Helpful Info for Buyers in Santa Clarita and Valencia, CA

Buying a new home is a serious business. It can be a pleasure or a headache. A house is not just your home, it is an investment in the home, the area, and in your future.

When buying a home, you're bound to have questions. For example, "Where can I find a home that suits my needs?", "How much income will I need to afford the monthly payments?" and "How long will it take to buy a home?"

Below are some helpful articles on the home buying process. Click on a link to read more.

Advice for First-Time Buyers

Pre-Approval:

Knowing how much you can afford is the first step, and sellers will be much more receptive to you when you have been pre-approved. You'll also avoid being disappointed if you go after homes that are out of your price range. With Pre-Approval, you apply for a mortgage and receive a commitment in writing from the lender. This way, the seller knows immediately that you are a serious buyer and can afford their property.

List of Needs & Wants:

Make 2 lists. The first list should include items you have to have (for example, number of bedrooms and bathrooms, one-story if accessibility is a factor, etc.). The second list is your wish list. It should include things you would like to have (pool, fireplace, den, etc.) but are not necessary.

Consider hiring a real estate agent:

You want one who will work for you, the buyer, and not for the seller.

Keeping Organized:

Keep the items that will assist you in maximizing your home search efforts handy and in an easy to reach location. Such items may include:

Detailed maps with areas of interest highlighted.
A file of the properties that your real estate agent has shown to you, along with ads you might have cut out from magazines or the newspaper.
If you are attending a series of showings, you might want an instant or video camera to help refresh your memory on individual properties.
Location: Look at every potential property as if you were the seller. Would a buyer find it attractive based on positive features such as the school districts, proximity to shopping, parks, freeway access? Or, would a buyer find negative features such as abandoned properties, garbage dump, excess noise?

Visualize the house with your decor:

Does the layout of the rooms fit your needs? How well will your furniture fit the floorplan? Is there enough light?

Be Objective:

Does the home really suit your needs? Take your time. Be sure you don't make a hurried decision that you may regret later.

Be Thorough: Don't forget such essentials as:

Include contingencies for inspection & mortgage in your written offer.
Use a professional inspector to inspect the property.
Insist on a second walk-through within 24 hours of closing
Check to see that no changes have been made that you didn’t agree to. (i.e., a nice ceiling fan that you assumed came with the house has been replaced by a cheap ceiling light).

If all of this sounds rather overwhelming, don’t worry. We are professionals and can keep track of all the details for you. Please email me or call me. I am happy to discuss any of your questions in further detail.

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How to Negotiate with Sellers

Buying a home is one of the biggest purchases most people will make. To make the right decision the first time, you need to be prepared. Before starting negotiations, consider the following:

Be prepared

Research the housing market in your target area. Once you have information about the area in general, focus on particular properties and sellers. Expect answers to these questions:

Why is the home owner selling?
How long has the home been on the market?
How does the current asking price compare to what the seller paid originally?
Does the seller's time frame for selling and moving fit with yours?
Are there structural problems with the home (cracks, old roof, etc.)?
Are there problems in the surrounding neighborhood?

Keep a Poker Face: Don’t act too desperate or enthusiastic about the property. By doing so, you’ll give the seller a stronger bargaining position. Be sure to keep your emotions in check when meeting with the seller or listing agent. Also, do not give the seller any personal information, such as your income, the maximum you are willing to pay, or when you’d like to move. If you’re working with a professional real estate agent, they should know not to reveal such information to the seller or to his/her agent.

Establishing a Timeline

Try to find out if the seller needs to close sooner or later. If the seller is under pressure to sell, you can use that to your advantage in negotiating. Even if you have a deadline for purchasing a home, you may regret it later if you allow yourself be rushed into a purchase or into making concessions on the contract.

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Types of Mortgages

Fortunately for most buyers, there are a several mortgages to choose from. Be sure to investigate each of them to determine which is the best for your situation. You may not qualify for all of them; you may only qualify for one. And if you do qualify for more than one, you could save yourself money (and time and concern) if you do your homework.

Fixed-Rate Mortgages
Adjustable-Rate Mortgages
The Convertible ARM
FHA and VA Loan
Fixed Rate Mortgages

If either of the following describes you, you’ll want to consider a fixed rate mortgage:

You plan on living in your new home for 7 or more years, and/or
You prefer knowing how much your payment will be each month.

The following are the advantages and disadvantages of the varying lengths and terms of fixed-rate mortgages:

15-Year Fixed-Rate:

Pay off your loan in half the time of a 30-year loan.
Equity builds up faster than with a 30-year loan.
Monthly payments are higher.

20-Year Fixed-Rate:

Pay off your loan in 2/3 the time of a 30-year loan.
Overall interest paid is considerably less than for a 30-year loan.
Monthly payments are higher.

30-Year Fixed-Rate:

Most common, especially for first-time homebuyers. It's the easiest fixed-rate loan to qualify for.
Monthly payments are lower than for 15-year and 20-year loans.
More desirable if you plan on staying in the same home for 7 or more years, since equity builds more slowly than for shorter-term loans.
Provides the maximum interest deduction for income tax purposes.

Adjustable-Rate Mortgages (ARMs)

If you are comfortable with risk or if interest rates are high at the time you take out your loan, an adjustable-rate mortgage (ARM) may be the best solution for you. You can also choose this type of loan if your planned ownership of the property is 7 years or less, or if you expect your income to increase to cover any rise in the interest rates.

The interest rate when you take out your loan will generally be lower than fixed-rate mortgages. But please note: Though this is true initially, it is not necessarily true in the long-term.

Since an ARM falls and roses depending on the prevailing interest rate, your mortgage payment will fall or rise accordingly.

Convertible ARMs

If neither the adjustable-rate or the fixed-rate mortgage seems like the best option, perhaps a convertible ARM would be right for you. Convertible ARMs combine the initial advantage of an ARM with a fixed rate after a number of years. This type of mortgage has the advantage when your initial interest rate is low and the future rate is not guaranteed.

Government Loans

Providing that you meet the qualifications for these loans, another mortgage option available to some people is a government loan,

VA Loans: Veterans might qualify for loans from the Veterans Administration. This option works best for those buying a lower priced home, since there is a limit on the amount you can borrow.
FHA Loans: The Federal Housing Association offers loans to qualified lower-income Americans. Look for the phrase "FHA approved" in ads and “For Sale” signs.

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Getting the Best Rates for Your Mortgage

Everyone wants to get the best deal for the least amount of money. And this is true for mortgage rates too.
Lower interest rates mean lower monthly mortgage payments. Also, it is easier to qualify for a lower mortgage payment than a higher one.

There are two routes to finding the best rate. 1) Do all the research on your own. 2) Use a mortgage broker.

Do-It-Yourself

Because of the Internet, much of the information is readily available. All it takes is a little time and energy to sort through online companies to find what you need.

But beware: Rates sometimes change daily. A great rate you might find today might not be available tomorrow. When you find a rate you are happy with, submit your loan application and lock in your rate.

Here is one source for rates on the Internet:

Bank Rate Monitor (http://www.bankrate.com)
E-Loan (http://www.eloan.com)

When you are comparing loans, be sure to compare loans of the same type. For example, you may find that "Loan X" for a 30-year loan has a lower interest rate than "Loan Y" (also for 30 years). But upon further inspection, you find that "Loan X" is technically an adjustable rate mortgage. Its payment is based on a 30-year amortization that becomes due through either a balloon payment or refinancing at the end of 5 or 7 years. These are sometimes referred to as 5-year or 7-year fixed-rate mortgages. While both so-called "30-year" mortgages, they are not the same kind of loan.

Ask your lender for a statement detailing all the fees associated with your loan. Factors such as the loan fee ("points"), interest rate, and extra fees which some lenders charge ("garbage fees") can vary a good deal from one lender to another.

Mortgage Broker

If you do not feel comfortable "doing it yourself," look for a professional mortgage broker who can assist you to find the right mortgage. You might ask friends or associates who have refinanced or purchased a home or income property recently if they have a broker to recommend. You'll want a broker who is flexible, energetic, and knowledgeable about loans and finance, and someone who has your best interests at heart.

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Surviving Escrow

Congratulations, you are now on your way to owning your own home! Follow the following suggestions (and your real estate agent’s advice) and escrow and closing with go as smoothly as possible. An escrow company will hold your deposit and coordinate most of the activity that goes on during your escrow period. Be sure there are sufficient funds to cover your check.

Assuming your sale goes through, your check will be applied to the purchase price of your new home. If for any reason the sale is not completed, you may be entitled to receive your deposit back, less any standard cancellation fees. In some instances, the seller may retain this for liquidated damages.

The period that you are "in escrow" is usually 30-60 or more days. During this period, each item in the contract must be completed to yours and the seller’s satisfaction. By the time you open escrow, you will have agreed on the closing date and any contingencies. Each contract is different, but most include:

An inspection contingency: Complete this as soon as possible after the contract to purchase is signed. Any unsatisfactory results from the inspection may mean that you’ll want to cancel your agreement.
A financing contingency: Once your contract is signed, you will have a period of time to secure your loan. If for any reason, you cannot secure funding during the alloted period of time (or the seller is unwilling provide a written extension), you have to decide whether you’re willing to remove the contingency and take your chances getting a loan. If you are unable to get secure financing, you may choose to cancel your purchase contract.

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