First Time Home Buyer - Doing Away With The Mystery Of Buying Your First Home - Part 1
There are four things that every first time home buyer in Colorado should know. The first of these has to do with Loan Contigency. Loan contingency is the period of time the seller is providing you to obtain full, formal loan approval. This contingency is usually between 15 and 21 days based on what you and your Real Estate Agent have managed to obtain on your behalf in the contract. The earnest money deposit that you put into an escrow account at the time the offer is confirmed will be put in jeopardy once that contingency for the loan has expired. In fact, pursuant to the terms of the contract, if the loan contingency expires and you do not close the purchase transaction, you can forfeit your earnest money deposit. For this reason it is extremely essential to make sure you are not agreeing to a loan contingency in an offer negotiation until you are absolutely certain you will be buying the home and you know you do not need to rely on on financing approval to close the transaction. Formal pre-approval will help to eliminate any problems in this area.
Seeking complete pre-approval for financing in advance of making an offer on a property is the perfect tactic for any home buyer in Colorado that can help you obtain the best deal possible, especially if you intend to make low down payment. The seller is often leery of the stability and trustworthiness of the buyer if the buyer is only capable of making a down payment of 10% or less. This can cause the buyer to lose a significant amount of negotiating flexibility, by being perceived as soft buyer rather than a strong one. This is why it is extremely essential to get full loan approval early on and provide a written proof of the loan approval when an offer is made. This shows it is complete, and you are perceived to be a cash buyer.
The contract period is the period of time in which all necessary items must be completed, including receiving loan approval, property appraisal, home inspection reports, termite inspection, etc. Give yourself ample time for all essential items to be completed for this vital purchase you are about to make. Normally, purchase contracts are drawn up for a period of 30 days, 45 days or 60 days. However, it is really normal for a purchase contract to be written with terms in excess of 60 days if the parties associated require that long of a grace period to perform all aspects of the essential items.
As part of the negotiation in your purchase contract, you and the seller will jointly agree upon the extent of time needed to complete all the home inspection processes that are required. Utilizing an outside third party service to carry out these inspections is highly suggested, especially for a first home buyer in Colorado. You will be given a report by the home inspection company that you should evaluate very carefully to insure there are no material defects in the property that you were ignorant of, and which could subsequently have an impact on the value of the property. If there are material defects, you should return to the negotiating table and talk about a large reduction in the purchase price to mitigate the cost of any essential repairs. Once your home inspection contingency has expired, you no longer have the control to go back and renegotiate the purchase price to resolve any issues revealed by the home inspection.
First Time Home Buyer - Doing Away With The Mystery Of Buying Your First Home - Part 1
Loan contingency is the period of time the seller gives you for formal loan approval. Pre-approval tells you how much home you can afford. The contract period is time in which everything must be completed. You and the seller agree on the time needed to complete all home inspection procedures.
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