FAQs About the Purchase Loan Process
Everyone wants to “buy low and sell high,” but sometimes life happens and you simply need to buy now without the luxury of perfectly timing the market. Limited inventory means that multiple buyers compete for the stock. That drives prices up and sellers generally have the advantage. In a seller’s market the power of a strong pre-qualification will give you an advantage on the competition.
Buying a home is a personal decision that should not be taken lightly. Many people purchase real estate to live in when they plan on staying in the same location for more than 5 years.
Your estate planner, CPA, and attorney are great resources to consult about any potential benefits that you may gain from owning a home.
Factors to consider include monthly payment, down payment, savings over renting vs buying, location, and lifestyle.
You should also consider the time you plan on staying in your new property before either selling or renting it out and purchasing something new.
Depending on whether we’re in a “buyer’s” or seller’s” market may also influence your decision to purchase real estate at any given moment.
Seller’s Market = More buyers than sellers (or available properties)
Buyer’s Market = More sellers (or available properties) than buyers
If you are using a mortgage to purchase a property, it is highly likely that your real estate agent and the seller’s agent will require a pre-qualification letter prior to accepting a purchase offer.
The primary benefit of meeting with a mortgage professional prior to shopping for a property is to determine what programs you are eligible for, which also include monthly payment options, property types and down payment scenarios.
During a seller’s market when inventory is tight and purchase offers are highly competitive, having a solid pre-qualification letter may help the seller’s feel confident in your ability to follow through with your commitment to purchase the property.
Plenty! Be prepared to provide full tax returns for two years, full asset statements for three months, letters of explanation if you have anything unusual on your credit or job scenario, identification, and to sign a full packet of loan disclosures. The more documentation you can get signed-off ahead of time through the bank, the smoother your purchase transaction will be.
It depends how far into the pre-qualification process you are. There are outside factors that can stall a purchase transaction, such as title, appraisal, property liens, inspection, inspection issues…. and the list goes on. Do not commit to a short escrow if you are just exploring mortgage options and haven’t spent some time learning to trust your real estate agent’s professional opinion.
If you are financing your home then you need to talk with a mortgage professional first. It is fine to start researching properties and neighborhoods, but your mortgage professional will be able to give you a better idea of programs you are eligible for and price ranges that will keep you within your budget.
Both are part of your Real Estate Team, and your mortgage professional should have a trusted source of referral partners that they can introduce you to while you’re in the process of interviewing real estate professionals to help you with your home purchase.
If you need a mortgage, then your real estate agent should require you to have a pre-qualification letter prior to scheduling an appointment to preview properties, especially in a seller’s market.
The benefit of meeting with a mortgage professional ahead of time is that you can discuss various mortgage programs that may require specific language or property criteria that your agent needs to know about. Knowing what you can afford will also help your agent research and recommend the right listings for you to preview.
A “buyer’s agent” represents a buyer in the buyer’s best interest.
A “seller’s agent” represents the seller in the seller’s best interest.
Some buyers feel like they would get a better deal if they work directly with the agent selling the home, but that is generally not the case for the reasons mentioned above.Since a sales price is negotiated between a buyer and seller, this would give the seller a competitive advantage if they had the only professional representation in their corner.
In cases where the loan program does not require a home inspection, it is highly recommended that you request a home inspection as part of the purchase offer process. Your are purchasing a large asset and a home inspection is a key element in understanding if you are getting a good deal. The home inspection report should clearly identify any potential significant defects, and give the home buyer a realistic estimate of the costs of repairs so that they can be negotiated in an updated purchase contract.
It is common that a seller will pay the buyer’s agent’s commission, unless specifically stated in a contract. Keep in mind that a property should sell at fair market value, which is backed up by the professional opinion of the agent representing the buyer and validated by an appraisal.
By including title insurance when purchasing a property, your title insurer takes on accountability for legal expenses to defend your property title, should it ever be challenged. The title company who examined your property’s title, and subsequently issued a title insurance policy, will then take on the legal expenses to defend your interest in title for as long as you are in possession of an interest in the property. Lender’s title insurance is required and owner’s title insurance is optional, but definitely recommended.
When the final closing documents are signed by both parties and the loan has funded. This process can take anywhere from 2 – 10 hours generally. Weekends, end of the month, acts of God and final mortgage funding conditions can stall this process. Your lender and real estate agent will be all over everyone to make sure this final step is quick and painless.