No matter how you purchase a home, whether it is thru a For Sale By Owner, Realtor or Builder -
FINANCIER$ can be of invaluable assistance.

If we furnish your home financing we can also legally offer you free help with contracts, forms & paperwork, offers/counter offers, time frames, etc.

Start early and we can even give you hints on how to work best with Builders, Agents and For Sale By Owners (FSBOs - pronounced FIZZ- BO)

Most people are more than a little bit confused as to the proper sequence of events when buying a home so we have excerpted some material from our HOMEBUYING SCHOOL to give you some general guidelines.

#1 Discover what size and type of home loan you can secure.
Before you go looking for a home you have to know what to look for. How will you know what size and price homes to look at if you don't know what type and size loan you can secure and will be happy with?

Especially nowadays there are so many variables in financing that can greatly affect the ultimate price home you can afford.

This means that Qualifying for a home loan requires professional assistance & cannot be done by a friend, book, computer or Realtor. Accurate loan qualifying figures can only be derived from a Lender performed personal Evaluation.This information cannot be determined by a simple Pre-Qualification (also commonly mis-known as a PreApproval) because a PQ simply doesn't go into enough detail!

A real loan approval is definitely much more involved than just looking at your debt to income ratio so your Evaluation should also be more involved. Debt/income ratios are less than half of the approval process.

How can you tell the difference between an Evaluation and a PQ?

One way is TIME, a PQ usually encompasses only these 3 questions.

What do you make?
How's your credit?
How much money do you want to put down?
Credit may or may not be checked
Your information may or may not be entered into a computer "underwriting engine"

A PQ usually only takes 5-15 minutes because little information is gathered and no information is verified or confirmed. An Evaluation takes 30 - 90 minutes minimum and before a definitive answer can be given it might even require multiple conversations with an underwriter if your situation is complex. In rare occasions, some Evaluations can take days before a definitive answer can be determined. You would rather have a studied, accurate answer than a fast, wrong answer wouldn't you?

Checking credit could be another clue, but sometimes credit is checked during a PQ also. (see also Credit Reports & Credit Scoring to learn the differences in the types of credit reports)

If you've talked to more than one mortgage company you will have a idea which companies are more thorough. You will probably have an idea if they did an Evaluation & PreApproval because it was a much lengthier & formal process than a PQ. An Evaluation will resemble a verbal loan application and underwriting all rolled into one and includes checking credit as well as an in depth look at your stability factors such as address, job, money, & money history. In other words an Evaluation will be very detailed and encompass all the information an Underwriter will want to know to approve you. This eliminates last minute surprises such as higher interest rates, larger downpayments, or even loan turn downs. (see also Qualifying and Approval Guidelines)

I called this an Evaluation and PreApproval, but that is a slight misnomer as you cannot be fully approved until you have found a property. The real approval process approves not only you but also the property. (there are acceptable & unacceptable properties for each loan type) All anyone can know from the Evaluation is that IF you buy an acceptable property (for the loan type you desire) and there are NO CHANGES in your situation, you have the capacity to be approved. It's not perfect, but it is as good as you can get.

An Evaluation gives you the information you need to make mortgage decisions.

This is more important than most people realize because you cannot fill out a binding purchase contract until you have made some definite financial decisions. FINANCIER$ Mortgage will be happy to do an in-depth Evaluation of your personal situation. To speed things up, loan application should also be made at this time or soon thereafter.

If you want a Seller to take you seriously you need to be able to prove to them you really have the capacity to buy their property.

This proof can make a difference in how seriously Sellers negotiate with you and how much you pay for the property. (see also How We Can Do What We Do)

#2 Look for a home.
Yes, that's right, looking at homes should be the 2nd step in the process. Until you have been Evaluated there is no need to look at homes. If you can't buy the type and price of home you want AND get acceptable financing terms & payments why bother?

Since there is no such thing as a perfect home, be ready to make a few compromises as you shop. Studies show that almost 80% of the people pick several neighborhoods they would like to live in and then drive thru them regularly. They stand ready to pounce on any new homes that come on the market. Studies have shown that most people look with at least 2 Agents and look at all FSBOs on the market as well. We can help you no matter which route you take!

The best way to do this is to measure your present rooms & make a room by room comparison of any present inadequacies. Accurate square footage figures are available on the appraisal. NOTE: Tax roll figures are usually wrong! The size on the tax rolls is per the builders initial plans, not necessarily how the house was actually built and the assessed values listed have little to do with actual values.

Another wives tale warning, although the price per square foot can be measured, it is not a factor in an appraisal or a determination of value. Layout, features, quality of construction and amenities, & condition are the biggest factors. Even so, if you found equal houses it could be a useful comparison. Just remember there is no such thing as a correct price per square foot for a neighborhood. Most neighborhoods can have a $40-$100 price per square foot variance.

#3 Buying the home is the easy part!
Well, it is if you know you can truly afford and secure acceptable financing of the home you want.

The Purchase Agreement is the next logical step in the process once you have found a home you like and know you can afford it. The Purchase Agreement simply embodies the terms you and the Seller have agreed upon. To ensure nothing is missed many people make notes on a contract as they look at the house.

Let's look at how the homebuying process differs depending upon whom you buy your house from:

BUILDER: The GOOD NEWS is that builders have their own contract and will help you fill it out. BAD NEWS is their contract is very one sided and will scare you if you read it. (there is a state promulgated FAIR contract, but most builders will not use it) The GOOD NEWS is that regardless of the legal terms most builders will let you out of the contract if things don't work out. The BAD NEWS is they try to get NON REFUNDABLE money for upgrades or "personal preference items" early in the transaction so that you have money to lose if you want to back out. Resist paying any money for "personal preference items" as long as you can. Make them threaten to tear up the contract before you give in and pay the extra money, it is the only protection you have.

After having been a lender for several builders and seeing tens of thousands of other Builder transactions I can safely say you would be much better off to buy a home that is almost completed or an almost new home in the same neighborhood than to build from scratch. Most people who build say they never will again!! The divorce and ulcer rate is very high when building.

The best bet is to wait 2-3 years to see how the neighborhood shapes up. It takes a while to see if the neighborhood will be maintained well and then many times there are a large number of foreclosures in the first 1-2 years.  The Builder's mortgage company doesn't care about YOU, they care about the Builder. All the Builder wants is O-U-T so they don't care if the financing fits your needs or not. Because of this many people get financing that ensures they can't afford the payments &/or interest rate changes which leads to a high foreclosure rate which affects property values in the area.  (I'm prophetic, that is exactly what happened to cause the mortgage upheaval of 2007 and the subsequent tightening of the mortgage market.)

FSBO: If you buy a FSBO then you (or someone in the transaction) must be conversant with how to write the Purchase Agreement and the necessary steps to get to a successful closing. If FINANCIER$ is your mortgage company then the law allows us to help with the contract, forms and closing coordination.

One great advantage you have working with a FSBO is that you get to talk directly to the Seller and explain your wants & needs. There is no intermediary (Agent) to confuse the issues. This makes it much simpler for you and the Seller to come to terms.

Don't get overly worried about the contract itself. There is a standard, state promulgated Purchase Agreement & written instructions that everyone can use. Get it here

AGENTS: The GOOD NEWS is that, unlike Builders, Agents use the state promulgated FAIR contracts. The BAD NEWS is that unless you are working with a BUYER ONLY AGENT (one whose company does not list properties and an agent who works exclusively with Buyers) the Agent isn't really on your side! At best they don't work against you, but then again, by law in some cases they must actively work against you (Seller's Agent)!

Just keep in mind that like we said above, a BUYER AGENT may not be really the Buyer's Agent, they might only be an INTERMEDIARY and cannot truly represent you (they are not supposed to be on anybody's side) so you may need outside help or knowledge. They can help you fill the contract out, but it is up to you to be sure you have all the proper terms and protections you need built into the contract.

In many cases the term BUYER AGENT is simply a title, not an actual indication of their legal loyalties. FINANCIER$ doesn't get involved with the negotiation process, but prior to contract time we will have told you what is normal and abnormal so that you have an idea of HOW you want to write the contract plus we are just a phone call away to make sure you include the terms that meet the needs of the financing you desire.

At the risk of offending some Agents let me explain the 3 types of Agents.

Seller's Agent = works for the Seller and must put the Seller's interests before the Buyer. They are supposed to tell the Seller anything they know or can find out about the Buyer that would help them get the best deal at the expense of the Buyer. The only price they can legally quote is full listed price.

Buyer's Agent = works for the Buyer and must the Buyer's interests before the Seller. They are supposed to tell the Seller anything they know or can find out about the Buyer that would help them get the best deal at the expense of the Seller. They are supposed to give you the data to allow you to determine if the house is worth less than full listed price as well as help and advise you as to pricing/offers.

Buyer Agent = "Wait, you've made a mistake, you've already listed Buyer's Agents." No, in Texas what is known as an Intermediary in other states got labeled as a Buyer's Agent. This means there are 2 different types of Buyer's Agents. One is a Buyer ONLY Agent and another that is really an Intermediary. By law an Intermediary is supposed to be impartial and not on the side of either the Buyer or the Seller.  They aren't supposed to have an opinion on pricing and value -so inother words if you've gotten the second type of Buyer's Agent then it's all up to you baby!

Due to this confusing labeling about the only way you will ever hear the term Intermediary is if you want to buy a house that is listed by your Buyer Agent. Intermediary is their term for the person they bring in to "help" you while they abandon you and represent the Seller. Now tell me the second type of Buyer's Agent is representing the Buyer! Keep in mind they know all your secrets and by law are now required to tell everything they know about you to the Seller and put the Seller's interests above yours and try to get the Seller the best deal at your expense.  They can't unlearn all they know about you so you don't get as good a deal as if you'd have had your own agent from the beginning.

Why did they assign an Intermediary type of Buyer Agent to you?  Go back and re-read the duties of the Agents above, go ahead, I'll wait . . .  OK, see an Intermediary is supposed to be impartial and not on the side of either party, BUT "your" Buyer's Agent already has a contractual duty with the Seller to put The Seller's interests above yours AND they are required to use their intimate knowledge of your situation to get the best deal they can for the Seller. It's like playing poker except that you are holding your cards so that everyone else can see them.

Basically this just means no one is on your side EXCEPT  the mortgage company. This is another good reason to be sure you have picked the best mortgage company. As I mentioned earlier, the difference between lenders isn't rates, but SERVICE!

As they say, "The proof is in the pudding." There are many levels or facets of service, but "Actions speak louder than words" so no matter what they SAY if they are acting like an XXX Agent they are an XXX Agent! Which means there could be legal ramifications! HERE'S A QUICKIE LITMUS TEST OF ACTIONS TO DETERMINE WHAT TYPE OF AGENT YOU REALLY HAVE! A Seller's Agent will automatically write the contract  so that the Buyer pays for the Appraisal. An Intermediary should ask who you want to pay for the appraisal, but usually won't. They normally just write the contract with the Buyer paying the appraisal because that is easiest on them. This way they don't have to have any "discussions" with the Seller's Agent. A Buyer's Agent will automatically write the contract so that the Seller pays for the Appraisal. After all it is up to the Seller to prove the house is worth what they are asking! They will also usually add a phrase to the contract that goes something like this: This contract is contingent upon the house appraising for at least the sales price. (that phrase has been removed from the state promulgated contracts) This gives the Buyer equal protection to the Seller.  They might also add: If the house doesn't appraise for at least sales price, irregardless of option period, the contract can be declared void by the Buyer and all earnest money and option fees will be promptly refunded. (the appraisal is rarely completed during the option period) If any  of the Agents balk about returning the option fee, explain that the concept behind this phrase is that this type of risk factor was never meant to be covered by the option fee. Tell them you are risking inspection money and a lot of your time based upon some assurances the house is worth a certain price so if this assumption isn't correct you shouldn't be penalized. If there is a big brouhaha over who is to pay for the appraisal then a true working for the Buyer agent might add a clause something like: Seller to pay for appraisal and the Buyer will reimburse Seller for the appraisal fee at closing if the house appraises for at least the sales price.

How do you know how much a house is worth?

If the house already has a mortgage appraisal you will have proof of it's fair market value. If the house has not been appraised you have no assurances the Seller's asking price is anywhere close to true value.

Tax Appraisals (actually just Tax assessments) are worthless when it comes to establishing value. A home's value on the Tax Rolls is derived from market data of a very large AREA and is not based upon that specific house or even that specific neighborhood values.

Lacking an appraisal the only thing you can do is make a comparison of the homes you have seen and then make a guess. Don't worry unnecessarily, you can add the phrase "This contract is contingent upon the house appraising for at least the sales price." This used to be a part of the contract but isn't any longer. A smart Seller already has a Mortgage Appraisal.

We see a lot of back & forth dickering and many lost contracts on houses that have not been appraised, but we usually see full price contracts on houses with Mortgage Appraisals. Why? A Buyer doesn't want to pay more than a property is worth, but they usually have no problems paying what it is worth. (see also Appraisals, Value & Pricing on the For Sale By Owner Registry site)

Now you can relax.
Once the contract is complete, the house is yours - subject to the formality of the loan processing & closing IF you have already been Evaluated & PreApproved. If you still don't know if you can actually get a loan you can live with then you need to be worried.

Without a prior Evaluation how do you make plans? You can't afford to tell your friends or even get excited.

Without a Evaluation you could also have the added dimension of possible legal ramifications. To get the Seller to accept your contract you, or your Agent, probably strongly assured the Seller you had the capacity to buy his home. (in legal circles that's called fraud if you can't get financing) I just hope the Seller doesn't lose a contract from another Buyer during this process or lose the house they are trying to buy if you can't get your loan. If he does he can prove damages which is another whole legal ball game! I hope you are finally getting the idea that financing MUST come first!

#4 No, this step is not to make loan application!
Loan application should have been done a long time ago, this should be the hurry up and wait step while the Mortgage company, Title company, appraiser, surveyor etc. do what is necessary to protect you and ensure the paperwork and transfer of title is done right.  This makes the whole process more pleasant and gives you the maximum amount of time to work out any unforeseen situations plus it gives you the most options when it comes to financing. It also lets you close much quicker. The wait from contract to closing is agonizing so anything that speeds the process is welcome!!

There are over 30 people involved at this stage - attorneys, title company personnel, appraisers, surveyors, abstracters, closers, etc. You don't need to add financing unknowns into this mix. This is another reason your financing should have begun before you looked at homes.

It is amazing how many people get the cart before the horse. They decide to look at a few houses just to see if what they want is available and somehow end up finding a home they want before they even know if they can buy it. If you wait for financing until after you find a home it is too late to research options or do anything to improve your situation. That is why so many people either lose the house of their dreams or end up stuck with a high interest rate or a mortgage type they really can't afford.

Typically loan processing & approval can take 2-6 weeks, but with F$'s Xpress Processing you can be ready to close in as little as 7 days. The more complicated your situation the longer it takes to process your loan.

TIMELINE OF A TYPICAL LOAN PROCESSING

#5 Close & Move!
Closing occurs at a title company not at the mortgage company or the Realtor/Builder office. The title company will research the Seller's legal capacity to sell the home to you and clean up all the loose ends like existing mortgages, liens against the property, ex-wives or husbands, and coordinate the transfer of title as well as filing all the necessary paperwork on the new mortgage.

F$ will help coordinate all the necessary paperwork with the title company and will even attend closing to make sure you understand what you are signing and there are no last minute UH OHs!