Get Your Finances in Order

Buyers should have their finances in order before starting the process of buying a home. Check your credit report and credit score. Banks and mortgage companies will use this information to determine if you qualify for a loan. If your credit score is too low you may not qualify for a mortgage or you may only qualify for a higher interest rate. Consider that at a higher interest rate your payments will be higher and you may only qualify for a lower loan amount. You should review your credit report from all three credit bureaus. If you find any incorrect information, notify them immediately. Consult a financial adviser if you need to repair your credit. It could take a few months before you can bring your credit back up.

Buyers should have enough money for a down payment. Most banks and mortgage companies would like buyers to have a minimum of 10%-20% in cash for a down payment. There are still loans available today where buyers can qualify with as little as 3.5% down payment, but there will be restrictions. Not all properties and/or borrowers will qualify for such low down payments. Sources for down payment can include personal savings, gifts from friends and families, etc. Buyers should also realize the down payment is not paid only at closing. In many parts of CT it is customary to pay a certain amount when the offer is accepted, another amount when contract is signed and the rest at closing. Buyers must have some of their money liquid in order to make these payments before closing.

Buyers should also have enough cash available for closing costs. Closing costs can add up to around 2% of purchase price. Your bank will inform you of what your closing costs will be. Closing costs include pre-paid real estate taxes and insurance, title search and tile insurance, loan fees, attorney costs, etc. Please discuss with your buyer agent if a deal can be negotiated where the seller will pay for your closing costs.

Mortgage Pre-qualification

Once your finances are in order, contact a bank or mortgage company to get pre-qualified for a loan. This can be done over the phone or during a quick branch visit. They will typically do a credit check and ask buyers basic financial questions. They will need to know your income and overall debt. If you are self- employed or if a portion of your income comes from tips and/or bonus that are not guaranteed, banks will average it out over a two year period. They will also need to know how much you have in liquid assets to be used for down payment and closing costs. With this basic information, they can issue you a pre-qualification letter that includes the amount of loan you qualify for. At this point you know what your price range should be, which will make your agent's job significantly easier.

Some buyers start looking at homes before they are pre-qualified only to get disappointed later. A few won't qualify at all. But many will still qualify, but for a lower amount. Imagine the disappointment of seeing nicer homes at a higher price only to find out you can't afford them. This is not the best use of time.

Needs vs Wants

When you work with our buyer agents, take advantage of their expertize. Our agents know the market and can help you filter through a large number of homes. Start by listing all features you absolutely need in a home. This helps your buyer agent eliminate homes that don't meet your needs. Some features are easy to identify through a listing but some aren't. Many items that may be important to you can only be observed in person. Keep in mind our agents have already done that. They can easily tell you a master bedroom has small closets or no private bath. Our buyer agents will know how the rooms flow, the ceiling heights, the finishes, etc. You and your agent should build trust by keeping an open channel of communication. A 15 minute conversation can save everyone 2-3 hours of showings.

Buyers should understand that within a budget limit properties won't have all the features they need. It's important to distinguish what is a need from what is nice to have. There isn't a buyer on a budget who doesn't have to compromise. People who can't compromise typically decide not to buy. A compromise means understanding your price range will limit your choices. Buyers must keep an open mind and consider the potential of a home, what can be added or modified at a later time versus what can't. Some items you really can live without, at least at first.

Finding the Right Home

There are buyers who find the perfect home very quickly while others take a little longer. There is no norm. Every buyer and their needs are so unique that it's hard to predict how long your search will take. The more information you provide our buyer agents about your needs and wants, the easier it will be to find you the right home. They can eliminate homes that won't fit your needs and narrow your search to homes that will. In some markets this could mean going from hundreds of listings, which is impractical to see in person, to dozens instead. In some circumstances there is nothing on the market that will fit your needs at a given time. Our agents will work diligently, looking through new listings and price reductions every day until the right home comes along.

Negotiate the deal

Negotiating a deal takes skill and experience. Our buyer agents are well trained to advise you on the best strategy and have proven records of successful negotiations. Price is certainly one of the main items. But other terms are often as important. Our agents can negotiate items to be repaired or credits to be given at closing. Our agents can also negotiate seller concessions, from closing cost assistance to interest rate buy down. Contact our buyer agents for more information on seller concessions.

Mortgage Contingency

If you are buying a home with a mortgage, it's advisable that you include a mortgage contingency as part of the deal. This contingency will give you an opportunity to secure a loan. If you can't secure a loan during the agreed upon period, you can cancel the deal and have your deposit returned. This is a safety measure to reduce the risk of losing your deposit. Although not common, it happens. You should be prepared and protected in case it does. Contact our buyer agents to discuss what you can do to better prevent this from happening to you.

Home Inspection

Discuss with your buyer agent if an inspection contingency should be part of your offer. For most buyers it should, although there are circumstances when it may not apply. Your home inspection should be conducted by a state licensed professional. They can conduct building and mechanical inspections where they will check the structure of the property, heating/cooling systems, electrical and plumbing. Depending on the property, you may also want to conduct a radon test. If your property has a septic system and/or well water, you may test them as well. Our agents can provide you with advice regarding what tests to perform and tips on what to ask your inspector.

As a result of inspection, repairs can be negotiated and agreed upon with seller. A credit may also be requested so that buyer can make the repairs themselves after closing. However, some loans such as FHA will require that certain repairs be made prior to closing. Contact our buyer agents to discuss this carefully before agreeing on a course of action.

Final Walk-through

Our buyer agent will take you to a final walk-through just before closing. This walk-through will allow you to verify the home is in the same condition as when you inspected it. You should also confirm all agreed upon repairs were made. The property should be free of seller's belongings and it should be broom clean. At times, this is not the case. Discuss any problems found during walk-through with your buyer agent and bring them to your attorney's attention at closing. Most issues can be resolved and closing still occurs. If needed, money can be set aside on escrow for issues to be resolved after closing.

Closing

Closing is the last step of the process. Any last minute issue can be resolved at the closing table. Buyers will sign all their mortgage documents and pay the remaining portion of down payment and closing costs. The attorneys will have prepared the documents related to transfer of title and will record them with the office of Town Clerk. Buyers will walk away with the keys to new home.

MYTH: Buyers should work with a specific real estate company because they have the best listings.

FACT: In CT, real estate companies participate in Multiple Listing Services (MLS). Most CT homes for sale are entered into an MLS and are not exclusive for the listing company to sell. Other companies that also participate in that MLS will have access to these listings, even when not theirs. These participating companies can show these homes for sale to prospect buyers, and can help them buy these properties. Buyers can work with any real estate company that is a participant in the Multiple Listing Service and have access to all available listings. In fact, buyers should seek their own buyer agent and get their own representation.

MYTH: Buyers that don't have a real estate buyer agent will save the seller money in commission payments, who in turn can pass these savings along to the buyer in the form of a lower sale price.

FACT: When a seller selects a real estate company to market their CT home for sale they agree to pay that broker a certain commission. Although commissions are not set by law and are negotiated for each listing, the commission is part of the listing contract, and for most part is fixed regardless of how the property sells. If another broker brings a buyer, a portion of the commission will be paid to the buyer agent. If the buyer has no representation, the whole commission will be paid to the listing broker. In reality, there are no savings to the seller one way or the other. In fact, buyers with representation are more likely to overpay for a property. A real estate broker acting as the buyer agent will provide the buyer with advice, including their professional opinion of the property's fair market value. They are also trained professionals that can better negotiate a deal on the buyer's behalf. Buyers are more likely to get a lower price when they have their own representation, their own buyer agent.

MYTH: Buyers with no credit or bad credit can't get a mortgage.

FACT: Although credit history and credit score are important, mortgage companies look at several other factors before deciding whether or not to approve a mortgage. Other important factors include buyer's income and employment history, buyer's assets and liabilities, amount of down payment, and etc. Most mortgage companies will look at the whole picture and take everything into account. Buyers with poor or no credit should consult a mortgage professional and consider all options available to them.

MYTH: Buyers must have at least 20% as down payment to get a mortgage.

FACT: Although many mortgage products require a minimum of 20% as down payment, buyers can still get a mortgage if they have less to put down, even in today's tough credit market. This is particularly true for individuals with good credit who purchase primary homes. FHA loans for example only require 3.5% down. There are also special community lending programs available to individuals who serve their communities as teachers, police officers, fire fighters, medical personnel, etc. These programs often require very little down, and some programs even allow for zero down payment. There are also programs tailored to first-time buyers that require less money down. In short, even if you don't have 20% for a down payment, you can still qualify for a mortgage and become a home owner.