What you should know before you buy a home, in easy to understand language.

Where Do I Start? Why Buy? Major Steps in Homebuying What Can I Afford? What Should I Buy? What to Look For...and What to Look Out For! Writing Your Offer You're Halfway Home! Before Closing Day... As a Homeowner

Where Do I Start?

There is a lot of information available about buying and selling real estate. In fact several hundred book have been written on this subject. Many of these books are long and difficult to understand. This will provide you with the basic information you need to make a wise investment in real estate. One of the biggest items in your personal budget will be housing. In fact, the largest investment most people make is the purchase of a home. You will need in formation and guidance in order to make a good decision when you buy property. This is where I can help you. I have the training and experience to guide you through the complex process of purchasing a home. Although this information will answer a lot of your questions, you will have many more during the home buying process. I will be there to answer those questions and represent your interests. Remember, I am working for you and want you to understand each part of the home buying process. The more knowledge you have, the more confident you will feel about your purchase.

Why Buy?

" The best investment on earth is earth." - George Washington " Buy land. They ain't makin' it anymore." - Will Rogers Real Estate values tend to rise. The only way to benefit from a rise in real estate is to own real estate. Real estate rises more in value during periods of inflation. When inflation goes up and the dollar is worth less, real estate prices go up. Home ownership offers great tax advantages. Mortgage interest and property taxes are tax deductible. That allows you to subtract the largest part of your housing related expense from your income, which could reduce you tax bill significantly. A first home often leads to a better second home. As you build up equity in your current home, it is usually easier to afford a nicer home in the future. You are better able to plan your housing costs. Rent increases are unpredictable and usually beyond your control. Pride of ownership is frequently the tie-breaker in the rent or buy debate. A person's home is the possession most critical to everyday enjoyment. When you own your own home, you are assured that the money you spend to improve your home will create a lasting and growing investment.

Major Steps in Homebuying

Decide how much you can afford. It is important that you get pre-qualified by a reputable lender. Given your price range, decide what kind of home you want; size, location, special features such as garage, fireplace, ect. Make an appointment with me to begin viewing homes for sale. I will show you the best home available in the area you choose. When you find a home you like, you and I will write an offer, including a partial down payment (deposit). Formally apply for a mortgage loan. Your loan representative will help you fill out the application. Get a professional inspection of the home. I can refer reputable inspection companies for you to choose from. Close the sale. That's when you complete your down payment, and other costs, sign the necessary legal documents and get your keys to your new home. The order of these steps may vary for individual home buying situations. Each step will be covered, in detail, later on.

What Can I Afford?

Before you start looking for a home, you must determine the price you can afford to pay. This is called pre-qualification. Lenders have loan representative who provide this service at no cost or obligation to the buyer. I will have reputable loan representatives I can refer you to. The most important factors that your lender will consider when deciding whether to approve your loan are down payment, income, debt, employment history, credit history and property value. When qualifying for a loan, the lender will use your gross income. This means all the money you earn before taxes, including overtime, commissions, dividends and any other sources, as long as you can show a steady history for these sources. Generally, two years is sufficient to show steady income. Your monthly housing expense, as a percentage of your monthly income, is called the housing expense ratio. A good goal is to spend about 33% of your gross income on your house payment, including taxes and insurance. Some mortgage programs let you stretch that ratio to much higher. Your lender will help you decide which program is best for you. Another important factor is your outstanding debt, such as car payments, revolving debt, child support, ect. Generally your total debt, including your housing expense, should not exceed 41% of your gross income. However, some mortgage programs allow this debt to income ratio to be slightly higher. Your lender will look at your credit record to see how well you have met your financial obligations in the past. Many lenders will request a credit report part of the pre-qualification process. Your credit report shows your current debt and the status of each account. It also lists any collections of judgments against you and shows how many inquiries have been made in the past 90 days. The property must also qualify for the loan. After you enter into escrow the lender will require a professional appraisal of the home before they finalize the amount of money they will lend on a mortgage. The appraiser will use the recent sales in the tract or neighborhood and see how they compare with the home you choose. There are several things you can do if you are planning on purchasing a home. Do not charge any major purchases on credit since additional debt will affect your qualification. Stay informed on your credit balances. Avoid skipping bills to make other payments. Although skipping a payment may bring immediate relief, it is only a temporary solution if you have a long term problem. Contact creditors immediately if you have a problem. Many times your credit can be repaired. Maintain a savings plan to handle unexpected interruptions of your income. Don't let any other creditor run your credit report, as this may lower your credit rating score.

What Should I Buy?

Affordability is the biggest factor in selecting your new home. Once you know what you can afford, discuss the options with me, as I am familiar with home prices in your community. Many first time homeowners start with a condominium. A condo will usually cost much less than a house in the same area. Many buyers like the fact that the homeowners association takes care of outside maintenance of the building and common areas. You can have the advantage of a pool, spa and maybe even tennis courts, without the upkeep. Remember, you first home is not usually your last home. You may find that as your family grows and your income increases, you will want to move up. You may have made some improvements to your home and your home may have appreciated. You can use you equity to move to a nicer home. It is also a good ides to become acquainted with the market. Talk to me about special programs that may be available in certain neighborhoods or for persons with certain income levels. If you are curious about a particular neighbor hood or home, write it down and ask me about it. The more you know, the more comfortable you will feel about your home buying decision. Once I know what you can afford and what you prefer in a home I will compile a list of homes that meet that criteria. I belong to the Multiple Listing Service (M.L.S.). This service has information on all the homes currently for sale in your area, whether they are listed by my company or any other real estate company. This enables me to choose from a larger selection of homes for sale. In addition to the Multiple Listing Service I have a large network of agents in my office that know of properties for sale before they actually go on the market. There are many homes on the market that will fall under your guidelines. I will, through previewing and knowledge of the area, choose those that appear to be a better value. If you are using a government loan to purchase your home, I will choose those homes and condominiums that qualify for government financing. Once you have an appointment with me to view the selected homes, appointments will be set up with the sellers. The tour is mapped out for time and efficiency. As you can see, much time and effort goes into this home tour, so that your time is not wasted. Therefore, it is equally important that you take your appointment seriously.

What to Look For...and What to Look Out For!

Location is very important. Consider the distance to your workplace. Schools, church, shopping and access to public transportation may also be important. You can visually check the condition of the property when viewing it. Has it been well maintained? Are there water spots on the ceiling that may mean roof problems? Have there been additions to the home and do they look professionally done? Of course, price may overcome both condition and location. After viewing five or six properties in the same price range, you will begin to see how price reflect the condition and location of the home. You may be willing to do some repairs if you like the location and price. Or, you may be willing to pay a little more for a property that is in good condition. The most important thing to remember is...keep an open mind when viewing property - no home has everything you want or can afford! There are other things to look for in a home. In the neighborhood safe? The police department of the Neighborhood Watch program can usually tell you. Are there plans for major changes in the neighborhood that may affect your property vales, such as new roads, closing of schools or zone changes? Zone restrictions are very important to your property value. Zoning is established by local governments to designate the type of buildings (homes, apartments, shops, factories) and how they may be used (residence, commercial, manufacturing). The following symbols usually apply: R1 will have only single family residences, R2 or R3 may include multiple housing units, C is for business and commercial, and M designates manufacturing. How much are taxes? Are there any special assessments in the area? For example, in newer developments there may be additional Taxes levied under the Mello-Roos provision of the State of California tax code. What is included in the sales price? For example, are the sellers leaving the storage shed or the appliances? Are there any contingencies? For example, does the seller have to find another home before he can move? These contingencies should be worked out ahead of time so there are no surprises. I will have access to all the information you need to make your decision to purchase. Don't hesitate to ask questions.

Writing Your Offer

Once you find a home you like, the next step is to write an offer. The document you will use is called a Real Estate Purchase Contract and Receipt for Deposit. this contract will state the price of your offer and all other terms and conditions of the sale. You will pay a deposit, sometimes called earnest or good faith money. Your deposit will be placed in an escrow account for safety. This money will be credited towards you down payment. The deposit receipt is six pages of legal terms and conditions and there will usually be an addendum of one or more pages. I will explain each item and how it affects you. The contract covers such things as price, terms of the loan, closing date, and any personal property that may be included in the sale price. Pest control, including termites is addressed. Disclosures, such as flood and seismic hazard zones are covered in the contract. Many of these items will be explained in more detail on the following pages. How do We determine an offering price? I will have access to recent and pending sales in the area or tract. You can compare the condition, location and price of the recent sales to the subject property. From this information you will be able to determine an offering price. Keep in mind that a seller may be more receptive to your offer if it is justified by comparable sales. If your offer is too low, you will antagonize the seller and further negotiations will be difficult, if not impossible. How do I take title? There are several methods of taking title and there are tax and inheritance consequences for each one. Talk to your accountant if you are unclear about what is best for you. Sole Ownership simply means ownership by a single individual. Joint Tenancy means the joint ownership of a single estate by two persons with the right of survivorship, and all of the joint tenants owning an equal interest and having equal rights in the property. The most important feature of joint tenancy it the right of survivorship. A joint tenant cannot will his interest in the property, since immediately upon his expiration the title vests in the surviving joint tenant(s). A tenancy in common exists when two or more persons have undivided interest in the same property. A tenant in common may sell, mortgage or otherwise convey his interest in the property as he wishes, and the new owner simply becomes a tenant in common with the other co-tenants. Upon expiration of a tenant in common the interest of the decedent passes to heirs. Community Property basically consists of all property acquired by a husband and wife, or either, during a valid marriage, other than specific exceptions regarded as separate property. Liquidated Damages is an important part of the contract. If the buyer fails to complete the purchase by reason of any default, the seller shall retain the buyers deposit as liquidated damages. There are several legitimate reasons for a buyer's failure to complete a purchase, such as, not qualifying or a buyer who fails to complete a purchase for no reason other than a change of heart. In any case, the deposit will not automatically be released to the seller. Release of funds requires written agreement of the parties, judicial decision or arbitration. You will be asked if you wish to arbitrate disputed in the event one arises. When both the buyer and the seller initial Arbitration of Disputes, any dispute or claim arising out of the contract will be decided by neutral and binding arbitration. When you agree to arbitrate disputes, you give up your right to have the dispute litigated in a court or jury trial. One reason to initial Arbitration would be to bypass the time and expense of the court system. Consider this matter carefully. Many of the items in the deposit receipt have time limit in which certain things must be done or approval must be given. In many cases failure to respond in writing will deem approval. Once your offer is written, I will present it to the sellers and/or their agent. The sellers may wish to negotiate some of the items on your offer. If so, they may write a counter offer. You may, at that time, accept the counter or continue negotiating.

You're Halfway Home!

There are now additional participants involved in your home buying process, such as, the lender, escrow officer, title officer, inspector and the pest control company. The lender will be the first one you will call once your offer is accepted. You should have the following documentation when meeting with your lender: 2 to 3 bank statements to verify down payment, 1 month pay subs from your place of employment, 2 years W2's or 2 years tax returns, if self employed, your landlord's name, address and phone number, 7 years residence history names and account numbers of all credit cards and auto loans plus the balance owed and monthly payment. There may be additional information needed - the smaller the down payment, the more documentation. The lender orders an appraisal of the home, obtains a credit report and requests additional documentation, if needed. Once the package is completed, it is sent to the underwriter for approval. The underwriter analyzes the credit risk, determines conditions that must be met and approves or denies the mortgage loan. The escrow officer assures that all documentation related to the sale of a home has been competed properly, including the title search and the title insurance. You will be signing escrow instructions at the beginning of escrow. Escrow instructions are a summary of the deposit receipt. The escrow officer will be there when you sign loan documents at the end of escrow. The title officer prepares a preliminary title report for the lender, buyers and sellers. The "prelim" will list all liens and easements that are filed against the property. You will have to approve this report for the escrow to continue. I will also review the prelim report. The title company will be insuring the property against unknown liens or easements. The title company will be recording the grant deed and trust deed(s) with the county recorder. The inspection company will be hired by you to inspect the home. the inspector will check the plumbing, heating, and electrical systems, the roof, structure and appliances. You will receive a written report on the condition of the home and you will have to approve it before the sale can continue. The pest control company is hired by the seller to inspect the home for termites and wood damage. You will receive a copy of the inspection report and clearance before your closing day. The seller generally pays for any termite work required.

Before Closing Day...

You will need to obtain homeowners insurance on your property unless it is a condominium, where usually it is included in the monthly association dues. As always, it is a good idea to get more than one estimate and compare rates. If your are purchasing a condominium, townhome, or planned unit development, you will receive a copy of the Covenants, Conditions and Restrictions of the Association (C. C. & R's). These are the rules which you agree to abide by while living in that particular complex. You will have to approve these before you can close the escrow. You and I, will do a final walk-thru before the closing day. You want to make sure the condition is the same as when you initially made the offer. It there were repairs that were needed, you will check these to make sure they were done. You will want the gas, electric and water transferred to your name. If you do this ahead of time, there will be no disruption of service. I will supply you with the names of the utility companies for the area. There may be additional items, depending on your purchase. I will advise you.

As a Homeowner

To be safe, you should save all your records connected with the purchase of your home, including copies of the sales contract, the title insurance policy, the deed, copies of the loan documents and your closing statement. Set up a file for these papers and add anything that pertains to your home. At the end of the year, your lender will send you a statement of your account. This shows how much you paid on the principle and interest for the year. If taxes and insurance were impounded, your statement will show this also. Keep this information. You will need it for your tax returns. Remember, interest and property taxes are tax deductible. Keep records of the cost involved when you make repairs and improvements to your home. You may need these records, if you sell your home and make a profit, and to save on taxes. A home is a major financial investment. Good record keeping is an important part of that investment. You may save a lot of money down the road if you have orderly and complete records.