Step 4. Flips to Real Deal

Arrange the Mortgage then Buy a Home

If you followed the first three steps in order this step is a lot easier!

You know exactly how much you can afford to spend, the terms of the financing and how much money you will need at closing.  We outlined in step 3 how to structure the offer aimed at maximizing your assets and minimizing the risk.

We laid out a plan for financing so it is important in this step to follow the plan.

 

Important!

Helpful Mortgage Hint

Set your boundaries BEFORE looking at the first house and do not push the envelope.

 

A common mistake I see Buyers make is chasing a home that is far out of their price range.  You already know how much you can spend based on the amount of mortgage outlined in Step 3.  Do not waste your time looking at homes that are priced double what you can afford.

In fact, there is no rule that says you must spend every dime you can afford.  There is nothing wrong with under spending when it comes to buying a home.

The Realtors that refer most of their clients to me will guide you through the process if you listen to their advice.  They do not mind answering questions.  It is the fear of the unknown that causes stress, so ask as many questions as you want.

Ask for a sample purchase contract in advance before looking at homes.  You will need to sign off on the offer once the right home is found.  The purchase contract is several pages long, way too long to read and digest after a long day of looking at homes.  The time to get familiar with it is BEFORE you make an offer.  There will be a lot of other things that need your undivided attention as soon as you find the right home, reading a long boring form isn’t one of them.

Remember the structure of the mortgage outlined in Step 3 while making an offer, especially if you are working with a Realtor that doesn’t normally work with your loan officer.  It is important the type of mortgage in the offer matches the type you were approved for in the previous step.  If they do not match it may be an issue not only for the lender but for the seller as well.

 

Warning!


Helpful Mortgage Hint

Do not offer more than you are approved to spend without first checking with your loan officer!

 

 

Even an extra $100 tacked on to the mortgage may switch the approval to a deny status.  This is not horseshoes, close isn’t good enough.

In Kentucky an offer to purchase a home must include a good faith deposit in order for the contact to be enforceable.  The money should come from an account or source that was specified in Step 3.  Do not write a check from an account that isn’t yours.  I know that sounds silly but things happen in the real world.

It is important to get the wording right if you are asking the seller to leave personal property; an example would be a refrigerator.  You cannot borrow for personal property using a real estate mortgage.  Make sure if you ask the seller to leave something it states clearly in the contract that none of the purchase price is allocated to the personal property.

Example: The refrigerator currently in the kitchen will remain with the home at no value as a convenience to the Seller.

Your Realtor may have better language as long as it states clearly that the item(s) have no value, AND it makes sense.  I saw a contract in which the Buyer asked the Seller for a new car.  Goofy stuff like that is not going to fly.  The strangest I have seen was the family dog; the sellers had a very friendly dog they left in the house when buyers looked at the home.  A buyer fell in love with both the home and the dog!!!  Note to Sellers, do not leave your pets unattended in the home when Buyers are looking.

No side deals with the Seller!  Do not have side agreements with the Seller in an attempt to keep some of the information away from the lender.  This is a serious crime!  Make sure your loan officer gets a copy of the entire agreement between you and the Seller.

Once you and the Seller have agreed to a price and terms your Realtor will send a copy of the fully executed contract to the loan officer.  Time for the real work to begin…

Go back to Step 3

Move forward to Step 5