Why be a normal buyer, when you can be a POWER BUYER?
How to Become a Power Buyer
Get a Pre-Approval Letter – Don't just be "pre-qualified" - get "Pre-Approved". Gone are the days when you could make a 2 minute call to a Lender and be assured that you can get a loan at an interest rate you will be happy with. The entire lending landscape has changed in the last 6 months. You MUST speak to a lender or a mortgage broker about getting a Pre-Approval Letter which will indicate to a prospective seller that a lender will make you the loan. Not a Pre-Qualification letter but a Pre-Approval Letter which means you completed an application and reviewed the necessary backup with the lender such as Tax Returns, Pay Stubs, Bank Statements. And forget about 100% financing. You will need some kind of down payment these days (at least 10%).
Crunch the numbers and figure out your monthly PITI – Principal, Interest, Property Taxes and Insurance. OK, so you have your Pre-Approval letter and you found the home of your dreams. Do you have any idea what your monthly “nut” is going to be? Are you comfortable paying that amount? Get your lender or mortgage broker to estimate your monthly PITI and make sure you are comfortable with paying that out before you start looking for houses you can’t afford.
New conforming loan limits are temporary - President Bush’s Economic Stimulus Legislation has given buyers more financing opportunities, i.e. new Jumbo Conforming limits, make sure you know what the new conforming limits in your area are before committing to any properties.
Deposit and Closing Costs - Be prepared to write a check for a Deposit (sellers usually ask for 3% of the purchase price but less can be negotiated) which will be deposited into escrow if and when your offer is accepted. You have a contingency period during which time you can do all your inspections and review any disclosures given to you by the seller, put your financing in place and get homeowners insurance. If during that contingency period you no longer want to proceed with the purchase you can cancel the escrow and get your deposit back. Also be prepared to pay Closing Costs in order to close the escrow. Estimate about 1% to 1-1/2% of the purchase price excluding any Loan Origination fees (points) you might have to pay a lender.
Retain an experienced Buyers Agent to represent you – Do not ask the agent representing the Seller to represent you as well in return for a break on the purchase price! Are you familiar with the phrase “conflict of interest”? Maybe you’ll save money on the purchase price but you run the risk of giving it back and then some if there is a disagreement between you and the seller during the escrow. Would you ask the lawyer of the person suing you to represent you too? You will have to sign at least 30 pieces of paper to write an offer in the State of California. Please, please use an experienced real estate agent who not only has read the Purchase Agreement and all the disclosures, but actually knows what they mean and can explain them to you. his commission. This is one of the biggest mistakes you can make. Buying a home is a complicated process. It’s the most expensive purchase you will probably make in your lifetime. The money you saved negotiating the price can easily be lost during the critical negotiations that go on during the escrow.
