Things to consider before making an offer on a home

Buying a home is one of the most exciting and stressful processes a person will ever go through. When you are ready to make an offer on a home, there are some things you need to think about first. With the market being the way it is, potential home buyers need to be well informed. Knowing these things beforehand will ensure you make the best decision. It could save you a lot of money in the long run.

Denver real estate agents

1. Home Inspection

A home inspection is a crucial part of the home buying process, but many people don’t ask for it. During the home buying process, you can put in a clause that the homeowner needs to have a home inspection done. Even if it is a newer home, you never know what lies in behind the walls or in other places you can’t see. Through a home inspection, you can learn if the home has plumbing, roof, or electrical problems. These things are costly to fix, so knowing about them sooner rather than later is better for your wallet.

2. Recent Repairs

Any repairs done to the home should be made known. You should know if the roof has been replaced and by whom. When was the last time the water heater or the air conditioner got replaced? How old are those appliances? Knowing this will give you an idea of what you may have to replace if you buy the home. You would hate to spend hundreds of thousands on a home, move in, and then have the air conditioner or water heater go out because they are old. The more questions you ask, the more prepared you can be.

House for Sale

3. Time on the Market

You should also consider the amount of time the house has spent on the market. Now a home spending months on the market with no offers may not be a bad thing. It could be a perfectly good home, but it may be overpriced. There are a number of Denver real estate agencies that can help you find out if that is the case. If this is the case, you may be able to negotiate the price down. 

4. Neighbors

Some people are so focused on buying a new home they don’t look at the area. More importantly, the neighbors. Consider speaking to the neighbors before you buy any home. You can ask them questions about the neighborhood. If they have children, you could ask about the school district. Speaking to the neighbors is one way to see if you and your family would be a good fit for the neighborhood. It is important to know this before you move in.

5. Closing costs

There are a lot of fees associated with buying a home. If you want to make an offer, you must know about all the costs upfront. Knowing this will ensure your bank account doesn’t get any surprises. Ask the mortgage company to breakdown all of the costs so you can see exactly what you can afford.

Buying a home is one of the most expensive purchases you will ever make. Keep these things in mind while you make this monumental decision, and they will help you make the best decision for you and your family.

What happens the week before closing on a house

If you are in the process of buying your first house, and all you have left is the closing, then you should be done with the hard part. Finding the right property, then going through inspections and sales contracts are much more stressful than finally closing the deal. That should be a happy event.

The best way to make sure of that, and avoid any snags, is to make sure you are prepared. Although you should have been given a list, and hopefully someone has explained how closing on a house works, it’s always comforting to know exactly what to expect and what is expected of you. So that is what we will tell you here. Take notes!

Before You Close

Since closing is the final step of buying your property, all of the following should have been taken care of and agreed upon:

• Inspection
• Appraisal
• Mortgage Approval
• Insurance
• Final Walkthrough
• Move-In Date

If any part of any of those have not been completely finished, then closing will not proceed smoothly, and could very easily be delayed. Additionally, your real estate agent should have nailed down Title search and insurance, escrow transfers and closing costs.

Closing Costs

Closing costs are the expenses that are generated on top of the sales price. These can be charges by your realtor for things like title search and insurance. They could also be charges from the bank that it incurred in processing your loan, such as appraisal or credit report fees, as well as advance payments for property taxes and homeowner’s insurance, if those will be included in your mortgage.

These costs can sometimes be used in negotiations, with either the buyer or seller agreeing to assume costs usually allocated to the other party. But buyers can expect to have to pay about 3 to 4% of the purchase price in closing costs. So if you bought a home for $200,000, your closing costs will probably be somewhere between $6,000 and $8,000.

Your agent is required to give you a Closing Disclosure document with the exact amount at least 3 business days before closing. You will add that to whatever amount you are required to provide as a down payment on the sale, and that is the amount you need to get a certified or cashier’s check for. Those checks will only be issued using funds that are not only in your account, but are also available. They can’t have any kind of hold on them.

Closing Documents

Essentially, closing is just you paying the seller and getting the keys to the house in return. Typically, you won’t need to bring more than two forms of ID and a certified or cashier’s check.

However, there will be a great deal of paperwork to sign, and you should prepare in advance to make sure it is all correct. You want to avoid is any kind of unpleasant financial surprises, and the best way to do that is to look over all of your documents very carefully.

Your bank will have given you a Loan Estimate document (see here) when your loan was approved. The three main things you want to verify on that document are:

• Monthly Payment
• Interest Rate
• Loan Closing Costs

The Closing Disclosure lists every charge that each party is paying. Now compare those numbers to the ones on your Loan Estimate. If any of them are different, you need to contact your lender immediately to find out why, and determine if you can still afford the loan.

In any case, take both the Loan Estimate and Closing Disclosure with you to the closing, so that you have documentation if questions arise.

Do not, under any circumstances, apply for or assume any more credit while waiting to close on your house.

It can significantly affect your financing, and will almost certainly cause your lender to have to redo your paperwork. That takes time, which means your closing would be delayed.

Where will the closing be held?

The most common location for a closing to take place is the title company that handled the sale. But it could possibly be at the lender’s office or even an attorney’s.

Who will be at the closing?

There are any number of people who could be at a closing: attorneys and real estate professionals for either or both parties, someone from your lender’s company, a notary. On the other hand, it wouldn’t be uncommon for it to be just you and the closing agent from the title company, or any number in between.

What exactly will happen at closing?

You will hand over the check and sign a lot of paperwork. Don’t rush through it, make sure you understand what each document represents, get out your own documents and take particular care with the three main ones:

• Closing Disclosure – This needs to be exactly like the form your realtor gave you within the previous 3 business days. Compare them, to make sure.
• Promissory Note – This is your promise to the lender to make payments on your loan, when you will make them and all of the other terms of your loan. Compare this document to your Loan Estimate before you sign it.
• Mortgage/Deed of Trust – This basically pledges the property you just bought as collateral for the loan you just signed.

Bottom Line

Your goal is to show up at closing, sign the paperwork you expect to see, hand over a check and get the keys to your new house. By knowing what to expect at closing, you will be much more prepared to achieve that goal.

How buying houses has changed over time: The evolution of homes from past to present.

There are two eras in American history that today’s potential home buyers look back on with envy: the post-war boom of the fifties and the real estate bubble years leading up to the financial crash of 2009. 

In both those periods, real estate was a booming industry. In the fifties, it was the government spending money like water so people could buy homes. In early years of the 21st century, it was the banks bending over backward to lend people almost as much as they wanted… certainly more than they needed. Today, things are different in some very important ways.

Financing

These days, stagnant wages and rising rents make it almost impossible to scrape up enough money for the down payment on a house…if you can even find one that’s affordable. But it wasn’t always like this.

After World War II, the government flooded the Federal Housing Authority (FHA) and the Veterans Administration (VA) programs for home loans with funds to provide cheap, easy financing with low down payments and interest rates. Lenders were protected from defaults because the loans were backed by the US Treasury. 

There were 1.35 million home starts in the US during 1950, and 51% of them were VA and FHA loans. Home ownership jumped from 40% to 60% in the next 50 years. Then financing became even easier to get for several years after 2000, due to loosening of a variety of standards.

  • Documentation – Low credit, no down payment? No problem. Lenders would give you up to 125% of what the property was appraised for with low or no documentation loans.
  • Loan ProductsBefore the crash, you had fixed and adjustable loans, but the ARMs could have a ridiculously high cap. You also had a choice of interest-only, balloon loans and even customized loans allowing you to choose your own payments.
  • Paperwork – Lenders did have to provide a loan estimate, Truth-in-Lending statement and a HUD-1 statement which contained all of the terms of your house purchase. But a vast majority of borrowers were actually completely clueless about exactly how they managed to afford the house they bought.

Today, you need to provide documentation about every single part your finances, as well as come up with at least a 3% to 3.5% down payment. Loan products are basically down to just fixed and adjustable, and the adjustable loans are required to have caps to prevent them jumping too high too fast. The lenders are now required to provide much more user-friendly standardized documents of your mortgage.

Housing Availability

Home building became stagnant during World War II for two main reasons. The first was that there was a mass mobilization of potential home buyers into the military. The second was that there were severe shortages of materials, because so much of them had been directed toward the war effort. Naturally, there was a great deal of pent up demand for home ownership when the war ended.

And the government was willing to meet it. Through the federal programs mentioned above, $3.6 billion was used for loans between 1953 and 1957, a number that completely dwarfed the amount devoted to public infrastructure during the same years. This allowed 2.4 million units of affordable housing to be started.

Adjusted for population and other factors, the 1.2 million homes started in 2017 were nothing compared to that. In fact, it was the lowest number per capita of homes started in 60 years. And unlike the post-war boom, far fewer of these homes are affordable enough to be considered starter homes.

In fact, every year, the supply of starter homes shrinks more than 15%. There’s are reasons for that, primarily stemming from the real estate bubble bursting. 

  • Low interest rates – Potential sellers have little motivation to move and get a new mortgage while the one they have is so low, especially if their homes are still underwater. Seniors, in particular, are working longer and are more willing to hang on to their homes while rates are low.
  • Costs – According the building industry, affordable homes are almost impossible to build these days, due to the combination of costs for land, materials and labor.

In spite of the fact that 10 million Americans lost their homes during the crash, a majority of adults still want to own one, including about 90% of renters. But one of the most fundamental differences between now and then is that buyers are now seeing houses as a home in which to live, rather than just an investment opportunity.