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Archive for October, 2009

You’ve found the home you want…

It’s owned by an individual(s) and not a bank.  That’s a very good thing!

Now comes the adventure of making an offer, waiting for a response, negotiating the counter offer, signing the contract and completing the deal.  This might all sound a little daunting but your Realtor is there to explain it all to you and help you every step of the way.

The process of making an offer on a home owned by an individual(s) is  different from making an offer owned by a bank.  (we will explore Bank Offers in the next post).  The conventional offer is fairly simple and straightforward.  Timelines are clear and spelled out.  You are dealing with only one contract — the California Residential Purchase Agreement and Joint Escrow Instructions.  This form is used in the vast majority of cases and is approved by the California Board of Realtors.  Other forms/contracts can be used but this is the one you’ll see 99% of the time.

If you want me to send you a sample contract so you can look it over and become familiar with it — just email me at jeffpalmer@windermere.com and I’ll send you one.

So you’ve found your home.  The realtor has given you a list of houses in that area that have recently sold (called a CMA — Comparative Market Analysis) so you can determine a fair price for you and the seller.  It fits in your budget.  Now you sit down and write the contract.  You fill out the Purchase Agreement with the property information, the price you are offering to pay, the way it will be financed and a timeline on when certain things will/must be done and who will pay for what.  These include obtaining financing, performing inspections, who will pay for what regarding inspections, title, escrow fees etc.

All of this can sound very scary and impossible, but the Purchase Agreement takes them all one step at a time and your Realtor is there every step of the way to explain each item to you so you are satisfied and secure.  When you take one item at a time it becomes very possible.  If you are unsure or don’t understand something — that is one of the reasons your Realtor is there.  They know the contract — they should be able to explain it to you so you can understand it.

Remember — this has been done literally millions of time before.  You can do it also.

So you’ve filled out the contract.  Your Realtor now sends it to the the seller’s Realtor to give to the seller.  In the contract you have give the seller a deadline for responding to your offer.  If they do not respond within the time you stated — your offer is no longer valid and you can walk away if you wish.  If and when they do respond — be ready for a Counteroffer. This is the Seller’s response to all your terms — the price, who pays for what, deadlines etc.  Now you either accept the seller’s new terms or get together with your Realtor and fill out a Counteroffer form giving your new terms.  This process goes back and forth until all the terms of the Purchase agreement are agreed upon by both you and seller.

Congratulations!  You’ve completed the first major step!  The clock has now started.

Escrow is now opened.  In your Purchase Agreement you and the seller have agreed upon an Escrow company with the help of your Realtors.  This company acts as an impartial agent.  They accept your earnest money and hold it, they receive papers/forms from the seller and from you that are needed to close the deal, and when everything has been completed — they take your money and your loan and exchange it for the seller’s property.  So now the seller has their money and you have the property.

In the Purchase Agreement you have stated how long everyone has to get this deal finished.  The clock starts ticking when you get the signed contract back from the seller.  Now you must get a loan.   Remember that PreApproval Letter you got (explained in an earlier post)?   You now bring all your papers that your loan person needs to secure the loan and they start their process.  Your Realtor will work with you and the loan person to make this process go smoothly and on time.  You must also get all your inspections completed in the time you both agreed upon — your Realtor will help you with these also and keep track of the deadlines.  This process can go wonderfully smoothly, might have some bumps along away (explained and remedied by your Realtor) or fall apart.  The first two end with you in your new home.  But you also might find some hidden problems in the house and cancel the deal.  Your loan might not go thru for some reason.  If this happens — you start the process over again.  It’s very disappointing but you must always keep your goal in sight — a new home — it’s worth the work!

This all might sound like a lot of effort — it is.  Be ready to ride the roller coaster of emotions.  But your Realtor is there to smooth out the bumps and help solve the problems.  It’s so important to keep your goal of owning a home in mind, go with the flow and hope for the best.  What’s the alternative?  And no matter what emotions you’ve experienced — nothing will beat the excitement and satisfaction you feel when you open the door to your new home.  Go for it!

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Is the New Credit Score Model Helping Home Buyers?

Credit Expert Eddie Johansson believes the improved FICO 08 credit scoring model will increase the credit scores of a significant segment of borrowers, but it’s not helping home buyers. According to Johansson, president of Credit Security Group, a leading nationwide credit analysis and rescoring firm, that’s because the largest sources of home financing, Fannie Mae and Freddie Mac, have not yet approved it.
“When Fannie and Freddie approve it, it has arrived- but not until then,” he said. Neither organization has provided its schedule or intentions for approving the FICO 08-based credit scores available from two major credit bureaus. Credit scores help lenders determine whether a mortgage loan is approved and the interest rate offered. In general, the higher the score, the easier it is to get a mortgage loan and the lower the interest rate.
Johansson said his analysis predicts the new model- if approved- will have the most impact on the current refinancing boom and mid-to-higher-end home sales. Speaking to 150 bank executives at the Independent Bankers Association of Texas Leadership Conference in San Antonio and to banking educators attending the Financial Literacy Summit at the Federal Reserve Bank of Dallas, Johansson said, “If it’s implemented as expected, it is a great opportunity to boost the housing market.” Johansson believes the new model will be a more accurate measure of credit risk. “It takes into account more of the borrower’s history and penalizes them less for a single unusual event,” he said. “It also has more score card levels, allowing finer adjustment of credit scores.” He said it will reduce the power of unscrupulous credit collectors too, since a single bad event- reported in error- will have less impact on scores.
FICO 08’s developer, Fair Isaac Corporation, predicts it will help lenders reduce default rates on consumer loans 5 to 15%.
Fannie Mae and Freddie Mac own or guarantee almost 31 million home loans worth about $5.4 trillion, which makes it all the more important that they approve the new score model.

Read more: http://rismedia.com/2009-09-08/is-the-new-credit-score-model-helping-home-buyers/#ixzz0QblwNFHv

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