I remember exactly how it felt to be a first-time home buyer. I didn’t understand the process. I didn’t know if I had enough money. I was afraid I might make a mistake and lose my money.
I was anxious and worried that I would screw it all up. Feelings like these are common for most first-time buyers and I don’t want you to ever have to feel like that.
My name is Chris Jacobson. I am a local Vallejo real estate agent. I don’t want you to every feel the way I did. I create this web page to help you understand the process and to have a chance to encourage you.
Buying your home is likely going to be the single biggest financial transaction you have ever made. There are absolutely some big mistakes to avoid, but stick with me. This page is packed with the answers you need.
Buying a home should be fun and exciting, not confusing and scary. I want to help you shift the process back to having fun and being excited. To do that, we need to find answers to your questions.
I feel uncertain. How do I make this process fun and exciting?
Sometimes all it takes to make the process fun is to start.
In order to be excited about buying your first home, you are going to need to understand the process.
Before we get wrapped up in what is possible for you, I want you to allow yourself to be free to imagine what you would choose if money and location were not an issue.
Most people find it easiest to grab paper and pen and write it down.
Before you limit yourself with the practical analysis of what you think you can afford or what you think you need, please give yourself the freedom to dream about what you really, really want.
Do you want dinners on the private patio, an amazing view, do you crave a master bedroom, or a private office? Have you always wanted to own a duplex, or a huge yard to build a garden?
Even if you don’t take the time to write it down, I know that over the next few days and the following weeks your imagination will help you.
Honestly, actually looking at homes really helps too. If you want direct access to the actual MLS, reach out to me and I will set that up for you. If you are ready to go and visit homes, contact me and we can do that too.
The exciting part of buying a home is that it will change your life! We will have to get serious about the details of what you can afford, but I do want you to start off by taking the time to find out your heart’s desire.
How much money do I need to buy a home?
Money is one of the most common concerns I hear from first time buyers.
This might seem frustrating, but the amount of money you’ll need depends on a lot of factors. This is actually a good thing. It means there are many ways to buy a home, and you have many options.
If you don’t have a lot of cash saved up, there are low down payment loans and even down payment assistance programs. It is often possible to have the seller pay part or all of the closing costs.
Of course, the more money you have, the easier it will be to purchase. A 3.5% down payment is usually about as low as it gets.
Closing costs vary and can be negotiated. Generally, I would say budget 2% for closing costs. Rarely does anyone have to pay more than this, and is likely you will pay less.
So that gives us a general minimum of 5.5%. That is often a very safe margin for a low down payment loan.
Lets say you are planning on buying a small Vallejo home for around $300K. The down payment would need to be at least $10,500 and the closing costs shouldn’t be more than $6000.
Let’s say that we negotiated a closing cost credit of $6000. That means that the total cost would be just the down payment.
As far as the down payment goes, the seller can’t pay for it. It must be the buyer. However, you could use gift funds or down payment assistance programs. It is possible that you could use money from your 401K or other asset to cover the cost.
I feel like I say this a lot but, with real estate, you have a lot of options, and that is a good thing.
When I work with clients, I make sure that costs and affordability are clearly understood. You deserve to feel confident in your choices. I remember how I felt when I was a first-time home buyer and I don’t want you to feel like that.
How do I avoid putting my money at risk?
As your realtor, it will be my job to make sure your money is never at risk unless we specifically talk about it. Generally, buyers follow the contract and that is the best way to avoid putting your money at risk.
With any offer you will need to make an earnest money deposit (EMD). This is about 2% of your purchase price.
The money can be forfeited to the seller if you break the rules of the contract. So, we need to make sure that we don’t break the rules of the contract. It is really that simple.
Remember, you’re not required to actually buy the home! You just have to follow the rules of the contract. My job is to guide you through the process. I want to help you understand how it all works so you feel confident.
Generally, we don’t have to create real risk.
What if my credit isn’t great?
I frequently hear first time buyers tell me that their credit isn’t good enough. This isn’t necessarily true.
The way that a credit score is created for a home purchase is different than the way it is made for consumer credit.
When you spend money with a credit card, you are usually buying things that a bank can’t usually take back, such as dinner for example. This is unsecured debt.
When you buy a home, the home itself becomes a high value asset that specifically relates to the debt. This is call secured debt.
If you track your credit online, or recently applied for credit and were told a number, it is likely that number will be higher when a lender runs your credit.
So what happens if your credit is still low? There are a lot of ways to clean up your credit score. How much can be done usually depends on how much time we have.
Even if your credit score is in the OK range, if your home purchase is months away, you might still want to clean it up.
The important thing to learn here is first, don’t be scared of your credit score. We need to know the full story as soon as possible.
Even if your credit is too low, I can help you get on a path to home ownership.
How will I know there is nothing wrong with the house?
This is a big worry many buyers have. We will have time to investigate the home (usually 17 days). We will use professional inspectors to get the answers we need. We will also review the home’s records with the county and the city.
If things are not right, you don’t have to buy the house.
If we have questions, we will get them answered to the best of our ability. We may need to bring in experts. Building a team is part of the home buying process.
Much like a quarterback, my job is to be the team leader. As your agent, I stay in the middle of your deal and make sure that all the details are handled, including a full investigation of the home.
Can you give me a short overview of the home buying process from start to finish?
The first stage is the search.
Searching for a home includes creating a target property. I use a targeting tool to help buyers figure out what they want and need. The other part of the search is finding out how much you can afford.
We will need to look at homes, and drive or even walk through neighborhoods. Buyers have a lot of uncertainty, but if we do the preparation, what usually happens is that at some point we find the right house and you just know it’s the right one.
We have spent weeks talking and preparing and looking. When the right house comes along, my hope is that you know right away.
The 2nd stage is the offer and acceptance.
Once we find the right home, we will draft an offer using a standard contract. Before this happens, I will make sure you have had the opportunity to learn about how the contract works and what to expect.
The offer will typically include items such as the price, the timeline, the inspections that will be done, and who will pay for these inspections.
If that offer is accepted by the seller, then it becomes the contract. The details of the offer become the details of the purchase agreement. The agreement will feel pretty straightforward, because it’s the same as the offer you made.
An account is opened with an escrow company (a neutral 3rd party) who will manage the legal details of the transaction.
The 3rd stage is the investigation.
Every contract is a bit different, but generally we will have 3 ways out of the contract without penalty. These contractual exits are called contingencies. As each contingency is signed away, we move closer and closer to being fully committed.
We will be able to investigate the home in detail. Usually we have 17 days to do this.-
If there is a loan, there will be an appraisal. If the appraisal comes in below the contract price, you don’t have to buy the home. In this case the seller may reduce the price or you may choose to pay more, but you are no longer obligated to buy the property.
Also, if there is a loan, you are not required to purchase if you don’t qualify. If we get to the end of the loan process and something happens where you can’t get a loan, you won’t be penalized for this. You are allowed to exit the contract.
These 3 contingencies (inspection, appraisal and loan) are the most important. Others may be included in your contract based on your needs or issues with the property.
Stage four is the close.
Once we are fully committed to the purchase, you will sign the loan docs and the final escrow paperwork, and the transaction will be complete. You will usually get the keys to your new home the same day. Congratulations!
Why is it that sellers are locked into a purchase agreement?
Once a seller accepts your offer, the offer becomes the contract (also called purchase agreement). Once that happens the seller is locked into that specific agreement and cannot accept another offer. If a better offer comes in the day after they accept your offer, they can’t take it.
Sellers are naturally hesitant to accept an offer, and they will want to make sure that you have the ability and the desire to complete the purchase.
As the buyer, you must meet the terms and conditions of the contract. The seller is only allowed to cancel if you as the buyer fail to fullfil your contractual obligations. Generally, this can’t even happen for at least 2 weeks.
In normal practice, there is a lot of negotiation that happens after a deal is made. There are often changes to the contract. Even though these could void the contract, they are done in such a way that both you and the seller consent.
Sellers typically want to stay with the deal they selected, so even if they are locked in and can’t pick another buyer, as the deal get nearer and nearer to the closing, sellers tend to want to complete the sale.
I keep hearing the word “contingencies.” What exactly are contingencies?
Contingencies are things that must happen for the deal to move forward. They are required by the contract, and if they don’t happen the contract can be canceled. Sometimes sellers can have contingencies, and it is very common for buyers to have contingencies.
The normal buyer contingencies are the inspection, appraisal, and loan.
Contingencies are important, because they are your way out of the contract to purchase. If you can’t get the loan or the appraisal comes in too low, then a contingency for that issue would let you out of the contract without penalty.
In this sense, contingencies are your contractual exit doors from the contract. You will sign away the right to these exits as we move through the contract from “investigating” to “committed to buy”.
At what point am I locked into the deal?
This is another common worry buyers have.
You must follow the rules of the contract, and the important term to learn is “contingencies”. Your contingencies are your way to exit the contract without penalty.
The short answer is, you are generally not going to be locked in until you’re near the end of the contract, and not until you are sure you want the home. If there is a problem, you don’t sign the contingency and the contract ends.
How much can I afford to spend?
The answer to this question is one of the critical things we must determine. Largely it will be determined by the prequalification process.
You should prequalify as early as possible. Failing to do so is one of the major errors buyers make.
Prequalifying early on can seem daunting, but it is easier than it sounds. I’ll be there to help. If you want to prequalify today, reach out to me and I will help you start.
How can I be sure I don’t buy more home than I can afford?
Before we ever make an offer on a home, we will have a very good estimate of the monthly costs and we will understand your expenses. We are working to make sure that you and your family are set up for success!
Once we offer, there is usually an appraisal from a licensed appraiser. The appraisal is for the lender to feel confident about the home’s value. Remember that the lender is not going to lend on more than the home is worth.
If the lender feels ok about the value, there’s a good chance you will be able to feel confident too.
There will be many income verifications and checks. I will be there to help you understand the costs and the benefits. If you have an accountant, we will bring that person into the team and get their advice. If you don’t have an accountant, we may find one for you.
Ultimately, we will look at the cost and your ability to afford the property. This is a process that will start before we offer, and will not finish until your loan is fully approved.
How do I find the right property?
This is one of the most important questions we can answer.
It is often a good idea to start seeing properties in person and looking close at online listings. It will take time but together we will create a profile of the types of properties you need.
First, to hit a target, you need to have a target.
We will work to define your target property both in terms of what you want and in terms of what you can afford.
As we start to narrow the search, you will probably also begin to discover things you wanted in a home and didn’t even know.
Once we have this target, it will be amazingly simple to find the right property.
There are many more questions to answer. If you need answers right away, you can always reach out to me personally.
How do I create a target for my home search?
Vallejo is a segmented market. There are brand new homes and homes from the 1800s. There are homes as small a 500 sq feet and there are mansions over 5000 sq feet.
In Vallejo there are many small apartments such as duplexes, triplexes, and 4-plexes which home buyers can purchase. There are single family homes of all shapes and sizes.
With all those choices, it is easy to start feeling anxious. A part of my job is to help take away the anxiety and uncertainty.
How will you find your perfect home? The simple answer is you need to have a target to hit a target.
If you have a profile of exactly what you are after, it becomes a lot easier to find. You will know that the home checks off every box on your list within minutes of walking through the door.
I hope you see how much anxiety we are going to remove from your life!
Having the right price range really helps this process, too. We will have to talk about affordability and pre-qualifying.
Focusing on what you need is another great way to start narrowing your target.
Your target is likely to include many commonly searchable elements: neighborhood, size, price, the number of bedrooms and bathroom.
But it is also likely to include things specifically geared to your needs like,
- Maybe you need a home office, or a 2-car garage.
- Maybe you really want a view or a big yard for your kids
It helps to physically visit properties to get a sense of what you want and need. It won’t take long to find the target. Don’t worry, I’ll be there to help.
Life’s a multiple-choice test, there is often more than one right answer. And even if you get an answer wrong, life will often give you another chance.
There isn’t just one home that is right for you. There probably are many homes that you could love.
I have found that even though you will likely face disappointments and frustrations, in the end we will find you a place that you will probably say is perfect.
There is so much work to purchase a home. How do I do it all?
Many buyers are surprised to learn that it takes a team to purchase a home.
You will need expert knowledge and talent to get the deal done right.
Luckily, you don’t need to have all that expert knowledge inside your own head. You can rely on a team of professionals.
Buying a home should always be a team effort. Your team will probably involve a lender, escrow agent, various professional inspectors, hopefully your accountant, and many more people.
Using the wrong team is probably the single biggest mistake buyers make.
The lender is a huge piece of the puzzle. Trust me when I say you want an actual human being who is focused on your needs and deeply engaged in your success as a person. A faceless online service often can’t offer you the personalized service you will need.
You will need various local Vallejo inspectors such as building inspector, roof, termite foundation, HVAC. You need people you can trust.
It is critical that you feel great about the home you will buy, and we will need to inspect many aspects of the property.
The complex process called escrow is something I discuss in other questions, but again the right escrow agent can really help.
If all this seems daunting, don’t worry. Putting the team together and managing the whole process is my job as your agent.
Think of the quarterback calling out plays in the last quarter. Leading the team to victory is time sensitive and detailed. For that reason, having the right agent is the most important piece of the team puzzle.
Many people start their search by going to open houses and meeting a few agents. They make a new friend and they think something like “hey, we both like skydiving, so he must be a great real estate agent”.
You can and need to do better. You need an agent that will not only be loyal and diligent but who has all the skills to manage your unique deal. You need an agent who can build and lead your team from the first step to the last step.
I actually don’t skydive, but I will use all my creativity and diligence to help you meet your goals. I am committed to your success in real estate.
Why do I want to prequalify right away?
Most buyers want to wait to prequalify. It is one of the biggest mistakes a buyer can make. There isn’t a good reason to wait.
Prequalifying accomplishes two big things. The first is that it will give you a price range to focus on.
We need to find you a target and a part of that target is what you can afford.
Once we have a price range, we can make an accurate estimate of all your costs.
The 2nd and even more important reason is that the process might expose credit or other qualifying issues early enough that you could resolve by the time you are ready to purchase.
Honestly, it is heart-breaking when a buyer finds a home they really want and then can’t even make an offer because some minor issue needs a little bit of time to fix. A few weeks later, the home they wanted is gone.
Now that you know why you should prequalify, what’s involved and how do you do it?
There are a lot of different loan products, and there are many ways to put them together to create a mortgage.
Basically, you will need to get all your financial info to the lender. Once that person has it they can assess the many different ways a mortgage could be created.
If you haven’t prequalified and you’re ready, reach out to me today and I will help you get the process started.
Why should I avoid any new credit lines or charge accounts?
Even if you are just thinking about purchasing a home, it is critical that you don’t open any new charge accounts or lines of credit. Don’t buy a car or even get a credit card from Target. Don’t touch your credit at all.
Even seemingly small lines of credit can have big effects on your ability to qualify for a loan. If you have questions about this, you need to talk to your lender and get specific instructions.
What do I need to do to get ready to offer on a home?
Most people start off in the “I’m just looking” stage. That is fine. But sooner or later you will begin to get into the “ready to buy” stage. Once this happens, it is particularly important that you begin to act like a buyer.
Your need to have your documents and financials in order.
When we submit your offer to a seller, they will naturally want to be sure you can afford the home. It is a good idea to have some type of proof of funds ready. This is usually a printout of a bank or investment statement showing your name and adequate funds (with the account number blacked out).
At this point, we will need a letter of pre-qualification or even pre-underwritten from the lender. This will prove that you can really afford the home.
In addition to proving you can afford the home, it is often a good idea to demonstrate how much you want the home. A personal letter which talks about why you love the house, and your hopes and dreams, is often enough to make you the winner in a crowded field of offers.
Think about that for a minute. The sellers have put grandma’s home up for sale after her death. They may have wanted to keep it but decided that it was better to sell.
You were the only buyer who wrote a letter and you described everything the sellers love about grandma’s home. You were not the highest bidder but split between the grandchildren the difference doesn’t seem that big.
Besides, grandma loved dogs and you did a great job of letting everyone know how much Fido will love the back yard!
How do we get the offer accepted by the seller?
This question doesn’t have just one answer. The answer that is often given is that “you have to make a strong offer,” but what does this mean?
You do want your offer as high as it can be, and your loan as strong as it can be. Showing cash reserves, prequalification verification, and generally talking about your motivation as a buyer are all classic and well-worn techniques.
But there are also a lot of other subtle ways to make an offer better.
It all comes down to thinking like the seller. Every seller has different needs. Figuring out what the seller needs and helping you craft an offer that is easy to accept is a part of my job.
Sometimes a seller doesn’t know when they will be ready to move. Everyone else’s offer promises the classic “fast close,” but we don’t. We offer allowing the seller to pick the close date and as a bonus offer to “rent” the home back after the close if they need more time.
We are flexible and we help them to win in the deal.
Knowing the needs of the seller is the real key to writing an offer that gets accepted, and of course there isn’t just one answer!
Why do the type and structure of mortgage matter?
Whole books could be written about the “type” and “structure” of debt, but they would not be bestsellers. No one cares about this information until they need it, and you may need it soon!
We tend to think of a “mortgage” as one size fits all. This is absolutely not the case. There are many different mortgage products. A good lender will help you create a mortgage that meets your needs.
A good lender will listen to your needs and then walk you through the steps to create a “structure of debt” that meets the needs of you and your family.
In basic terms, a mortgage has principle and interest. However, there are many ways to divide up how the principle and interest are paid. How it is paid is the structure.
It is worth your time to talk about this with your lender and make the right choice for you and your family.
I have seen deals where the buyer was only able to purchase at the last minute because the lender was able to craft a structure of debt that changed how they qualified.
I have also seen lenders who were able to drop the monthly payment by hundreds of dollars in the weeks before close because of the loan structure and loan type.
Often, the right choices can’t be made until just before the close, and that is another reason to select a lender you trust. In real estate, trust is king.
My job is to put people on your team that you can count on to get the deal done right the first time.
What does it mean to go through underwriting?
Because mortgages are bought and sold, they need to be standard “products.” There are many types of mortgages, and each one has its own conditions. A borrower must meet all the conditions of the loan to qualify for it.
Underwriting is the job of making sure (insuring) that a borrower meets the conditions and that the mortgage will be a standard product.
The process is more nerve wracking than it sounds. There are often many ways for a buyer to qualify or not qualify. Sometimes it comes down to the opinion of the underwriter.
One of the big jobs of a lender is to create a loan that is documented in the right way so that it easily gets though the underwriting process.
Once a loan goes clears underwriting, it often has conditions. If the conditions can be met, then the loan is automatically approved. Which is great news.
If the condition can’t exactly be met, then the loan must go back for a “full” review. That is often not good.
Having a lender on your team who is able to get the right loan for your needs and help you to create the documentation to qualify on your first try is critical to your success. There is a lot going on behind the scenes. Having the right team is critical.
I need to trust my team. How do kickbacks work in real estate?
The real estate industry is now heavily regulated. The consequences for any type of kickback are so huge that the practice has been nearly removed from the industry.
A part of my job as your agent is to build a team of professionals who will help get your deal done. My choices to select different people are based on how well they have served my clients.
There are people who have won my trust and I look forward to recommending them for the team to purchase your home.
What happens once I have a deal?
We will make offers, and at some point, a seller will say yes. Once this happens, we begin the transaction part of the purchase.
I remember what it was like to have to go through this without really understanding what was happening or why. That won’t happen to you.
I have a 35-step process that is designed to get my clients through their transaction. I communicate at every step to make sure that you understand what is happening and what your options are.
The transaction is highly detailed. There is a lot to learn here and many steps to follow. I will be with you the whole way.
We will open escrow, inspect, appraise, and usually get a mortgage. There will be many documents to understand and sign.
This whole process is complex and can be confusing. My job is to make sure that we meet your goals, and my hope is that I will do it so well that I win your business for life.
How do the investigations work?
The most important investigation is probably the building inspection. The inspector is a person who has expertise in all the systems of a home. This person will test or inspect many systems including electrical, plumbing, heating, cooling, foundation, and roofing.
In addition, the inspector will investigate many aspects of the home to determine if there are problems or issues which may arise in the coming years.
It is a good idea to do the building inspection as soon as possible, because issues may be found that require further inspections from other professionals.
If needed, we can hire experts in foundation, roofing, HVAC or even arborist.
We will usually want a termite inspection.
I am often asked what happens if we find a problem. If something is wrong with the home, you don’t have to sign the investigation contingency. If there is a serious problem with the home, we can renegotiate the price or ask for a repair.
Of course, the seller has the option of agreeing or not, and at that point you will have the option of leaving the contract without penalty.
How does the appraisal process work?
An appraisal is an opinion of value made by a person licensed to judge the value. For normal residential homes, that value is determined by the sales of similar homes. Many homes (especially historic homes) are not similar to other homes.
Appraisers will add specific dollar amounts for features like a 2-car garage or a 2nd bathroom, and subtract away value for features that are not similar. In the end, an appraiser will assign a specific value to a home for a specific date.
Most offers have an appraisal contingency, which means if the home appraisal comes in too low, you don’t have to stay in the contract to purchase.
Can I be sure my lender will not change the deal at the last minute?
Lenders are required to create a good faith estimate. The estimate can be lower in cost but not higher. Near the end of the lending process there will be a loan disclosure and a waiting period. As your agent I will review your loan with you so that you feel comfortable with the loan process.
You are not in this alone.
How will I know the repairs I requested were done and the home I offered on has not been damaged or changed?
We will receive receipts and verification of all agreed to repairs, but that is not enough. You need to see with your own eyes that the property you offered on is the property you will buy.
In the final five days before the close of escrow we will do a walkthrough of the property (called a Verification of Premises).
During this walkthrough, you will be able to see that agreed-to repairs have been made or that the property was cleaned as agreed. If the seller has moved out and the appliances were included as a part of the sale, you will be able to confirm that they have been left for you.
The closing statement is complex. How do I understand it?
Once your loan closes, it is written in stone. We will not be able to make any changes to the fees or credits.
Before this happens, we will be given an estimate of the closing statement. It is critical that we review this for errors. Errors can happen for many different reasons, and this estimate is our chance to find them and correct them before it is too late.
Like many financial statements, this one often confuses buyers. Buyer questions are par for the course. It is a part of my job to make sure you understand this statement and make sure that it includes all the contractually required credits.
I find that it is also a chance to help my clients feel good about the charges and what they mean. There are almost always questions at this point. My job is to make sure that you get the answers you need to feel great about the process. Hang on, we are almost there.
How does the escrow finish and what does that mean for me?
Closing an escrow is a legal process, and it has both legal and financial implications. Before we close, we need to make sure that the specifics of your deal meet the needs of you and your family.
This will usually require the assistance of an accountant and sometimes even a lawyer. It is important to get the details correct as they may have tax and legal consequences for many years.
A big question to consider is how you “take title.” This is basically “how you will own” the property. This seemingly simple question has legal consequences, and can dramatically affect your taxes. Everyone’s situation is different, and that is why we want an accountant on the team.
If you have not paid the balance of your down payment, you will need to complete that.
Now that you will own a new home, you will also be selecting home insurance.
Once everything is in place, we “move to close”. Escrow will do a detailed accounting of who owes who how much, and will create settlement statements and balance all the accounts.
Both parties will sign all the documents needed for the sale, and the lender will fund the loan. After that, the transfer of ownership will be recorded with the county.
Congratulations! You are the owner of the home! Giving you your key is the highlight of my day.
What do I do after I buy?
My mission is to help you create your success in real estate. That does not stop just because you purchased a home.
I will be there to help you in the weeks, months and years to come.
For a start, you will need to set up your utilities, and I will send you a list of action items I recommend for all new homeowners.
You may want to make repairs or improvements, and I can help you with this. There are some important tax records that you need to save, and others that you will want to start keeping.
Don’t worry. I will be there to help at every step of your home ownership journey.
Wrapping up: In conclusion.
Buying a home can be scary. I remember exactly how that felt. One of my jobs as your realtor is to help you understand everything. If you understand the process and the steps involved, suddenly it all seems so much more do-able. Don’t worry. I am going to be there to make sure that nothing goes wrong!