The road to buying a home can be both exciting and stressful. While buyers and sellers are generally motivated to make the deal go smoothly, challenges can arise.
It’s wise to be prepared and find professionals who you can trust. Your Realtor and mortgage loan officer will be your greatest allies throughout this process.
Loan Obstacles – The tight financial climate has led to many changes in the mortgage.
There are a number of things you can do to be prepared:
- Get your finances in order and know your credit rating.
- Talk to lenders and get familiar with your mortgage options. There are many loan options available with widely varying credit and down payment requirements.
- Get pre-approved but understand that this does not guarantee final approval.
- Do not make any major purchases that can affect credit until after closing.
- Discuss possible road blocks with your lender and how they can be mitigated.
Home Search Obstacles – Finding information about homes for sale has gotten easier over the years. Surf the Internet, drive around neighborhoods and prioritize your wants and needs. Most importantly remember that your local real estate professional has been inside hundreds of homes. Make use of their knowledge and experience.
- Be sure to understand the market in general and the fair market value of any homes of interest.
- Make an offer and negotiate the terms.
- Be sure the purchase contract protects you using all the standard contingencies as well as taking into account any special circumstances for your situation.
Inspection Obstacles – What happens if your inspection turns up serious or unexpected problems?
- Minor unexpected repairs are usually easily resolved between a buyer and seller. Major issues are more difficult to resolve. Your options typically include asking the seller to complete repairs prior to closing or agreeing to a price reduction or help with closing costs in lieu of repairs. Escrow for repairs after closing is generally no longer an option.
- Focus on findings that impact safety and the soundness of the home. Find licensed professionals to help you understand the significance and potentials costs.
- Think carefully about what is important and reasonable. Unless you’re buying new construction, you can’t reasonably expect that a home will be like-new. Understand that you may have to walk away from the transaction if a satisfactory agreement can’t be reached with the seller.
- Do a walkthrough just prior to closing to make sure everything is as expected.
Appraisal Obstacles – The appraisal process has changed and although well-meaning, can be flawed.
- Local appraisers are more familiar with our market and tend to do a better job than appraisers sent from out of town by internet lenders. Keep this in mind when selecting your lender.
- If an appraisal does not come in at value, you can ask the seller to reduce the price to the appraised value. You also have the option to make up the difference between the appraised value and loan value.
- If a satisfactory agreement cannot be reached, the appraisal contingency in the contract can be used to terminate the transaction.
Other Potential Roadblocks – Examples of other steps that can derail a purchase include problems with title, survey and loan underwriting.
- Make sure the home has good title and an acceptable survey.
- Final loan underwriting can be challenging as all documents are reviewed one last time just prior to closing. Disclose and discuss everything that might be relevant about you and your finances to your loan officer well in advance of closing.
Preparation is key! Purchasing a home is rewarding but it is an increasingly complex process. There can be bumps in the road. Being prepared, asking questions and finding professionals you can trust goes a long way to making the process smooth and painless.
Editor’s note: Jon Bernard is an Associate Broker at RE/MAX of Los Alamos. He can be reached at (505) 662-6789×32, and firstname.lastname@example.org.