Patty Manzi's Tri-Valley Real Estate Blog

I talk to lots of people about buying homes.  Not long ago I was talking to a newlywed couple and they mentioned they wanted to buy a house and they were saving for a down-payment.  I then asked them what else they were doing to prepare for the home purchase.  They looked at me with a most quizzical expression and asked “What do you mean”? 

While a down-payment is a necessity, it takes much more than a down-payment to buy a home.  Buying the home is the goal and to accomplish this goal you must have an ‘Action Plan’ to get there!  What do I mean by action plan?  I mean there are many steps that must be taken along the way prior to the home purchase.  For example:

• Do you know what your credit score is?  This is an important factor in obtaining a loan.   You must have a minimum credit score to qualify for a loan.  Your credit score is based on your payment history (on time & delinquent) and how much debt you have. 
• Have you seen a copy of your credit report? This is very important.  You can download a free copy of your credit report every year from each of the three credit bureaus.  This report contains a list of your creditors, balances, payment history, and personal information.  It is a good idea to get this report and verify that the information is correct.  There could be outdated or incorrect information on your report that negatively affects your credit score.  You can contact the credit bureau directly to dispute or correct information.  This may take some time so factor that into your timeline of your action plan.
• Have you spoken with a lender about how much house you can afford now? Another very important step.  A lender will meet with you and get a picture of what your financial status is and advise you of where you need to be prior to purchasing a home.  The lender can also advise you of what documentation will be required to qualify for a loan (pay stubs, tax returns, employment verifications, etc.)
• Have you educated yourself about down-payment assistance programs that might be available to you? Your lender can assist you with this information.  There is also a great organization called the Tri-Valley Housing Opportunities Center.  The Tri-Valley Housing Opportunity Center  (TVHOC) provides home-buyer pre and post purchase education, income and asset development education, information regarding private sector lender programs, and funding sources – helping match those in need with programs and services that benefit them most.

After performing these tasks, you may find out that you may have some financial work to do before you can buy a home, and you can establish a time line (action plan) for accomplishing this goal.  Or you may find out that you are financially ready right now.  Either way it is worth the effort to be educated, informed, and prepared.

I recently heard a story about a buyer who was in contract to buy a home, had received his loan approval, then went out and bought a car using a cash down payment!  Long story short, the loan was rejected in final underwriting review because the purchase of the new car had changed the debt to income ratio and also changed the amount of the cash reserves the buyer had on hand. 

This reminded me of a list someone had given me years ago, so I dug it out of my files, and I am posting it here to share with you~

The Ten Commandments for Buyers……. Until Your House Closes

1. Thou shalt not buy a new car
2. Thou shalt not buy furniture for the new house or any other big expenditures that affect your bank accounts
3. Thou shalt not make any unexpected or unexplained large deposits that affect your bank balance (unless it is a work related bonus, or a tax return, and then keep a copy of the check/deposit)
4. Thou shalt not apply for any credit anywhere, and thou shalt tear up all of the offers for “Pre-Approved Credit Cards” that come in the mail
5. Thou shalt not run up the credit cards that you already have
6. Thou shalt not retire or voluntarily leave your present employment or change employment status
7. Thou shalt advise your agent and your lender of any unexpected changes in your life, especially if it changes your marital status.
8. Thou shalt not leave to go on vacation during the escrow process without notifying your agent or lender
9. Thou shalt not spend money you will need for your down-payment and closing costs
10. Thou shalt not be late paying any accounts during the escrow period

Here is a little information on home warranties for resale and new homes.

Resale Home Warranties-

When you purchase a resale home, you can purchase a home warranty plan that will protect you against most ordinary flaws and breakdowns for at least the first year of occupancy.  The warranty may be offered by the Seller as part of the overall package, but if it is not offered, it is well worth the investment to purchase it yourself.  A home warranty program will give you peace of mind, knowing the major covered components of your home will be repaired if necessary.  Coverage for home warranty plans start with a basic plan with an option to purchase additional coverage for specific things like appliances, pool equipment, and air-conditioning.  Your real estate agent will be able to provide you with names of local home warranty companies in your area.  I suggest contacting the companies to inquire about their pricing, coverage, and deductibles for service calls.

New Home Warranties-

When you purchase a newly built home, the builder usually offers some sort of full or limited warranty on things such as the quality of design, materials, and workmanship.  These warranties are usually for a period of one-year from the date of purchase of the home.  At closing the builder will assign to you the manufacturer’s warranties that were provided to the builder for materials, appliances, fixtures, etc.  For example, if your dishwasher were to become faulty within one year from the purchase of your newly built home, you would call the manufacturer of the dishwasher – not the builder.

If the home builder does not offer a warranty, BE SURE TO ASK WHY!

I’m often asked the question:  Why should I use a real estate agent to purchase a brand new home?

The advantages of having an agent help you purchase a newly constructed home are the same as those for purchasing a resale home…..knowledge of the market, help in finding the perfect home quickly, expertise in contract writing/negotiation, and closing assistance.  The builder has a professional representative watching our for his needs, and you need the same expert representation.

Buying a new home is a little more difficult and time-consuming that buying resale.  A real estate agent can professionally guide you through this process.  A real estate agent has experience working with builders, and can help you research loan programs that will best suit you.  A real estate agent  can also guide you through the  new home warranties and builders purchase contracts. 

It is very important that your interests be professionally represented when you are entering into a contract for a semi-custom, or build-to-suit home.  These transactions are complex and the contract details must be exact in order to protect you and to ensure you get exactly the home you want!

Is there any advantage to not using an Agent to purchase an brand new home?  NO!

Think of planning a trip around the world without the help of a travel agent, or buying insurance for your car without an insurance agent.  What if you were the  executive of a major corporation involved in a legal dispute, would you represent yourself in court?  If you depend on people in the service industry for travel needs, insurance claims for a car accident, or handling legal affairs, then why would you want to represent yourself in the most expensive and probably the most important purchase of your lifetime – your new home?

It is a common misconception that buying a home directly from the builder, without the help of an Agent, will save you money.  There is no financial advantage for you to buy directly from the builder.  Builders, for the most part, have a ’single-price’ policy, meaning you will be charged the same price whether your interests are represented by an Agent or not.  Just as in resale, the Seller pays your Agent’s fee.

REMEMBER though, the Builder requires that your Agent accompany you on your first visit to the Builder’s sales office, or they will NOT PAY your representative’s fee.

When you are considering purchasing a brand new home, there are several questions you should ask before you commit to the purchase:

• Is this a good builder?
• Does this builder have a solid reputation?
• How many years has this builder been in business?
• How does the quality of this builders product compare to that of other builders?
• What are the existing inventories of the various builders?
• How do the builders models meet your needs (floor plan, square footage, location)?
• If I should sell in a few years, what upgrades are available now that I can include to be competitive?

Your Agent will be able to help you research many of these question and it is well worth the time to do so.  Taking these precautions will help to assure you the best service and expertise in making this important decision.

Choosing the right neighborhood is almost as important as choosing the right house!  There are many factors to consider when selecting a neighborhood that is right for you.  Below are just a few of the many factors – You may think of others that are important to you.  Please write them on your ‘requirements’ list so they are not forgotten.

Neighborhoods have characteristic personalities.  Investigate to determine that the neighborhood in which you choose to look for a home matches your lifestyle and personality.

Scout out the Neighborhood! 

It is important that you scout the neighborhood in person.  You live in more than your house.  Talk to people who live in the area.  Drive through the entire area at different times of the day, morning, afternoon, evening, and late at night, go during the week as well as weekends.  Look carefully at how well other homes in the area are being maintained; are they painted, are the yards well cared for; are parked cars in good condition; etc.

Neighborhood Factors to Consider

Look for things like access to major thoroughfares, highways, and shopping.  Listen for noise created by commerce, roads, railways, public areas, schools, etc.  Smell the air for adjacent commerce or agriculture.  Check with local, civic, police, fire, and school officials to find information about the area.  Research things like soil and water.  Look at traffic patterns around the area during different times of the day and drive from the area to your place of business.  Is the neighborhood near parks, churches, recreation centers, shopping, theaters, restaurants, public transportation, schools, etc.?  Does the neighborhood belong to a Homeowners Association?

Taking the time to investigate these things before you commit to buying a home can save you some surprises and potentially some disappointments later on down the road.