WHAT DO I NEED TO GET A LOAN?

Finding a home to buy

There are obviously many choices - What kind of home do you want to buy -- new or old -- single-family, townhouse, condominium, or cooperative? Where do you want to live? How close do you want to be to your job, a grocery store, or schools? Provided here is a What we want in a home and What we need in a home worksheets that helps you make sure that any special requirements you have are part of the property you want to purchase.

Working with a Real Estate Agent

Usually you don't pay for the agent's services, the seller does -- through a commission based on the selling price of the home. Remember that the real estate sales professional works for the seller of the home and represents their interests. Since buyers and sellers have opposing interests, you may consider enlisting the help of a buyer's agent to represent your interests in the transaction. When hiring a buyer's agent, review how the agent will be paid - for example; ask if you will pay a commission or if they will share the seller-paid commission on the home.

Here are some tips for working with your real estate agent:

Be up-front about how serious you are about purchasing a home.
Be specific about the types of homes and amenities you're looking for (printing out the worksheet above - "What we want/What we need in a home" - can help you).
Look at as many homes as possible to get a better feel for the homes available in your price range.

Homebuying Homework

It's much easier to start looking for a house when you're pre-approved, don't confuse it with a pre-qualification (consists of a few questions from a loan officer who gives you a pre-qualification letter). Getting pre-approval gives you more negotiating clout with the seller, essentially you become a CASH BUYER and in some cases, (especially multiple-offer situations) that can make the difference in buying a home. The pre-approval process is like a full-approval with the exception of an appraisal and title search. Realtors are reluctant to show you homes before being pre-approved, they don't want to waste anyone's time.

Buying a house is a very complex process - do your own homework, here's some points that may help

Get everything is in writing - Don't make verbal agreements! Written contracts usually override verbal contracts.
Choose a lender with a lot of consideration - There is no substitute for asking family, friends and professionals for referrals of prospective mortgage companies. Don't just choose one because they have the lowest rate, you must also feel comfortable that the loan officer you select, is committed to your best interests and will deliver what they promise.
Shop for a loan - Consider at least 3 mortgage companies before you make a decision. Many consumers have wound up paying higher rates or getting an unsuitable loan, because they didn't do their homework.
Get a professional inspection - It is highly recommended that you get a property inspection, unless you are buying a new house where you have warranties covering most equipment. Inspection reports are great negotiating tools, if a professional home inspector states that certain repairs need to be done, the seller is more likely to a make those repairs. Have your inspector verify that the repairs are done prior to close of escrow, this is the best way to know what you are buying.
Start shopping for insurance as soon as you have an accepted offer - Don't wait for home insurance until you are ready to close, many buyers wait until the last minute and do not have time to get the best coverage or rates.
Don't sign documents without reading them - Do not sign documents in a hurry, try to get them ahead of signing so you can carefully review them. It is a good idea to ask for a copy of all loan papers a few days ahead of the closing, it gives you time to review them and get any questions answered. Do not expect to read all the documents during the closing.
Don't make your moving plans too tight - Example: you expect to move out of your residence on a Friday and into your new residence over the weekend. Then you give your landlord notice to end your lease on Friday and arrange for movers to come to your house on that Friday. But your loan officer calls and your loan closing gets delayed until the following Tuesday. Now you are homeless - new tenants could be moving into your apartment, and the movers will charge you for wasting their time. It's a better plan to allow a 5-7 day overlap between closing and moving.

What's an appraisal got to do with it?

Appraisal Methods

An appraisal is an opinion of value or the act or process of estimating value, it is derived by using three common approaches, based from the market.

Cost Approach to value - is what it would cost to replace or reproduce the improvements as of the date of the appraisal, less the Physical Deterioration, the Functional Obsolescence and the Economic Obsolescence. The remainder is added to the Land Value.
Comparison Approach to value - makes use of other "benchmark" properties of similar size, quality and location that have been recently sold. A comparison is made to the subject property.
Income Approach to value - is of primary importance in ascertaining the value of income producing properties and has little weight in residential type properties. This approach provides an objective estimate of what a prudent investor would pay based upon the net income the property produces.

Then, after thorough analysis of all general and specific data gathered from the market, a final estimate or opinion of value is correlated.

When to Order an Appraisal

To determine an offering or selling price
To obtain a loan
To settle an estate:
Taxing authorities such as the IRS often require appraisals to establish the value of an estate when a death occurs. Generally, the survivors want a conservative value estimate that limits their tax liability as much as possible. Most estate appraisals are ordered by attorneys, not by the survivors.
To establish the replacement cost for insurance
To establish just compensation for condemnation
To contest high property taxes