real Estate practice very different.
Step 2: Qualifying for Your Home Loan
The first thing a buyer needs is the Loan Status Report (LSR). An LSR is written by the lender to inform sellers that you are qualified to purchase their property. By meeting with a lender prior to looking for a home, buyers can carefully identify mortgage programs that best meet their needs, namely those with the lowest costs and best terms. A second benefit is that you will know your "buying power" which creates are much more targeted search. Also by meeting with the lender in advance you will be aware of any issues that may have to be ad addressed in order to get the best rates.
How much money can you put down?
If you place less than 20% down, lenders will want the mortgage guaranteed by an outside party such as the VA, FHA, or a private mortgage insurance company to protect the lender agaist defaults. Typically a mortgage insurance will cost you somewhere between 0.6-0.8% of the total loan amount pr. year.
How solid is your credit?
How you have previously managed your bills will be a major factor in finding the best loans. Sometimes issues can show up in the credit report, and sometimes your loan officer can actually help you straighen out these issues. You can however do much to prepare yourselves: Reduce the amount of credit cards open, reduce the revolving balance and wait until your home financing is in place to buy a car or take on other debt liabilities.
Do you qualify for state-backed mortgage programs?
Under most state programs, a first-time homebuyer, also referring to someone who has not owned property within the last three years, can qualify for low interest loans as well as down payment assistance.
The loan officer will give you a Good Faith Estimate of the closing costs involved with the financing, which may include origination fees and discount points. The appraisal fee, credit report, and other lender fees, such as document preparation, underwriting fee, are further one-time closing costs.
Please check out Home Financing 101 for an in depth discussion of home financing. From the Mortgage Center you can access latest rates, mortgage calculators and additional articles.
Step 3: Making An Offer
As we refine the home seaerch and "candidates" starts to show up, it is time to make appointments. 90% of the homes have lockboxes, and sellers are very accommodating. Should you be interested in new construction homes it is important that I accompany on your first visit to the builders site. Too read more about buying a new construction home: Click Here
After we have found just the right house, and are ready to make an offer, I will first do a Comparable Market Analysis (CMA). A CMA compares similar homes sold in the same area within the past six months. This will help you determine the amount you should offer. Current market conditions will also be evaluated so you can make the most informed decision.
Once you make your offer, one of three things will happen. Your offer will be accepted or rejected; or you will receive a counteroffer. If all goes well and the offer is accepted, you’ll want to then proceed with a Home and Termite Inspection. If your offer is rejected, you can still come back with a higher offer if you are really interested in the house. Rest assured that I will work earnestly to bargain the deal in your favor.
Once your offer has been accepted, the next step is to provide earnest money, proving your commitment to purchasing the home. The earnest money can be applied toward the downpayment or your closing cost. Your escrow officer at the Title Company will hold the deposit.
A contingency protects you, the buyer, from being obligated to purchase a house based solely on an accepted offer. The two most common contingencies in purchasing a home are:
- The home must pass the home inspection, and if not, the contract could become void, and
- The borrower must obtain specific financing from a lending institution, but if the loan cannot be procured, the buyer won’t be bound by the contract.
Should anything arise from the Home and Termite Inspection Reports, there is a way to address these issues in the Buyer Inspection / Seller Response (BINSR).
Within five days of the accepted offer, we will receive the Seller Property Disclosure Statement (SPDS). The Seller must disclose any material information regarding the property of which they are aware for the period of time that they held ownership. There are warranties that survive the closing. Any information that was withheld which materially and adversely affects the sale will survive the closing.
Step 4: Role of the Title / Escrow Company
An escrow is an arrangement in which a neutral third party, in Arizona a Title Company, holds legal documents from the buyer, the seller and the lender, and funds on behalf of a buyer and seller, and distributes the funds according the buyer and seller’s instructions via a purchase contract.
Escrow is opened with a fully executed Purchase Contract and earnest money check that the escrow company holds on the buyer’s behalf. After they deposit the earnest money check, escrow orders a preliminary title report, homeowner’s association information, and requests any loan payoff information from the seller. Once the property has been researched by the title company, the preliminary title report is sent to the escrow officer, agents, buyers, and sellers. It is reviewed for any liens, judgments, or other surprises that might pop up.
Escrow is given any relevant information regarding the transaction. The buyer must submit proof of insurance for their new home (only if they are financing it), termite/home inspection reports are submitted, along with any repair bills, and loan payoff information to name a few.
The buyer and seller meet with the escrow officer at different times to execute all the documents. They need to bring a valid government issued picture (license or passport) and the buyer will need funds in the form of a cashier’s check or wired funds for closing. Once this is completed, the documents are sent to the lender for review and funding.
Finally! Recordation happens after all funds have been received and the original documents have been sent to the Recorder’s Office. The transfer is complete and now the buyer is the new owner.
Step 5: Right Before Closing
Your lender will be your new “best friend” at this time. You will be in touch with him frequently to provide any final information. Also at this time, the seller will take care of any requested repairs. Buyers (and sellers) and their agents will be given an audit sheet (the settlement sheet) showing the closing costs beforehand, so there are no surprises, and the buyer will know exactly how much his cashiers check or wire transfer should be.
The settlement papers you receive at closing are extremely valuable, so hold on to them! In the short term, they can help establish tax deductions for the year in which the property was purchased, and in the future, if the property is sold, such papers will be important for tax purposes.
The closing is done at the title company (an exception could be an out-of-state buyer, in which case documents are couriered and need to be notarized). Buyer and seller close at the title company separately, and the keys are not given to the buyer until the recordation, which may be that afternoon, or the next morning. The recordation, which is the recording of the deed, is considered the actual "closing", so time your movers accordingly.
As a buyer, you will want to arrange for the utilities to be turned on when the seller’s is turned off. Don’t forget to have the phone company ready to turn on your new service as well. Make sure all magazines, bills, and family and friends, have your new address! Anything related to school registration should also be done well in advance. Moving preparations should be made as soon as you know the offer is approved.
Step 6: Moving Day
The following is a list of items that will help you in preparation of your moving day. You may find helpful information under the Relocation page and the dedicated Moving Tip page.
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Defrost and empty refrigerator
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Have adequate funds available for the move (cash and checks)
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Prepare transportation for pets and children
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Notify post office of forwarding address (forms are available at the post office or online at www.USPS.com )
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Notify your bank
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Inform all subscriptions / magazines
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Notify all credit card companies
With the following utilities make sure to check for refund once all utility companies have been notified of moving date at the old residence. After this has been done, notify utility companies at new address.
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Telephone
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Electric
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Gas
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Water
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Cable
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Garbage Pickup
Obtain the following records before your move date:
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Medical Records
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Dental Records
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Veterinary Records
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School Transcripts
Register the following items before your move date:
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