Buyer's Guide

Is Home Ownership Right For You?

Making the right choice in purchasing real estate begins with research and preparation. Before you ever set foot in a house for sale, it is wise to understand what home ownership is all about. For example, how much can you borrow? Will a lender allow you to borrow an amount such that you are “house poor” after you move in? And what are the tax savings that home ownership will provide? Click here for additional information.

Prequalification

In Arizona, the Arizona Association of Realtors form demonstrating that a buyer has been prequalified is the Loan Status Report, LSR .  The LSR is completed by the loan officer after receiving information and documentation from the buyer which that allows the loan officer to make a decision regarding the buyers’ ability to qualify for a loan. A thorough prequalification will include submitting a loan application, discussing income, debt, assets and a review of the buyers’ credit report.   By going through the prequalification/pre-approval process, you will have an idea of how much the lender is willing to finance.  At the same time, you'll have a better understanding of the different types of loans and the respective interest rates.

Two things to ask for from the lender

Deciding on the appropriate lender can be confusing process.  Once you find the lowest interest rate, you may think the search has ended.  However, will you be paying additional and excessive underwriting, process, loan and documentation fees in exchange for that low rate?  Two things to ask for from your lender are:    1.) A Good Faith Estimate,    2.) An Amortization Schedule.   A Good Faith Estimate will disclose the interest rate plus all the fees that the lender will charge.  A Good Faith Estimate  will allow you to make an informed comparision of different lenders and loan programs. (Good Faith Estimate sample form)   The second thing to ask for is an amortization schedule.  As loan programs become more specialized and creative, the days of only choosing between a 15 and 30 year fixed rate are long gone.  An amortization schedule will show you your monthly payment  and how is it applied towards the principal and interest payments along with the remaining loan balance.  If a lender has problems providing this, find someone who can.

How much can I afford? - Part II

The prequalification process will involve a review of debt to income ratios, credit history, etc. It may not take into consideration any savings plans, tithes to your church or synagogue, or regular charity contributions, or that annual Alaskan Cruise that is part of your lifestyle!

Therefore, it is extremely important to have your Realtor help you identify what the monthly payment will be for a particular house. This can be done since the MLS will disclose previous year taxes and any HOA dues. With a good estimate of the hazard insurance and the loan type and interest rate, your realtor should be able to assist you in calculating the approximate monthly payment. It is always helpful to discuss your desired range for your monthly house payment and not rely solely on the prequalification amount.  

Buyer’s Advisory

In 2002 the Arizona Department of Real Estate developed the Buyer Advisory to assist buyers in their due diligence when purchasing real estate in Arizona.The Buyer's Advisory  is divided into three sections: (1) common documents a buyer should review; (2) physical conditions in the property the buyer should investigate; and (3) conditions affecting the surrounding area that the buyer should investigate.  The advisory will review issues and areas of concern that a buyer will want to investigate during the due diligence period of the contract.  

New Home Construction

Over the last year, The  Phoenix valley has consistently had over 500 new home subdivisions under construction by approximately 90 new home builders. To compare the many new home builders, check out the JD Power ratings for new home builders in Arizona. New Home Builder Rankings.   A couple of things to remember when purchasing a new home:  *The interest rate will not be known until 30 - 60 days before you close escrow.  * Backyard landscaping and window coverings are NOT included.  *Make sure and understand what is included in the base price. It is not everything you see in the model! *Budget at least 10% of the base price for upgrades.  *Any earnest money that is deposited is refundable until the final Public Report is delivered to the buyer. *Remember, that the cordial, pleasant sales person has a fiduciary responsibility to the builder.

Purchasing a Home? Read this! The Arizona Dept. of Real Estate maintains this website that addresses issues such as Airport Disclosures, Arizona Sex Offender Infosite, a real estate checklist for anyone purchasing real estate in Arizona, flood control maps, expansive soil, freeway construction, and and environmental concerns. 

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