Get Pre Approved
MOST DEFINITELY!!
Most mortgage lenders take the guess work out of applying for a loan by figuring out for you the amount you can afford to borrow. Then, they give you a printed document stating the maximum mortgage amount you qualify for based on your particular finances and income.
Mortgage pre-approval establishes your price range and strengthens your buying position by letting the Seller know that you have already been approved for the loan. It can also ease time constraints once the purchase agreement in signed between Buyer and Seller.
Consider these Scenarios:
You're out looking at homes. Your Real Estate Broker never mentions that you should get pre-approved and just ballparks what you can afford. Of course, the more house he shows you, the better he usually comes out. You find the perfect house and work out a deal with the Seller. Three weeks later, the lender informs you that the house is $10,000 over what you qualify for and does not approve your loan. The Seller has already bought another house. You've given notice where you're renting and told all your friends about the great house you bought. And then, there's the money you've already spent on inspections on a house you can't own.
or
You and your REALTOR have been working diligently finding that "perfect" home. A new listing comes on the market that's priced right and has got everything you've been looking for. You write an offer. Your REALTOR takes it to the listing REALTOR and is informed that another offer is coming in and will have to present both offers simultaneously to the Seller. The other Buyer is pre-approved for his loan. Whose offer do you think the Seller will negotiate first??
Should You Get Pre-Approved for a Loan First??
Most Definitely!!
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Home Inspections
Buying a home may well be the largest financial investment you will ever make. Naturally you will want to know as much as possible about the property before you finalize the purchase at closing.
It's important to hire a knowledgeable, independent home inspector for advise on the overall condition of the property. The purchase contract usually requires specific time periods for each inspection, and it's critical that these time frames be met. Usually the cost for any and all inspections and re-inspections are paid by the Buyer. Prices can range from $350 to $500 for whole-house inspections.
Some examples of common inspections are:
- Structural - Defects caused by poor construction, soil movement, water or drainage conditions, settlement, fire, etc.
- Environmental Hazards - Including asbestos, lead-based paint, radon gas or any other toxic material.
- Roof - Can include framing members, decking and shingle condition.
- EMP - Electrical, Mechanical and Plumbing - Should include electrical and plumbing systems, built-in appliances, heating and cooling systems, swimming pool/spas, sprinkler systems and security systems.
- Termite - Report would show any visible infestation or visible damage caused by and wood destroying organism (termites, water damage, wood rot).
Many companies specialize in only one area of inspection, and others will group several together and offer a package price. Whichever route you go, assure yourself your getting the inspections you need. Many can be found in the yellow pages or your Broker can provide a list of several of each to choose from.
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Home Insurance
When buying a home, one word you will hear often is "insurance." As a homeowner you are concerned about protecting your house, your personal belongings and your personal liability. It is important that the coverage you choose provide the comprehensive protection that you need.
Homeowner's insurance protects you and your house against losses from fire, theft, liability, vandalism, water damage, wind damage, tornadoes and loss of use. Earthquake and flood insurance are not included but can be purchased separately.
Types
There are three types of homeowner's policies to choose from. A clear understanding of the coverage each type offers will help you select the right policy for your needs. Each type carries a deductible amount you select.
A standard policy requires coverage for at least 80% of the value of your home, excluding land and the foundation. It will usually insure your personal property at actual cash value.
A broad-from policy is more inclusive than the standard policy and covers additional named perils such as glass breakage, smoke damage, etc.
An all-risk policy covers even more than do the standard and broad-form policies. An example of a covered risk might be damage caused to your roof from ice build-up in the gutters.
Some of these policies offer optional guaranteed replacement cost coverage on your home and its contents. Replacement cost coverage will pay to rebuild your home and replace its contents with no depreciation coming into play.
It is important to understand that the replacement value of your home is based on your insurance company's estimate of the cost to rebuild your home on your property. It is not based on the purchase or appraised value of the home. Most policies have a built-in annual increase of replacement cost coverage.
Reducing Premiums
When purchasing homeowner's insurance, there are ways of lowering your premium. Most insurance companies offer discounts for smoke alarms, fire extinguishers, dead bolt locks, and whole-house alarm systems. If your home is fairly new, or if you elect to insure your automobiles with the same company, you are likely to receive a discount on your premium.
Another way of lowering your premium is to select as high a deductible as you can afford. Raising your deductible reduces your premium.
Insurance is the type of service you buy hoping that you will never have to use it. Discuss with your REALTOR your unique needs and concerns when you purchase the insurance and whenever your needs change. The right insurance can give you a sense of security in knowing that you are adequately protected.
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Home Warranty
A home warranty policy protects you from the expense of major repair or replacement caused by unexpected mechanical failure of a major system or appliance. For a moderate premium (usually in the $400 range for a basic policy) payable at closing, you can acquire a policy which protects your for one full year after closing from major repair or replacement bills.
Most policies have a $50 to $100 deductible, and you usually must call through their people for repairs. The age of the home should be a consideration as to purchase a warranty or not - a 15 year old home with original equipment versus a two year old home. Several companies offer these policies.
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