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First Time Home Buyer - Shedding Light On The Enigma Of Being A New Home Owner - Part 1
There are four things that every first time home buyer in Colorado should know. The first of these concern Loan Contigency. Loan contingency is the period of time the seller is providing you to obtain full, formal loan approval. This contingency is normally between 15 and 21 days based on what you and your Real Estate Agent have negotiated on your behalf in the contract. The earnest money deposit that you put into an escrow account at the time the offer is confirmed 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 expires and you fail to close the purchase transaction, you can forfeit your earnest money deposit. For this reason it is extremely imperative 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 rely 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 best tactic for any home buyer in Colorado that can help you acquire the best deal possible, especially if you intend to make minimal down payment. The seller is often leery of the stability and trustworthiness 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 weak buyer rather than a strong one. This is why it is extremely crucial to get full loan approval early on and provide a written confirmation of the loan approval when an offer is made. This shows it is complete, 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 obtaining loan approval, property appraisal, home inspection reports, termite inspection, etc. Give yourself ample time for all necessary items to be completed for this vital purchase you are about to make. Typically, purchase contracts are drawn up for a period of 30 days, 45 days or 60 days. However, it is really normal for a purchase contract to be written with terms in excess of 60 days if the parties interested need that long of a grace period to accomplish all aspects of the necessary items.
As part of the negotiation in your purchase contract, you and the seller will jointly agree upon the amount of time needed to complete all the home inspection processes that are required. Utilizing an outside third party service to accomplish these inspections is highly recommended, especially for a first home buyer in Colorado. You will be given a report by the home inspection company that you should examine very carefully to make sure there are no material defects in the property that you were ignorant of, and which could subsequently have an impact on the value of the property. If there are material defects, you should go back to the negotiating table and talk about a decent reduction in the purchase price to mitigate the cost of any necessary repairs. Once your home inspection contingency has expired, you no longer have the control to go back and renegotiate the purchase price to resolve any issues revealed by the home inspection.
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