4 MAJOR ROADBLOCKS TO CLOSING
There are four common roadblocks that a buyer can encounter when moving through the home buying process. If your Realtor® is aware of them it could help you avoid or go around them before they happen.
Before you even start searching for your dream home, you should get pre-qualified. Especially today. With tighter mortgage loan requirements many more people are finding it much harder to get funded. They are having to go back to the credit repair table before they can even begin the loan process. Even with FHA loans the requirements are getting more restrictive. If your agent helps to get you pre-qualified it will save you time and stress from the beginning. Then once you are ready you will possibly be even better equipped to negotiate a better interest rate. There are several reasons in which people are not able to get financing. Usually due to poor credit, not enough money to put down or close with, not making enough money, or high debt to income ratio. You generally should have a credit score of at least 620 and your monthly mortgage payment should not be more than 28% of you monthly income.
Title insurance helps to assure the buyer that the seller can actually sell the home and that you will eventually be free and clear to own the home once the note is paid off; and that no one else will try to come along later and claim that money was owed against the home prior to your closing. Therefore if a cloud on the title comes back it could either cause the deal to be postponed or worse yet to fall apart altogether. You agent can help by asking questions but unfortunately until you actually have the home under contract you can be totally assured of a clear title until the title company sends you a commitment. You agent should look this over and if there are any questions on schedule C of the commitment they should be addressed. Recently a client made it through the first phase of betting financing. We thought it would be smooth sailing from there on since we were getting a great deal on a nice new home worth about $40,000 more than asking. Then I got a call from the title company telling me that evidently the seller’s lawyer never recorded the deed into the new sellers name and that it was still in the previous seller’s name. Because of this we couldn't find a bank to finance the loan for 90 days. Since banks have come down hard on doing "flip" homes in response the scamming practices of the past. Even though the circumstances did not exactly classify this home as a flip home; on paper it looks like a flip. We now have to wait until October 2010 to close this deal.
Inspections are probably one of the most common roadblocks and often one of the most unexpected of them all; especially among first time home buyers. This is because inspectors have a way of making everything in the inspections sound equally bad. Instead of placing a hierarchy on the issues at hand they give the impression that EVERYTHING is gloom and doom. This is to cover them in case of a potential lawsuit. So if you go into the inspections with the understanding that this is the case; and a good agent can help prepare you for what things will probably come up, it will make the inspection process a lot smoother. Inspectors inspect the foundation, structure, roof, attic structure, electrical system, plumbing system, heating and air conditioning system, and more. Code requirements change all the time. Inspectors impose the new codes requirements upon older homes just as they do on newer homes. So obviously an older home is going to have a laundry list of issues; some a greater concern than others. Often times it really depends upon the house and your own judgment as to whether or not you can or cannot live with these things or if you want the owner to fix them or offer a concession to get them fixed. If the parties cannot come to an agreement then the deal may fall apart. A knowledgeable agent may be able to put things into perspective and help find negotiable terms to keep the deal moving. I had a situation in which my buyers’ inspection report came back with foundation problems. We got a quote on the foundation and it was going to be about $5000. The seller offered to contribute $5000 at closing but refused to do the deal himself. My buyer decided that she was not going to do the work herself because foundation work could potentially cause other lateral damage such as walls to crack or doors to jam and she didn't want to be left behind fixing other possible issues. The two parties faced a grid lock and the deal fell through.
Banks require a home appraisal in order to determine whether or not they are investing in a home that is worth the price you have agreed to purchase it for. If the appraisal comes back and it is lower than the agreed upon price you have the option of paying the difference, asking the seller to come down that amount, splitting the cost between the buyer and seller or simply walking away. Another problem that may arise from an appraisal is a difference in the size of the home or the lot. If this happens you must decide whether or not this difference is enough to walk away from the deal. If the home doesn't appraise that may be enough reason to change your mind. I experienced a situation in which there was a difference of about 200 square ft. The seller told me that he had added on to the house and never reported the add-on which would lead one to believe that the addition was not accounted for. So we added 200 sq ft to the total square feet of the house. When the appraisal came back the buyer walked away from the deal; even though the home appraised about $500 above the asking price. A hard lesson learned but a very good lesson learned for sure.
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