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First Time Home Buyer - Doing Away With The Enigma Of Purchasing 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 offering you to obtain full, formal loan approval. This contingency is usually between 15 and 21 days depending 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 accepted will be put in jeopardy as soon as 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 relinquish 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 depend on financing approval to close the transaction. Formal pre-approval will help to eradicate any problems in this area.
Seeking complete pre-approval for financing in advance of making an offer on a property is the perfect method for any home buyer in Colorado that can help you obtain the best deal possible, especially if you plan to make small down payment. The seller is often leery of the stability and reliability of the buyer if the buyer is only capable of providing 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 exceedingly essential to get full loan approval in advance and provide a written verification of the loan approval when an offer is made. This shows it is a done deal, and you are regarded as 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 plenty of time for all essential items to be completed for this very important purchase you are about to make. Generally, purchase contracts are drawn up for a period of 30 days, 45 days or 60 days. However, it is really not uncommon for a purchase contract to be crafted 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 mutually agree upon the quantity of time needed to complete all the home inspection procedures that are required. Choosing an outside third party service to carry out these inspections is highly suggested, especially for a first home buyer in Colorado. You will be supplied with a report by the home inspection company that you should evaluate very thoroughly to be certain there are no material defects in the property that you were not aware of, and which could therefore have an impact on the value of the property. If there are material defects, you should return to the negotiating table and consider a large reduction in the purchase price to offset the cost of any required repairs. Once your home inspection contingency has expired, you no longer have the leverage to go back and renegotiate the purchase price to correct any issues revealed by the home inspection.
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