Homebuying Process

HOMEBUYING PROCESS

The process of buying a home in Colorado is not a difficult one. However, there are many steps involved in doing it successfully:

1) Speak with a few lenders and determine which one will be the most successful for you.
There are a wide variety of options available for mortgage loans. They include conventional mortgages with 20% down, FHA with as little as 3% down, fixed rates for a predetermined amount of time as well as many adjustable rate products to name a few. The loan that will be best for you will be determined by your circumstances. For instance, if you are only planning on being in your house for a short time, then it is probable that you may want to look at an adjustable rate mortgage. However, if you are planning on living there for more than 5 years, then it is likely that a fixed rate would serve you better. Your lender will supply you with a good faith estimate that shows you what your loan costs will be.

2) Once you have determined who your lender will be, they will give you a  prequalification, or preapproval letter. This letter will accompany any offer you make on a property. Typically, it is best to have this letter be property dependent. In other words, you do not necessarily want the Seller to know whether or not you are qualified to purchase at a higher figure than the one written in your offer. Once the lender has met with you, either by phone or in person, he (she) can quickly write a letter as needed. They may do this up front, however, you will certainly want them to redo it once you have identified a property and a sales price. Your costs may vary greatly depending on the time of month you close as well as the length of time you are under contract. Lenders have different "lock periods." Lock periods refer to the length of time they will "lock" your interest rate, the longer the period, the more costly it is. Typically, you will pay a one percent loan origination fee (one percent of the loan amount). There are times when you may choose to get an interest rate lower than prevailing rates. In that case, you would typically pay "loan discount points" to "buy down" the rate. Each loan discount point is equal to one percent of the loan amount.

3) Secure an agent. After interviewing a few different agents, you will hopefully settle on one. You may work with an agent as a "Buyers agent," which means they are solely beholden to you, although their commission may be paid by the Seller. Alternatively,  you may hire someone to work with you as a "Transaction Broker." A transaction broker is a facilitator. They neither represent you or the seller from a legal perspective. However, that person is still bound to tell you anything about the property that may be considered a "material fact." A transaction broker may give you information about the property, comparables etc. Once you have determined who your agent will be, you will then sign an agreement with them which will "hire" that person to work on your behalf. In most cases, your agent will be paid by the Seller. The fee is not added to the price, it is deducted from the existing sales price.

4) Search for properties. Your agent may send you listings that meet your criteria. Your agent will look to several resources to find them. The most likely, although not the only, place will be through the Multiple Listing Service. Once you have identified properties you would like more information on, your agent will get that for you. For out of town Buyers, I often go to the properties and take multiple pictures or videos to send to my clients.

5) The Offer. The next step in the process is to write an offer. It is typically based on information regarding other comparable sales that have occurred in the neighborhood, as well as the amount of time a given property has been on the market and its condition., the particular circumstances surrounding the reason for sale may impact the offered price as well. The offer is usually given by the Selling agent (your agent) to the Listing Agent (agent for the Seller) and it is the Listing agent who will discuss it with the Seller. A good agent will make sure the Seller is aware of any facts you are willing to share that may make you a more attractive buyer than someone else. At the time you make the offer, you will be required to put down a deposit (earnest money). This money is both a deposit and part payment for the property.

6) Counterproposal. The Seller may choose to either accept your offer as written, reject it, or counter with a different price, and, or terms. The ball is then in your court. In the event you choose to accept it, then you are "under contract."  You may also decide to reject the Sellers counter and start over or move on to another property altogether.

7) Under contract phase.  (Appraisals, Inspections) This is the time when you will want to have your property inspected. Your lender will hire an appraiser to take a look at the property and render an opinion regarding its value. Most contracts will be dependent upon the value of the property being at least as high as the contract price. It is an unfortunate fact, that the appraiser will know the sales price before starting to work on the appraisal. An appraisal is not the same as an inspection. It is always best if you are able to attend the inspection. If not, then your inspector will typically send you a detailed report on the condition of the property. They may include photos and other materials as well. Some inspectors hire subcontractors to look at specific items such as heat/hvac. In the event your inspector sees something they feel needs more attention, then they will advise you of that as well. This area has some specific concerns that may need to be addressed. We have radon in many of our homes. You will most likely want to have the home checked for that. Additionally, many areas of town have shifting soils. You want to choose an agent who has knowledge of that and can direct you to a structural engineer if necessary. Some of the older areas may have sewer issues as a result of vegetation growing in the lines. You may want to have those photographed. We do not have a major problem with termites, but certain areas are experiencing more of them than others, and a pest inspection may be warranted. There are even Inspectors who will take thermal photographs of a house to see if there is moisture behind the walls or even to show hidden work that may have been done at a prior time. I offer a free one year Home Warranty on the properties I sell. Most of the properties you will look at, will have a Sellers Property Disclosure. This is a document the Seller will fill out to advise you of anything they know regarding the condition of the property. This is not something you should rely on. Your seller may or may not be an expert on their own home.

8) Inspection Issues. In the event you find something that is less than satisfactory on the Inspection, you have the right to either walk away from the transaction and get your earnest money back, or ask the Seller to make requested repairs or reduce the price or give you a credit for the repairs and let you make them once you own the property. There are time periods outlined in the original offer that will dictate when this needs to be agreed upon.

9) Insurance. Property Insurance is now an important part of the process. Once you are under contract you will have a specific time frame in which to secure Homeowners insurance. Homeowners Insurance rates are dependent upon several different factors. Flood plains, any issues that have occurred to the property within the last several years, as well as your credit scores and any insurance claims you may have filed. As result, you want to make sure you can get adequate insurance at an acceptable rate by the date specified in the contract.

10) Title Work. In the original offer, there are deadlines for you to receive information regarding the title to the property. There are additionally deadlines for you to reject a contract based on that information. Some of what you will receive include covenants, any Homeowners Association documents, if applicable. Each subdivision may have rules regarding what you can or cannot do on a given property. It is up to you to determine whether or not they are satisfactory to you.

11) Survey. You may choose to have a survey or an Improvement Location Certificate done. This will show you where the correct boundaries are as well as any "encroachments" on the property. The cost of an ILC is in the neighborhood of $225.00. However, if you want the surveyor to place the pins, then the cost can be about double that. It is a small price to pay if there is a boundary dispute later.

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