The Key to Residential Home Buying:

BE PREPARED!

This year, with fluctuating interest rates and a limited inventory of available homes for sale, the task of buying a new home can be daunting. Once you’ve found the home of your dreams, things can and do move very quickly. Therefore, before you even begin house hunting, there are a number of things you should have in place.

Organize your finances. After finding the perfect house, the most time consuming activity associated with the purchase of the home, is obtaining mortgage financing. Make sure you have copies of the income tax returns you filed for the last two years, including all W-2's and 1099 statements. Prepare a list of all of your assets and debts, setting forth all account numbers and balances on account or amounts owed. Be prepared to submit pay stubs and bank statements going back at least two or three months, possibly longer.

Shop around for a mortgage. Despite rising interest rates or, perhaps because of them, there is keen competition between the banks and funding companies to get your business. Make sure you know all of your available options. Through SONYMA, first time home buyers may qualify for 30 year fixed rate mortgage with reduced interest rates. Some banks and funding companies will pay some of your closing costs for you. Depending upon your circumstances, you may want to consider an adjustable rate mortgage which generally charges interest at rates below the fixed rate in the early years of the loan. The time to get this information is before you make your offer to purchase. Making a decision as to the mortgage program that is right for you can be confusing. It is best to get all of the information and to start getting comfortable with the procedure before you are faced with the time constraints associated with obtaining a mortgage after going to contract. Shopping around for a mortgage is the perfect opportunity to get a pre-qualification or pre-approval letter from a lender. The pre-qualification letter is a preliminary evaluation of your ability to pay for a house and an estimate of how much you can borrow given your current assets and liabilities as well as your current income and expenses. It is important to note that, other than for the nominal cost of a credit report, there should be no fee associated with obtaining a pre-qualification letter. Additionally, by accepting a pre-qualification letter you are not making a commitment to the bank issuing the letter. A pre-qualification letter is an indication to any prospective seller that you are a serious purchaser with sufficient financial resources to qualify for a mortgage.

Interview home inspection companies. Either before or immediately after signing a contract to purchase your new home, you will have to arrange for a home inspection. The home inspection is an examination of a home’s construction, condition and internal systems by a trained inspector. The inspector should also check for termites or other wood destroying insects as well as for the presence of radon gas. If the house was constructed prior to 1978, you may also want to test for the presence of lead-based paint. Every area has numerous companies that will carry out these inspections. Some inspectors will walk through the house and give you a report at the conclusion. Others will prepare a report once they return to their offices. The inspection can range from $350.00 to $700.00. As a practical matter, many people end up choosing a home inspector by who is available to do the inspection at a designated time. However, if you contact home inspection companies before you actually have to employ one, you will be able to get an appreciation for what is included in the cost of the inspection and what expertise, if any, the companies have. If you find a company whom you trust, you may want to accommodate your schedule to the inspector’s schedule.

It is always a good idea to hire an inspector who is familiar with the locale. Chances are if there is a flooding or a drainage problem in the neighborhood, a local inspector will be aware of it and can advise you accordingly. It is imperative that you are present at the inspection so that the inspector can discuss any existing conditions with you as they are noted.

Get to know your attorney. For many people, the first time they use the services of an attorney is to represent them in the purchase of their house. In many locales, the current trend is for the parties to sign a form contract provided by the real agent at the time an offer is made and accepted. This contract is subject to an attorney’s review. The attorney’s review period is usually three to five business days. The contract becomes binding on all of the parties at the conclusion of the attorney’s review period. This is a very short amount of time to contact an attorney and know that he or she is the person to do the job for you.

In other locales, upon acceptance of your offer to purchase, you will be asked to sign a binder and to provide the name of your attorney. The seller’s attorney will then prepare a contract and send it to your attorney. Knowing the name and address of your attorney is a sign to the seller that you are a serious purchaser and not just "testing the waters."

In retaining an attorney, it is important to determine whether the individual attorney has substantial experience in representing clients in the sale and purchase of residential real estate. It is also a good idea to make sure your attorney is familiar with the nuances of the local real estate market.

A word about the binder. The binder is technically called an Offer to Purchase. It is not a legally binding contract. In this tight real estate market you may find yourself signing a binder and then finding out that a higher offer has been made to the seller. Frequently bidding wars start after a binder is signed. The lesson to be learned is be prepared to move fast. Only by all parties signing a contract can you be assured of getting your dream house for the price you are willing to pay.