The homebuying process in California involves a complex series of events. All elements of the process are briefly described below, but estimating how long the process will take from acceptance of the offer to closing is difficult. Under normal circumstances, the process will ordinarily take eight to fourteen weeks.
As you can see in the table of activities outlined below, obtaining a mortgage in California takes a long time, whether you're buying a detached house, townhome or condominium.
Activity
Estimated Time
Average Time
Selecting your new home
1 day - 3 months
60 days
Negotiation with the seller(s)
1 day - 1 week
3 days
Mutual acceptance and beginning escrow
1 day - 1 week
2 days
Getting a mortgage/contingency period (Also disclosure, discovery and inspection period)
The most important step to purchasing property is attaining an experienced, hard-working agent who will make the buying process as painless as possible.You can count on me to do the following:
Help you to prioritize what home attributes are important to you, and are also affordable
Make a comprehensive search of the market (including all appropriate Internet sites and publications) to find homes that meet your criteria. My initial searches can easily take in excess of six 6 hours, during which time I will study videos, pictures and floor plans. This ensures I am taking you to homes that meet your needs, and that your time is never wasted.
Advise you on all aspects of your purchase
Help negotiate the best possible price for you
Recommend excellent escrow, title, physical inspectors, lenders, etc.
Prepare you for closing
Recommend qualified, quality contractors before, during and after the process, if necessary
I will be focused on best representing your interests, making sure that you get the home that best meets your needs at the best possible price, and seeing to it that you get it as quickly as possible.
Work with you as either a dedicated buyer´s agent or as a dual agent, depending upon your needs and your comfort level.
Be honest. While not all people who sell homes in California are licensed realtors, I am a member of the National Association of Realtors, the California Association of Realtors, and the San Diego Association of Realtors. These organizations only accept as members people who work within a very strict code of ethics, which I take very seriously.
STEP 3: Getting Pre-qualified is Easy. It's also Very Important
Once we determine what type of home you want to see, I'll make appointments with sellers of sellers´ agents for us to see homes together. Many of those sellers´ agents will ask me if you´ve been "pre-qualified." They want to know in advance that if you like their seller's home, you´ll be able to afford it, and that the process will go smoothly.
Becoming pre-qualified means having a bank or mortgage broker examine your assets and liabilities. This can be done in a matter of a few minutes over the telephone, and is a free service. If you need a mortgage broker, click here.
By talking to banks or mortgage brokers early on in your buying process you'll have a good idea of whom to call on when you're ready to use their services.You'll also be able to determine what type of loan is best for you.
When you find the home you like, you will need to move quickly to secure it, and we will need to be able to reach each other easily. Before submitting your first offer (there may be counter-offers required), I will try to obtain prices of similar, recently sold homes in the neighborhood. This will give us a good understanding of market value.We will also take into account other offers for the same property and length of time the property has been on the market when making an offer.
STEP 5: The Five Elements to Your Offer
Your offer should include the following:
The price you will pay
The percentage of the price you will finance, if any. Homes are typically purchased for 20% down, though mortgages can be arranged for significantly less.
Whether you plan on waiving your loan contingency.
Any inclusions or exclusions of property in the home, such as fixtures, refrigerators, washer/dryer and/or furniture.
A convenient closing date.
PLEASE NOTE: Homes with less than 20% equity are typically assessed a Private Mortgage Insurance (PMI) charge of .5% of the total mortgage loan. This insurance premium, which is not tax-deductible, can be sidestepped by a second mortgage or equity line equal to 10% of the mortgage, with interest that is tax-deductible. This translates to a 10% equity stake in the property on your part.
Loan Contingencies
"Loan contingency" simply means that the purchase of a home is contingent upon getting a loan.In a seller's market, buyers may be asked to remove their loan contingency, meaning that the seller would be entitled to keep the buyer's earnest money if the buyer was unable to obtain necessary financing. Had the buyer been turned down from even a single mortgage company and not waived his/her loan contingency, he/she would have been able to be released from the contract without losing the deposit or suffering any further penalties.The seller would then have to start the process all over again.
Unfortunately in California it usually takes a few weeks to get a commitment letter or notification of a mortgage from a mortgage institution.It also takes time negotiating with buyers.And from the time the contract was signed, to the day you learned your buyer was unable to obtain a mortgage, the home was off the market.
While there clearly is an advantage for the buyer to not remove their loan contingency (thereby not putting their deposit at risk), by doing so, the buyer's offer will be more compelling to the seller and give this buyer an advantage over any buyer not willing to waive their loan contingency.
If the buyer is absolutely confident that either a satisfactory loan can be obtained or funds for the home will be available, the buyer may choose to submit to removing the loan contingency.This makes the offer much stronger, and now this buyer will have an advantage over buyers that require a loan contingency. Sometimes this is the difference between getting the home and not getting the home.
In other words, by removing the loan contingency, the buyer bets the earnest money that a satisfactory mortgage can be obtained.For the seller, a non-loan contingency reduces the risk associated with the buyer applying for a mortgage.If the seller receives two offers at approximately the same price, and one of the offers has a loan contingency, he will probably choose to go with the non-loan contingency offer.
Depending on the market, the seller's financial situation and timeframe, your financial situation and timeframe, and how much you want the home, your first offer can be below, at, or above the asking price.Once I submit the first offer to the seller or seller´s agent, I will receive one of the following:
Notification that the offer has been accepted.
A counter-offer.
Notification that the offer has been declined.
An Accepted Offer
Immediately after I receive notice that your offer has been accepted, I will notify you and the following events will immediately occur:
We will begin the escrow process with the agreed upon escrow company
We apply for a loan and submit a loan package with your lender
The discovery/contingency period begins with acceptance of the contract.
Schedule and conduct all inspections (i.e. physical, roof) and review all disclosures related to property.
A Counter-Offer
If the seller provides a counter offer, your choices will be:
Refuse to offer more. If this is your decision, you should assume that a meeting of the minds will not take place, and we will immediately start looking for another home.
Offer an amount less than the new figure proposed and more than your first offer.
Agree to the amount requested by the seller.
The Offer is Declined
If the offer is declined, we will immediately start looking for another home or re-submit a different offer for this house.
STEP 7: The Deposit
To accompany the contract, you will give a personal check, payable to the order of the escrow account, covering a portion of your down payment on the purchase price. This is what is commonly referred to as your earnest money.
Depending upon the price of the house, your earnest money can be anywhere between $3,000 and $20,000, and is a figure agreed upon in the contract by the buyer and seller.
You can apply on line for a loan directly through a lender (e.g., a bank), or use the services of a mortgage broker. Either way, this can be the most complex and lengthy part of the process. You should be prepared to provide detailed information, as required, for your application, and be prepared to offer clarification about any items that may appear on your credit report.After your mortgage application is submitted, the lender performs a credit search and orders an appraisal of the home's value. Then your loan documents are submitted to the lender's underwriting department for review.
Residential mortgage brokers are regulated by the California State Banking Department. Mortgage agents negotiate, originate and process residential real estate loans on behalf of the borrower (you). A mortgage broker does not actually lend money to prospective purchasers. Instead, he/she will arrange for a loan through an institutional lender on your behalf. While using a mortgage broker may seem like an added expense, they can almost always provide you with a mortgage at a rate lower than you can get on your own. Mortgage brokers are extremely helpful to have involved in the process - particularly when a ball has been dropped (this happens more often than not).
A lender's decision to make a loan is usually based upon the following factors:
Your credit rating
Income
Assets
Liabilities
Amount of the loan
Appraised value of the home
To verify this information, the lender will require you to complete a loan application setting forth your assets and liabilities, and confirming your employment and income. Then the lender will initiate a credit report and arrange to have the home appraised.
When obtaining a loan on a condominium, the lender will need to make sure the building is in good financial condition. Therefore, when applying for a loan, the escrow company will obtain for you the building's and Home Owner Association´s (HOA) financial statements for the last two years. This process usually takes 2 to 6 weeks.
During this period, I recommend you remain in touch with your lender and your agent as to the status of your Loan Commitment. A "Commitment" is the lender´s written agreement to lend you money to buy the home. Once the Loan Commitment has been issued, you and your loan officer should review it. If everything is in order, sign the Commitment and return it to the lender or mortgage agent as directed.
After you receive your Loan Commitment letter, the lender requires that conditions be met. Title is also ordered for the house.
STEP 9: After Discovery Period
Immediately after mutual acceptance, seller will provide all disclosure on property, along with title report and natural hazard disclosure. Discovery period/contingency period and removal take place over an (approximately) 17-day period.
Copy of Purchase Sales Contract or Offer to Purchase and All Addenda - signed by the buyer and seller.
Property Information Listing Sheet or Multiple Listing Service Sheet
W-2 Forms - Previous two (2) years W-2 forms.
Pay Check Stubs - Two most recent check stubs.
This checklist outlines the principal documents and information you will need to furnish at the time of application. Although additional information may be required, depending on the circumstance of your loan, you can save time by furnishing the information in this checklist at the time of your initial application.
Tax Returns - Previous two (2) years' personal federal income tax returns and all schedules if you are:
Self-employed.
Employed in a family business.
A tradesman.
Receiving all or part of your income from bonus, commission, partnership or trust income.
Or if you:
Own rental property.
Have income from an otherwise nonverifiable source such as corporate ownership, installment sales and tips.
Information Generally Required to Complete Loan Application
Employment History - Name and address of employer(s) for the last two (2) years, dates of employment and income, Explanation of recent gaps in employment.
Social Security Number(s) - For both borrower and co-borrower(s).
Checking and Savings Accounts - Depository institutions' names and addresses, account numbers and balances. Depositories include banks, credit unions, and savings and loans. Passbooks and bank statements from the previous three months may be required.
Stocks, Bonds, Investment Accounts - Name and address of broker and previous three months´ statements or copies of the stock certificates. A list of serial numbers and issue dates may be acceptable for verifying bonds.
Life Insurance Policies - Name of insurance company, policy number, face amount and approximate cash value of each policy.
Retirement Plan - Approximate value of vested interest and copy of most recent statement.
Automobiles Owned - make and year of each automobile owned and current market value. (Evidence of clear title may be required if owned free and clear.)
Other Assets - Estimate of the market value of other assets; i.e., furniture or personal property.
Credit Information - For each open account, including credit cards with a zero balance, provide:
Creditor Name
Address
Account Number
Payment Amount
Current Balance
Date Paid in Full and Copy of Statement with -0- Balance (if Applicable)
You may also be requested to provide information regarding any application you have made for credit within the last ninety (90) days prior to making application for your mortgage loan.
Additional Information That May Be Required
Self-Employment Borrower - Previous two years´ and current year-to-date Profit and Loss and Balance Sheet.
Divorced or Separated - Copy of divorce decree or maintenance agreement, along with any amendments and a 24-month payment history of alimony/child support payments, if such payments are provided or received.
Overtime Income - W-2s from the previous two (2) years if overtime income will be used to qualify.
Other Income - Documentation of the income received for the past 12 months if such income is used to qualify (i.e., interest or dividend income).
Renters - Landlord´s name and address and previous 12-month rental payment history. Rent receipts or cancelled checks are applicable.
Real Estate Owned - Name and address of your mortgage lender, account number and most recent year-end statement. In addition, if the real estate owned is:
Currently Rented - a copy of the current lease or rental agreement for each unit.
Listed for Sale - a copy of the listing agreement.
Sold But Not Closed - a copy of the sales contract and escrow number
Sold, Closed and the Proceeds From the Sale Will Be Used for the Down Payment - a copy of the HUD-1Uniform Settlement Statement.
Gift Letters - If your source of down payment is a gift, a signed letter is needed from the donor to verify that you are not required to repay the funds.
Construction/Permanent Loan - Signed construction contract with cost breakdown and builder plans.
At the closing, you will first sign all documents necessary to put a first mortgage or combination first/second mortgage on the home. These documents include a Mortgage and a Trust Deed. Then you will sign and receive all documents to convey the home to you. Cashier´s checks or bank wires representing the balance of the purchase price and adjustments are exchanged for the keys and you pay all appropriate taxes and title charges. You now own your own home. Congratulations!
Typical Closing Costs
Appraisal Fee
$50
Bank Application Credit Check
$500
Bank Recording Fee
$150
Closing Fee
$400
County Property Taxes
Varies
Credit Report
$20
Deed Recording
$10
Document Fee
$150
Fee Title Insurance
approx. $200
Flood Certification Fee
$20
Funding Fee
$40
Hazard Insurance
$75
Lien Search
$250
Loan Origination Fee (Points)
0 to 3% of loan
Mortgage Recording
$50
Mortgage Tax
1.8% of amount of mortgage on loans under $500K less $30 or 1.925% of entire amount on loans over $500,000 less $30
