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by Brian Yui, CPA, MBT
CEO of HouseRebate.com
Loan Pre-qualification vs. Loan Approval
Your offer is much stronger with a loan approval vs. a loan pre-qualification. By having a loan approval, you take out the majority of the risk in the loan process. Given two equal offers, a Seller will generally accept the buyer with loan pre-approval over the buyer that only has loan pre-qualification. Loan pre-qualifications are easy to obtain and often given without any verification of data.
Location, Location, Location
You probably already know this one, but it really is true. Check out the neighborhood: Are homes on the upswing or are they deteriorating? Look down the road to when you plan on selling.
- Are the schools good?
- Is the property near a flight path?
- Does the property have excessive noise?
- Does the property have easy access to major freeways?
- Am I buying the best property in the neighborhood where by my upside potential is limited?
Really do your research regarding the location of the property prior to closing escrow.
Don't wait!
In hot real estate markets, don't delay in writing your offer. While you are contemplating whether everything is perfect with the home, another buyer is already in escrow. If you generally like the house, present your written offer to the seller immediately. The standard purchase contract usually provides a period for inspections and loan approval without risking your earnest money deposit.
Inspections
A home inspection is perhaps the most important item in the home buying process. A home is typically the largest purchase one makes in one's lifetime. Hiring a qualified inspector to investigate any potential or existing problems with the property is well worth the effort.
Identifying problems up front will give you the necessary ammunition to negotiate a possible price reduction from the seller. Use caution when hiring someone who may have a conflict of interest that prevents them from being impartial. Try to get referrals from friends or anyone you know who has had a satisfactory experience with a home inspector.
Home Protection Plans
Ask the seller to pay for a home protection/warranty program as it protects both parties. A home warranty plan is a service contract, which protects homeowners against the cost of unexpected repairs or replacement on their major systems and appliances that break down due to normal wear and tear. If the home has a pool or spa, you need to request additional coverage for these items. The warranty typically covers mechanical breakdowns while homeowners insurance covers the damage. If your heater breaks down in the first year, the warranty will cover repair or replacement if necessary.
Determine what features you want in a home
Sit down and make a list of everything that you need in a home. Then make a list of everything you would like but don't necessarily need. Keep all these factors in mind while touring homes. You don't have to buy your dream home right away. Unlike prior generations, most people these days will buy more than one home in their lifetime. Start with something modest and trade up as your home appreciates.
Study your market area
It's easy to fall in and out of love with a home almost daily. Visit as many homes as possible in the area that you're searching. You will be surprised how your opinions will change after seeing several homes. Once you get a feel for the neighborhood and what market price is for a property, you will be ready to write that offer when the ideal home comes on the market at the right price. Try to stay focused and look at homes that are in your price range. Be realistic about pricing given the market conditions. Don't expect the seller to accept a significantly lower price than market if they're not motivated.
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