Tuesday, September 11, 2007

Oh, We're Just Looking

Much of my time is spent talking to home buyers I meet at open houses on the weekend. We talk about many things; families, schools, the city, neighborhoods, but out of everything, the most common thing I hear people say is, "Oh, we're just looking". While there is nothing wrong with "just looking", and "looking" is a necessary part of "finding", our jobs as Realtors is to make sure you are ready to buy when that time comes. That time is, of course, when you walk through the doors of a house and it suddenly feels like you are home. It can happen suddenly, unexpectedly, and it can catch you off guard. Yes, folks, I am talking about falling in love! Cheesy, perhaps, but true. Much of buying a home is about financial planning, crunching numbers, making sure you are making a sound investment, but another huge part of it is emotional. If you are in "just looking" mode, and you are not properly prepared to buy, you might not be ready when you do find the right house. There are a couple of important preparation steps you can take so that when you have finally found what you've been looking for, you can make an offer without hesitation.

Getting Pre-Approved

The first thing you need to do is figure out how much you can afford. You do this in two ways: you decide how much you want to spend each month, and the bank decides how much money they want you to borrow. These two amounts don't always match up but the important thing is that you do not stretch yourself beyond your comfort zone. You may actually qualify to borrow more than you want to spend. When figuring out comfortable monthly payments, be sure to include property taxes (1.14% of purchase price in San Francisco) and hazard insurance. Part of the process of being approved by a lender is filing out a loan application. They will ask you about your income, debt, and assets, and they will run your credit. Credit is important; your credit score will dictate what interest rate you qualify for. The bank will run the numbers and come up with an amount they feel comfortable lending. They will also provide you with something called a "Good Faith Estimate" which is an itemized estimation of your closing costs at the amount you have been pre-approved for. They will also give you a pre-approval letter stating that they have reviewed your finances and will lend you a certain amount of money provided the property you are purchasing is worth the amount you have offered. In San Francisco, you cannot make an offer without this letter. Your offer would not be taken seriously.

Building Your Team

Another very important part of your preparation is finding a Realtor. Just like your loan consultant, you want to work with a Realtor you feel comfortable with and trust. Your Realtor can help you understand what goes into making an offer before it's time to sit down and do it. There is a mountain of paperwork involved in this transaction; Anja and I like to sit down with our buyers early on and take them through things little by little so that you are not overwhelmed when it comes time to submit the offer. If you are actually thinking of buying, make sure you are ready to find the right house. Get your team in place. Your Realtor and your loan consultant are your best friends in this process.

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