Altenative Capital 
2448 Union Road 
Cheektowaga, NY 14227 
Office Phone: (716) 668-6875
www.mortgagafinderofwny.com

  If you're like most people, purchasing a home is the biggest investment you'll ever make. If you're considering buying a home, you're likely aware of the complexity of the endeavor. Because of the numerous factors to consider when purchasing a home, it's important to prepare as best you can. Some common home-buying principles and caveats are presented here for your consideration. By keeping them in mind, you'll help create a successful and more enjoyable experience. The information contained herein is presented as a primer. Since your home could cost you 25 to 40 percent of your gross income, it's important to conduct research, ask questions and study the process carefully.

Buying a home 

Looking for a home before being pre-approved. As a potential buyer competing for a home, you'll have a better chance of getting your offer accepted by being as prepared as possible. Consider this hierarchy of buyer preparedness: 
Offers are submitted and - 
 

The buyer is not pre-qualified or pre-approved 
Buyer is Pre-qualified 
Buyer is Pre-approved 

The benefits available at each level can be easily understood when viewed from the seller's perspective. Imagine you're a seller in receipt of multiple purchase offers. A complete stranger (buyer) is asking you to take your property off the market for at least the next two to three weeks while they apply for a loan. As the seller, lets consider the type of buyer you'd prefer to deal with.

Neither pre-qualified nor pre-approved 
This buyer provides no evidence that they can afford to purchase your property. You may wonder how serious they are since they're not at least pre-qualified. 
Pre-qualified 
This buyer has met with a mortgage broker (or lender) and discussed their situation. The buyer has informed the broker regarding their income, expenses, assets and liabilities. The broker may also have seen their credit report. The buyer provided you with a letter from the broker stating an opinion of what the buyer can afford. 
Pre-approved 
This buyer has completed a loan application, provided a broker or lender with written evidence of income, expenses, assets, liabilities and credit. All information has been verified by a lender. As a result, much of the paperwork for this buyer's loan has been completed. This buyer will probably be able to close quickly. They provide you with a letter (pre-approval certificate) from the lender. You're as certain as possible that this buyer can close. 

As a potential buyer, you can see that being pre-approved will give you the best chance of getting your offer accepted. This is critical in a competitive situation.

Making verbal agreements. If you're asked to sign a document containing instructions contrary to your verbal agreements--don't! For example, the seller verbally agrees to include the washing machine in the sale, but the written purchase contract excludes it. The written contract will override the verbal contract. Do not expect oral agreements to be enforceable.

Choosing a lender because they have the lowest rate. While the rate is important, consider the total cost of your loan including the APR , loan fees, discount and origination points. When receiving a quote from a lender or broker, insist that the discount points (charged by the lender to reduce the interest rate) be distinguished from origination points (charged for services rendered in originating the loan). A below market or low interest rate quote may indicate some hidden loan requirements, like a prepayment penalty, requirement for escrow impounds, a short 15 day rate lock or requiring a bigger down payment. Make sure the rate quoted is for your specific loan request.

The cost of the mortgage, however, shouldn't be your only criterion. Select a reputable company which will deliver the loan as promised. Insist on a written pre-approval from the lender. If in the final hours of the transaction you find that the lender has suddenly increased their profit margin at your expense, you won't have time to start again with a different lender. Ask family and friends for referrals, and interview several prospective mortgage companies. 

Not receiving a Good Faith Estimate (GFE). Within three business days after the broker or lender receives your loan application, you must receive a written statement of fees associated with the transaction. This is both the law and the best way to determine what you'll pay for your loan. Bring the GFE with you when you sign loan documents. You should not be expected to pay fees which are substantially different from those contained in your GFE. 

Not getting a rate lock in writing. When a mortgage company tells you they have locked your rate, get a written statement detailing the interest rate, the length of the rate lock, and program details. 

Using a dual agent--i.e., an agent who represents the buyer and the seller in the same transaction. Buyers and sellers have opposing interests. Sellers want to receive the highest price, buyers want to pay the lowest price. In the standard real estate transaction, the seller pays the real estate commission. When an agent represents both buyer and seller, the agent can tend to negotiate more vigorously on behalf of the seller. As a buyer, you're better off having an agent representing you exclusively. The only time you should consider a dual agent is when you get a price break. In that case, proceed cautiously and do your homework! 

Buying a home without professional inspections. Unless you're buying a new home with warranties on most equipment, consider obtaining property, roof, structural and pest control and other relevant inspections. This way you'll know what you are buying. Inspection reports are great negotiating tools when asking the seller to make needed repairs. When a professional inspector recommends that certain repairs be done, the seller is more likely to agree to do them. 

If the seller agrees to make repairs, have your inspector verify that they are done prior to close of escrow. Do not assume that everything was done as promised. 

Not shopping for home insurance until you are ready to close. Start shopping for insurance as soon as you have an accepted offer. Many buyers wait until the last minute to get insurance and do not have time to shop around. 

Signing documents without reading them. Whenever possible, review in advance the documents you'll be signing. (Even though some specifics of your transaction may not be known early in the transaction, the documents you'll sign are standard forms and are available for review.) It's unlikely that you'll have sufficient time to read all the documents during the closing appointment. 

Not allowing for delays in the transaction. Ideally, all real estate transactions would close on time. In reality, transactions are often delayed a week or more. Suppose you asked your landlord to terminate your lease the day your purchase transaction was scheduled to close. A day or two before your scheduled closing date, you learn that your transaction is delayed a week. Very likely your landlord is inconvenienced and angry. The eviction process takes a little time, so the Sheriff won't immediately remove you, but this type of stress-producing episode can be avoided. How? Terminate your lease one week after your real estate transaction is scheduled to close. That way, if there is a delay in closing your transaction, you have some leeway. 

Alternative Capital - 2448 Union Road - Cheektowaga, NY 14227 Office Phone: (716) 668-6875 
www.mortgagafinderofwny.com