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First Time Home Buyer - Doing Away With The Enigma 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 giving you to obtain full, formal loan approval. This contingency is usually between 15 and 21 days which depends on what you and your Real Estate Agent have arranged for on your behalf in the contract. The earnest money deposit that you put into an escrow account at the time the offer is approved 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 has expired and you do not close the purchase transaction, you can lose your earnest money deposit. For this reason it is extremely essential to make sure you are not committing to a loan contingency in an offer negotiation unless you are absolutely certain you will be buying the home and you know you do not need to count 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 before making an offer on a property is the perfect strategy for any home buyer in Colorado that can help you obtain the best deal possible, especially if you want to make small down payment. The seller is often leery of the stability and dependability 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 power, by being perceived as soft buyer rather than a strong one. This is why it is very essential to get full loan approval in the beginning and provide a written verification of the loan approval when an offer is made. This shows it is a done deal, and you are perceived to be a cash buyer.
The contract period is the period of time in which all essential items must be completed, including receiving loan approval, property appraisal, home inspection reports, termite inspection, etc. Give yourself enough time for all essential items to be completed for this significant purchase you are about to make. Usually, purchase contracts are drawn up for a period of 30 days, 45 days or 60 days. However, it is really common for a purchase contract to be written with terms in excess of 60 days if the parties interested require that long of a grace period to complete all aspects of the essential items.
As part of the negotiation in your purchase contract, you and the seller will together agree upon the quantity of time needed to complete all the home inspection things that are required. Utilizing an outside third party service to accomplish these inspections is highly suggested, especially for a first home buyer in Colorado. You will be provided with a report by the home inspection company that you should evaluate very rigorously to be certain there are no material defects in the property that you were unaware of, and which could subsequently have an impact on the value of the property. If there are material defects, you and your Real Estate Agent should return to the negotiating table and discuss a large reduction in the purchase price to recompense the cost of any required repairs. Once your home inspection contingency has expired, you no longer have the power to go back and renegotiate the purchase price to resolve any issues revealed by the home inspection.
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