Las Vegas Home Buyers Guide
You are about to embark on one of the most important and exciting decisions in your lifetime, the selection and purchase of your home. It is a decision that will bring you years of comfort and joy. Yet, the idea of spending your free time evaluating homes and neighborhoods, figuring your down payment and monthly costs, applying for a loan, and finalizing the purchase can be an overwhelming process. For some buyers, the process is tedious and confusing. This is why consulting a professional realtor is a smart decision.
A licensed Real Estate Agent can help you find a house, efficiently and quickly. Discuss with your agent the type of home you believe will be right for your needs. Is your family growing? Do you entertain a lot? Garden? Barbecue? Work at home? Are you a chef? A wardrobe buff? Are you a fixer-upper or a total couch potato?
Your realtor’s expertise and experience will be crucial in helping you find the right home of your dreams. He/she has access to the Multiple Listing Services (MLS), which provides information on virtually every home for sale in the market. This is a useful tool because it provides the most current comparative information available for more informed shopping.
In addition, your Realtor will show you homes that you can comfortably afford. He/ she will have the resources to help you understand how much a lender will let you borrow and on what basis it is calculated. Once you have calculated a price range, your Realtor will work with you to establish criteria that will lead you to the right home.
When you are ready to make an offer, your Realtor can assist you. He/she cannot suggest a lower price than what is listed, but he/she can tell you what comparable homes are selling for in the same neighborhood. Your realtor will act as the intermediary between you and the seller who is likely to also be represented by an agent. If there are negotiations over price, closing dates, contingencies, and items – such as appliances- to be left or taken, your Realtor will be your representative.
Once your offer is accepted, you will have a lot to do in a short period of time. Your Realtor will direct you to a lender, and inspection and insurance professionals and a Title Company for your escrow and title needs. He/she will keep you on track and organized.
Shop Smarter…Not Harder
Fine tune those dreams of your nest home by working on the answers to two questions:
How Much House Can You Afford?
Though you may be willing to spend until it hurts, the name of the game is how much you can afford
based on the lender’s calculations/requirements. Your realtor will put you in touch with a lender that he/she trusts to help you through the financial process of pre-qualifying (targeting the amount that a financial institution will lend you.)
In general, lenders allow your total monthly housing costs to go as high as but not more than 30 percent of your gross monthly income. The second requirement is that not more than 36 percent of your gross monthly income can be tied up in total monthly house payment and any payment(s) on outstanding long term debt.
Lenders use slightly different formulas for arriving at “total monthly house payment”. These costs generally include your mortgage principal and interest payment, property taxes as a monthly figure, and hazard insurance as a monthly figure. These four items are referred to as PITI (principal, interest, taxes& insurance). If you’re required to pay private mortgage insurance (PMI) because your down payment is less than 20%, this PMI payment will also be included. If you decide to buy a condominium or town house, the monthly homeowner’s association fees will also be included. Keep in mind, these formulas aren’t cut and dry and things change from lender to lender, so your best bet is to do your research and make the comparisons for yourself.
What Type of House Do You Want?
Perhaps you know exactly what you want….2,200 square foot ranch style home on a wooded lot. If so, your realtor can look immediately for only that type of house. On the other hand, if you don’t know what you want, but “you’ll know when you see it”, you need to complete the Home Shopping, “Needs and Wants Checklist”. It will help you define what you really “have to have” and really “want to have” in a house and neighborhood. This will help your realtor considerably when searching for the right homes to show you. When you look at homes, bring this workbook with you so you can keep a record of your notes on each of the homes you will be touring.
Get Your Financing In Order
You can get together with a lender to get your loan application completed and the financing process started. Be prepared to provide the lender with copies of any important and necessary information.
Making Decisions About Your Purchases
Below are some of the items you’ll need to consider and how the purchase process works:
How Much Should You Offer to Pay?
Should you offer to pay the seller’s asking price or a lower one? Consider such factors as: How long has the house been on the market? Is its price reasonable? Your Realtor can show you comparable sales (comps) for similar properties in the neighborhood to help you. How competitive is the area’s home buying market? If the seller is offering an assumable mortgage or financing, how much is it worth to you?
Making Decisions About Your Purchase
Once you have found the perfect house, your Realtor will take you through the purchasing process: Submit your offer to buy the house. The seller may accept your first offer, or you may go through one or several counter-offers before you and the seller agree on the terms of the sale. Once you both agree, you have a contract of sale which spells out the details and responsibilities of all parties involved in the transaction.
What Conditions Do you want To Place On Buying The House?
When you commit to buy the house through your offer, you may make that commitment contingent upon certain things happening, such as you securing financing for the home. In a similar vein, you may purchase contingent upon the sale of your present home by a certain time and under certain terms.
You will also want to make sure the house is in good shape. You may make the contract subject to your being satisfied with a building inspector’s report and/or an inspection for termites. The purchase should also be subject to your being satisfied with your own inspection of the house just prior to closing.
What Special Provisions Should Be Included?
Most contracts for sale include some standard provisions, such as one for property taxes, insurance costs, utility bills, and special assessments to be prorated at closing between buyer and seller. Others outline particulars about what happens if the property is damaged before closing or if the seller or buyer fails to go through with the sale. You may want to add your own special provisions. For example, you may want a new home builder to provide you with home warranty insurance at no cost to you.
What Are you Buying?
The contract should spell out everything that is part of the purchase that may not be clearly part of the real estate. Common items that could cause questions include appliances, light fixtures (such as chandelier in the dining room), shades, blinds, curtains and rods, screens and storm windows, shelving or cabinets, potted flowers, shrubs and trees, or perhaps a swing set that is cemented down.
What Happens To The Earnest Money?
A “deposit” is made, in part, to show the seller your seriousness about buying. Your Realtor will inform you of the amount that is usually given in your area. The seller doesn’t actually receive the earnest money. A third party, Title / Escrow Company – holds the amount in a special trust- or escrow account until the sale is closed or the contract is broken.
If you go through with the sale, the money is applied to your down payment or other closing costs. If you fail to buy the house, the seller has the right to keep the earnest money. However, you can get your money back until the point at which you are notified that the seller has accepted your offer. And if the seller fails to fulfill his/her obligations, the money is yours.
Overview of Closing Costs
Listed below are some typical closing costs you, as the buyer, may incur as part of your loan transaction.
When you apply for a loan, you will receive a Good Faith Estimate of closing costs and settlement charges, along with a booklet that will explain these costs.
Appraisal: This is a one time fee that pays for an appraisal – a statement of property value for the lender. The appraisal is made by an independent fee appraiser.
Credit Report Fee: A one time fee that covers the cost of the credit report.
Loan Discount: A one time fee used to adjust the yield on the loan to what market conditions demand. It is often called “points”.
Loan Origination Fee: The lender’s administrative costs in processing the loan are covered by this fee.
PMI Premium: You might be required to pay an up front fee for mortgage insurance, depending on the amount of your down payment. Lenders may also require monies be placed into a reserve account held by them.
Prepaid Interest: Depending on the time of month your loan closes, this per diem charge may vary from a full month’s interest to just a few days. If your loan closes at the beginning of the month, you will probably have to pay the maximum amount if your loan closes at the end of the month, you will only have to pay a few days interest.
Taxes and Hazard Insurance: You may be required to reimburse the seller for property taxes, prorated depending on the month in which you close. You will also need to pay a year’s hazard insurance premium up front. Also, you might be required to put a certain amount for taxes and impounds into a special reserve account held by the lender.
Title Insurance Fees: There are two title policies, a lender’s policy (which protects the lender against loss due to defects in the title) and a buyers’ title policy (which protects you). These are both one time fees.
Escrow Fee: Fee charged by the title company to handle funds and documents of buyers and sellers.
- Notary Fees: State established fee of $10.00 per signature.
- Recording Fees: Fee paid to county to record documents.
- Inspections Fees: Fees charged for various inspections of said property.
- Home Warranty Plan: Optional Warranty Package that pays for repair/replacement of home’s major
- systems and appliances.
- Disclosure Source: Optional. Consult your Realtor.