Get a Pre-Approval Letter – Gone are the days when you could make a 2 minute call to a Lender and be assured that you can get a loan at an interest rate you will be happy with.  Buyers make the mistake of getting in their cars and looking at lots of houses without having any financial plan in place for how they are going to pay for their dream home when they find it. The entire lending landscape has changed in the last 6 months. You MUST speak to a lender or a mortgage broker about getting a Pre-Approval Letter which will indicate to a prospective seller that a lender will make you the loan. Not a Pre-Qualification letter but a Pre-Approval Letter which means you made an application and reviewed the necessary backup with the lender such as Tax Returns, Pay Stubs, Bank Statements. And forget about 100% financing. You will need some kind of down payment these days (at least 10%).

Crunch the numbers and figure out your monthly PITI – Principal, Interest, Property Taxes and Insurance. OK, so you have your Pre-Approval letter and you found the home of your dreams. Do you have any idea what your monthly “nut” is going to be? Are you comfortable paying that amount? Get your lender or mortgage broker to estimate your monthly PITI and make sure you are comfortable with paying that out before you start looking for houses you can’t afford. The cost of borrowing “jumbo” money is now EXPENSIVE.  Make sure you know what your payments are going to be.

Deposit and Closing Costs - Be prepared to write a check for a Deposit (sellers usually ask for 3% of the purchase price but less can be negotiated) which will be deposited into escrow if and when your offer is accepted. You have a contingency period during which time you can do all your inspections and review any disclosures given to you by the seller, put your financing in place and get homeowners insurance. If during that contingency period you no longer want to proceed with the purchase you can cancel the escrow and get your deposit back. Also be prepared to pay Closing Costs in order to close the escrow. Estimate about 1% to 1-1/2% of the purchase price excluding any Loan Origination fees (points) you might have to pay a lender.

Retain an experienced Buyers Agent to represent you – Do not ask the agent representing the Seller to represent you as well in return for a break on the purchase price! Are you familiar with the phrase “conflict of interest”? Maybe you’ll save money on the purchase price but you run the risk of giving it back and then some if there is a disagreement between you and the seller during the escrow. Would you ask the lawyer of the person suing you to represent you too? You will have to sign at least 30 pieces of paper to write an offer in the State of California. Please, please use an experienced real estate agent who not only has read the Purchase Agreement and all the disclosures, but actually knows what they mean and can explain them to you. Please, please use an experienced real estate agent who can advise you on what inspections to get so you will not be surprised with a problem after escrow closes that might have been discovered. Please, please use an experienced real estate agent and not your friend because they promise to discount the commission. This is one of the biggest mistakes you can make. Buying a home is a complicated process.  It’s probably the most expensive purchase you will make in your lifetime. The money you saved negotiating the price can easily be lost during the critical negotiations that go on during the escrow.