Home Buying Guide
Choosing an agent in the Peninsula and the Central Coast Region
Of all the decisions you’ll face when buying a home, the most important decision you’ll make is choosing the Professional that represents you.
Their job is to help you find the home you want, in the neighborhood you like, for the best price and terms possible, while maneuvering you through the complex escrow process.
Your Real Estate Professional will show you the process of buying a home, explain the flow of escrow and familiarize you with the various documents and communication procedures that you will experience throughout the transaction.
Tips For Selecting a Professional
Your Real Estate agent should be:
- Informed about the communities that are most desirable to you.
- Knowledgeable on the local and state requirements affecting your transaction.
- Your point person for the multi-party, face-to-face negotiations.
- Experienced and with access to knowledgeable people who are experts in specific fields (i.e.: Title, Escrow, Lending, IRS 1031 Exchanges and Insurance).
- Supported by highly trained legal counsel.
Most agents and lenders recommend pre-approval for a loan before selecting a home to purchase. With lending being very tight, it is important to understand that “pre-approval” does not always mean the lender will fund the loan at the close of escrow. In a declining market, the underwriter may want to review the appraisal one more time just before funding the loan.
This process can be frustrating and offensive to say the least, but a good agent will direct you to a lender that will help you:
- Determine the price range you can afford in a declining or escalating market.
- Understand the various loans you qualify for.
- Determine a monthly payment you can comfortably live with.
- Determine the down payment and closing costs.
The Loan Process
Once you decide on a lender that you feel comfortable with, you will proceed with the following steps:
Application – A good lender will help you fill out the application. You will discuss fees, down payment, receive a Good Faith Estimate (GFE), a Truth-in-lending statement (TIL), and itemized closing costs for the loan.
You will be asked to provide certain documents to your lender (i.e.: paystubs, proof of down payment, liquid assets, insurance, and a copy of the purchase agreement contract if possible, etc.).
Loan Submission – Once all the necessary documentation is in, your completed file is submitted for approval.
Loan Approval (Underwriting) – Loan approval, or underwriting, generally takes 1 to 3 days. You will be notified of any loan conditions that must be received before the loan can close.
Closing – Once all parties have signed the loan documents, they are returned to the lender immediately via escrow. When all the forms have been properly signed, the lender funds the loan to the escrow company’s trust fund via wire transfers.
At this point, escrow records the deed of trust (a deed that serves as evidence of and security for an indebtedness) and the grant deed (the transfer of real property from one person or entity to another person or entity) simultaneously first thing in the morning at the local county recorders office, or through what is called a “special recording” in the afternoon on the same day.
Finding and Choosing the Right Home
After discussing your criteria, your agent will help you find your ideal home. There are many factors to consider in selecting a property, (i.e.: location, schools, bedrooms, baths, and other important amenities).
As you view different properties, your criteria may change. Open communication is fundamental to a successful working relationship. Together with your agent, you may spend so much time looking for the right property and communicating on a regular basis, you may actually experience “separation anxiety” after the close of escrow.
Making the Offer
Once you have found your dream home, your agent will help you structure an attractive offer and present you (the buyer) in the most complimentary light possible.
This is where your agent’s past experience and negotiating skills make the difference. When the offer is presented, the seller will have the option of accepting, rejecting or counter-offering.
After your agent drafts the purchase agreement, they will explain contingency options (i.e.: in case you need to get out of the contract because of something you felt uncomfortable with in the property inspections), customary practices, and local regulations. Title and escrow and home warranty arrangements will be detailed in the offer. The final decision on price and terms is that of the buyers, although your agent will give you advice and their opinion on what is a sound offer.
Managing the Escrow
When the offer is accepted and signed by all parties, your agent will open escrow (escrow is a third neutral party that acts to receive, hold, and distribute all monies associated with this transaction). At this point your down payment or deposit will be placed into escrow.
Before the close of escrow (COE), all contingencies in the Purchase Agreement must be satisfied. Your agent will manage this process. Some contingencies include:
- Approving the Seller’s Property Disclosure Statement (disclosing any known defects on property).
- Approving the preliminary title report, a “PRE” (A PRE is a document prepared on real property once an escrow is opened, but prior to closing. It provides all kinds of information about the property that is essential for a buyer to see, such as how title is currently held and what kind of liens, easements or encumbrances to title are currently of record. The PRE then becomes the final title report, on which title insurance is based).
- Loan approval.
- Appraisal of the property.
- Physical inspections of the property.
- Pest inspection, clearance and certification.
- Homeowner’s insurance.
Close of Escrow and Celebrating your new home!
When all of the conditions have been met, and you have signed your loan and closing documents, the balance of your down payment and closing costs, will be deposited to escrow. The lender then will transfer the balance of the loan to escrow. The deed will then be recorded at the County Recorder’s office and you will take possession of your home!