Make Sure to Have Everything Ready for your Lender

After selecting a full engaged Realtor to assist in finding the perfect home, be ready to find out what you buying power is.  When contacting a lender there are several items needed:

􀂾 Picture ID with proof of Social Security Numbers
􀂾 Residence address(es) for the past 2 years
􀂾 Name and address of employer for past 2 years
􀂾 Gross monthly salary – base only: Overtime & Bonus should be listed
separate
􀂾 Names, addresses,  and balances of all checking and
savings accounts – past 2 months of bank statements
􀂾 Names,  balances and monthly payments of all open
loans
􀂾 Names, balances and monthly payments of all credit
cards
􀂾 Addresses of other real estate owned
􀂾 Loan information on other real estate owned
􀂾 Certificate of eligibility and DD214’s (VA only)
􀂾 Money for credit report unless a recent credit report is available
􀂾 W2’s (2 years) and current paycheck stub
􀂾 Full divorce information if applicable, regardless of when this occurred.

Compare several lenders before committing to one and keep track of how each answer all questions.  Below are some important questions to ask potential lenders.  .

1. What is the interest rate on this mortgage?
To know exactly what you’ll be paying in interest over the life of the
loan, you need to know the rate. The lender should be familiar with many loan types to ensure their clients are in the correct product for their situation.
2. How many discount and/or origination points will I have to pay to get this
rate and loan?
Lenders can charge points that lower your interest rate and points that provide no
benefit whatsoever to you. Find out how many you’ll be expected to pay for the
loan and which kind of points they’ll be.
3. What are the closing costs?
Lenders are required to provide a written estimate of closing costs
within three days of receiving a loan application.
4. When can I lock in the interest rate and what will it cost me?
The interest rate of the mortgage you’re applying for may go up or down between
the time you apply and the time you close. Ask if there is a fee for locking in the
rate and if you can also lock in points and how long the rate lock lasts.
5. Is there a prepayment penalty on this loan?
Find out the duration of any penalty period and how the fee would be calculated.  Most lender no longer have a prepayment penalty
6. What is the minimum down payment required?
Depending on the amount of your down payment and its relation to the price of
your home, you might be charged different interest rates or quoted different loan
terms. Loans made at high loan-to-value ratios can cost more than loans with
larger down payments. Again – Make sure that the lender is familiar with many loan types.
7. What are the qualifying guidelines for this loan?
The qualifying guidelines can relate to your income, employment, assets,
liabilities and credit history. Some first-time home buyer programs and
government-sponsored loans have easier qualifying guidelines.  There are special programs for Vets, Native Americans, Teachers, etc.
 8. How long will it take to process my application?
This varies from lender to lender and is critical when making offers on property.

Home Inspection

PHYSICAL INSPECTION
The Physical Inspection clause in the Purchase Contract allows the buyer the right to
have the property thoroughly inspected by as many different specialists as the buyer feels necessary.  A physical inspection is a general inspection of the property and can lead to additional inspections.  While pest inspectors must be licensed in the state of California, home inspectors are not required to have a license and can be performed by anyone.  It is very important to hire a home inspector that hold credentials from at least one of the major home inspection associations such as CREIA or ASHI.  This home inspection is generally paid for by the buyer and generally cost between $350 and $600 for a typical home.

WHAT IS INSPECTED
The Home Inspection is a general inspection of all the major systems within the property and covers items such as exterior, roof covering and flashings, flooring,
appliances, water heater, HVAC, electrical service and components, and all visible plumbing.  This should include access to and inspection of the attic area and crawl space. During the physical inspection, the inspector may find issues and recommend further evaluation by licensed trades professionals.

ADDITIONAL  INSPECTIONS
If conditions warrant, the Home Inspector may recommend further evaluation by a
Licensed Roofing Contractor, Licensed Electrician, Licensed Plumber or other qualified
tradespersons. If further inspections are ordered, reports will follow stating the
condition of that particular system, including, if needed, a detail of recommended
corrections and costs to address the issues. Additional inspections are generally paid for by the buyer at the time of the inspection.

WHAT AN INSPECTION IS NOT!

An inspection report that is provided by the home inspector is a report of the current condition of the property at the time of the inspection and it is not a “repair list” to be supplied to the seller.  The report is, however, generally added to a request for repairs by the buyer as backup documentation.

Pest Inspection when purchasing real estate

STRUCTURAL PEST INSPECTION

Often referred to as a “Termite Report,” the Structural Pest Control Inspection is conducted by a licensed Inspector. In addition to actual termite damage, the Pest Report will indicate any type of wood destroying organisms that may be present, including fungi (Dry Rot), which is generally a result of excessive moisture.  The termite report consists identifies the type of issue and the location by use of a single line diagram of the property.  The two types of issues are Section I and Section II conditions. The report is not required by law but it is required by lenders funding a loan for the property.

SECTION I CONDITIONS
Section 1 conditions are those which are “active,” or currently causing damage to the property. Generally Section 1 items need to be corrected before a lender will loan on a home. Regardless whether or not there is a lender involved, the buyer should ensure that all section 1 issues are addressed to ensure damage to the property has been halted.

SECTION II CONDITIONS
Those which are not currently causing damage, but are likely to, if left unattended. A typical Section II item is an irrigation system that sprays on the dwelling that has not yet caused deterioration. Another common section 2 item is soil to wood contact.

WHO PAYS?
The Purchase Contract will specify who is responsible for the cost of the inspection and making any needed corrections. This is a negotiable item and should be considered very carefully since the cost of repairs can be 10s of thousands of dollars depending on how log the current condition has been allowed to go on unchecked. Every transaction is different so some sellers will do repairs while others will address none of the pest issues.

What is Escrow and why do you need it

WHAT IS AN ESCROW?

An escrow is a nuetral third-party, brought into a transaction to see that the
principals (Buyer and Seller) perform as they have agreed. Escrow enables a buyer
and seller to do business with minimum risk because the responsibility for handling
the funds and title transfer are placed in the hands of someone who has no interest in
the transaction. The escrow holder is a disinterested “go-between” for the parties involved in the transaction…One whose legal obligation is to safeguard the interests of everyone who is affected by the outcome.

WHY SHOULD I USE AN ESCROW?
You should use and escrow in order to ensure concurrent performance.
“Concurrent Performance” means that the Grant Deed is recorded with the county recorders office at the same time, or on the same day that you money is released from escrow. Escrow guarantees that your money is taken care of properly and legally so that your real estate transaction will occur with concurrent performance.
Escrow also assures that your money and important papers are safely in the hands
of a disinterested third-party who has legal responsibility to protect them. In
essence, escrow provides a clearing house for funds and documents, which includes
ensuring that all contractual conditions are met prior to the property changing
ownership.

Personal Property vs. Real Property

THE PERSONAL vs. REAL PROPERTY DILEMMA

The distinction between personal property and real property in California can be the source of difficulties in a real estate transaction.  The Real Estate purchase contract is normally written to include all real property; that is all aspects of the property that are fastened down or an integral part of the structure. For example, this would include light fixtures, drapery rods, attached mirrors, trees and shrubs in the ground. It would not include potted plants, freestanding refrigerators, washer/dryers, microwaves, bookcases, swag lamps, etc. One exception that has become more ubiquitous over the last several years is a flat screen TV bracket. While the bracket IS attached, it is still considered to be personal property and should be dealt with in the purchase contract.  If there is uncertainty whether an item is or is not included in the sale, it is best to be sure that the particular item is notated in the purchase agreement as being included or excluded.  When including items in the contract, it is important to add model numbers and serial numbers to help avoid confusion.