How to apply for a mortgage: Your 4-step guide.

Applying for a home loan is the first step to take when getting serious about buying a home. It will help you understand how much house you truly can afford. Get ready for the application process by gathering your financial info, finding a lender to work with, and getting pre-approved. You can always shop around and pick another lender once you get an accepted offer.

Mortgage loan pre-approval means approaching a lender with financial, credit, debt, and other information that will help them determine if you qualify for a loan at a certain amount.

There are four essential steps involved with mortgage pre-approval:

  1. Gather financial information
  2. Select a lender
  3. Get a mortgage pre-approval
  4. Close on your home

This article will give you an idea of how to get pre-approved for a mortgage and why pre-approval is important for buying a home.

 

How to get pre-approved for a home loan

Step 1: Gather financial information

Before heading to your lender’s office, gather and prepare the following financial information:

Credit Information: Your credit score and reports will determine the size of loan you may qualify for and the type of financing plan you will be offered. For example, a borrower with a credit score below 740 will usually have a higher interest rate associated with their loan. A borrower with a score below 580 will usually have to put down a higher down payment.

Pro Tip: Check your credit score for free with credit.com.

Debt Information: Gather and prepare any of your debt obligations. This includes student loans automobile loans, and credit card payments.

Pro Tip: If you have a significant amount of debt, the amount that you’re pre-approved will likely be smaller or rejected. Before applying for your pre-approved mortgage, try paying off your debts and minimize the number of new debts you take on.

Income Information: Gather and prepare income information from the previous two years. This includes tax returns, W-9s, pay stubs, and additional income information (from second jobs, overtime pay, social security payments, alimony or child support payments, etc.).

Asset Information: Asset information refers to assets you own other than your income. This involves gathering bank statements, property statements, investment information, and money received by family members.

Personal Information: Bring a personal ID such as a driver’s license or passport and your social security number to your lender’s office.

Employment Information: This includes your proof of employment and the length of time you’ve been with your employer.

Budget Information: Before going to see a lender, determine your budget for buying a new home.

Pro Tip: Your total housing payment budget should not exceed 35% of your pre-tax income. The ideal percentage is 25% of your pre-tax income.

Step 2: Select a lender to work with

There are two types of lenders you can work with (1) big lenders (aka the bank) or (2) small lenders (aka small, community banks or small mortgage lenders).

There are pros and cons associated with each type of lender:

Pros of big lenders:

  • Security: You can trust that big banks will protect your sensitive information as it’s a crucial part of their reputation.
  • Customer support: Banks usually offer 24/7 customer support.
  • Availability: Making an appointment for a loan will be easier with big banks as they have a larger number of loan officers available.

Cons of big lenders:

  • Rates: The rates of the big banks are usually higher than the rates at small loan offices.
  • Approval: Banks have a specific ‘credit model’ that they like to use as a guideline for approving people looking for loans. You may have a hard time being approved for a loan by a big bank if you don’t fit this ‘credit model.’

Pros of small lenders:

  • Rates: Small lenders tend to have better rates than the big banks. Furthermore, smaller lenders generally let their customers exit early. In other words, small lenders allow their customers to pay off their mortgage early and either sell their house or find a better mortgage.
  • Approval: Small lenders will generally approve loans to freelance workers, property investors, or someone who doesn’t fit the bank’s credit model.
  • Customer Service: Small lenders provide more personalized customer service and usually have faster response times.
  • Specialized Financing: Smaller lenders offer more specialized financing options than big banks. For example, if you’re looking for a small mortgage, most big banks won’t accept your application because it’s not worth their time. The smaller lender, however, will be happy to work with you.

Cons of small lenders:

  • Vulnerability: Due to their size, small lenders are more sensitive to market fluctuations.
  • Availability: Smaller lenders may not have as many available lenders as the big banks.

Should I get pre-approved by multiple financial institutions to compare rates?

  • Yes, because you can still shop rates before locking into a rate and accepting an offer. Research different lender’s reputation, search for their past clients, read their online reviews, and give them a call to get a ‘feel’ of whether or not you want to work with them.

Step 3: Get pre-approved

Most first-time home buyers are confused about the pre-approval process. So, to clear things up, we answer “how to get pre-approved for a mortgage” and the 6 other common questions first-time home buyers ask about mortgage pre-approval:

1. How do I get pre-approved for a mortgage?

  • Gather Documents: Gather the necessary documents (as listed in step 1).
  • Organize Documents: Create a Google Drive or Dropbox where you can organize all information in one, easily-accessible place.
  • Contact a Lender: Call, go online or visit a loan office/bank. The loan officer will review your documents and give you a preliminary estimate of how much house you can afford, your monthly mortgage payments, and mortgage interest rate.
  • Find out if you’ve been pre-approved: You will receive a pre-approval letter that secures your interest rates for the next 90-120 days (more on this below). On the other hand, your lender will notify you that you have not been pre-approved.

2. Why get pre-approved for a mortgage?

Benefits of Pre-Approvals:

  • Accurate: The best pre-approvals will give you an accurate idea of how much house you can afford. Furthermore, you’ll get an idea of your monthly mortgage payments and your short-term mortgage interest rates.
  • Protection: When you apply for a mortgage pre-approval, there is usually a 90-120 day protection against rising rates. In other words, pre-approvals lock-in interest rates and allow you to search for a home without worrying about interest rates increasing significantly.
  • Trustworthy: A pre-approved mortgage signals to sellers and real estate agents that you’re serious about buying a home.
  • Advantage: A pre-approved mortgage may be the deciding factor between you getting a home over another home buyer.
  • Free: Getting pre-approved for a mortgage is free, and there is no obligation to use the lender that pre-approved your mortgage.

3. What is the difference between pre-qualification and pre-approval?

  • Pre-qualification: During the pre-qualification stage of securing a mortgage, a lender will interview you to determine your income, expenses, and assets. The purpose of getting pre-qualified is to give you a rough estimate of how much house you can afford.
  • Pre-approval: During the pre-approval stage of securing a mortgage a lender will look through your income, expenses, and asset more thoroughly. A pre-approval is a more concrete estimate of how much house you can afford.

4. What if I don’t get pre-approved for a loan? Now what?

If you don’t get pre-approved for a loan, your lender can tell you why you were rejected. Lenders can also offer advice of how to get approved in the future.

For example, you may have to:

  • Build Credit: If bad credit was the reason you aren’t pre-approved, then pay off your credit cards and try not to miss your debt payments for the next 6-12 months.
  • Build Savings: Lenders usually want to see a significant amount of cash reserve in your savings account. Again, pay off your debts and try to save some money before applying for a pre-approval again.
  • Build Income: If your lender says that you don’t make enough income for a certain loan amount, either try applying for a smaller loan or, if you’re married, ask for a joint-loan with your spouse.
  • Build Employment History: Usually, lenders don’t like to see inconsistencies in employment history. Wait until you’ve been at the same job for two years before applying for a loan.

5. Does pre-approval guarantee a loan?
Pre-approval does not guarantee a loan. It is only a review of your qualifications for how much you might be able to borrow.

A buyer receives their pre-approval letters, searches for their dream home within their pre-approved amount, has their offer and financial structure accepted by the sellers, and then submits their proposal to the lender.

The lender then reviews the proposal, the buyer’s finance details, and the details of the property. If everything goes smoothly (i.e., the home doesn’t look like a money pit), the buyer will be approved for a mortgage.

However, the pre-approval letter alone does not guarantee a mortgage.

6. How long does it take to get pre-approved for a mortgage?

Depending on who you’re working with, you can get pre-approved for a mortgage in minutes. Sometimes all it takes is a phone call.

7. What impact (if any) will this have on my credit?

The short answer here is that it depends.

As mentioned above, lenders will look at your credit score and history to determine if you’ll be pre-approved. These are called credit report inquiries.

First-time home buyers usually don’t have to worry about inquires damaging their credit score. However, the more inquires your credit history shows, the more it can damage your credit score.

Inquires hurt your score because it shows lenders that you could be doing something with your credit that puts you at risk.

Step 4: Close on your home

Once you’re pre-approved for a mortgage, you can start the process of searching for a home, within your pre-approved amount.

The process of closing your home looks like this:
1. Application: The mortgage application involves submitting the documents outlined in step 1.

Time it takes: 1 day

2. Loan estimate: The lender analyzes your financial information and produces a loan estimate. A loan estimate describes the details of your loan including the terms and the predicted costs associated with your loan.

The loan estimate does not tell you if you have been approved for a loan. It simply estimates what your loan would look like if you’re approved and will help you determine if you would like to move forward with the mortgage application process.

Time it takes: The law states that you must receive your loan estimate 3 days after submitting your mortgage application.

3. Open a file: Your file is submitted to a loan processor who analyzes your financial documentation and property information. The loan processor places all this information into a loan package that is to be submitted to the underwriter.

Time it takes: 1 day

4. Loan underwriting: An underwriter analyzes your loan to determine the risk of approving your mortgage. Essentially, the underwriter is the key-decision maker and determines if you’re a good candidate for a loan based on the likelihood of you paying your mortgage each month.

The duties of an underwriter:

A. Assess: The underwriter assesses your risk by verifying that your credit, debt, income, and savings information is true. For example, they may call your employer to confirm that you do in fact work x amount of hours and are paid x amount of dollars.

B. Appraise: This is where the underwriter determines if your desired property’s price is comparable to the prices of similar properties. The purpose of the appraisal is to determine if the money you would like to borrow matches the value of the home you would like to purchase. If the appraisal is less than the loan amount, the underwriter will usually disapprove the mortgage or suggest another loan amount.

C. Approve or reject: The underwriter considers all this information and then approves or rejects your loan application.

Time it takes: 1-7 days

Pro Tip: The underwriting process generally takes longer and requires more documentation if you’re self-employed.

5. Mortgage Commitment: If the underwriter approves your loan, you are officially locked-into an interest rate.

Time it takes: 2-4 days

6. Closing: This is the step in the home-buying process where you sign all the necessary documents to own the home officially.

 

I read this article at: Open Listings

Got Real Estate Questions?   The Caton Team is here to help.

We strive to be more than just Realtors – we are also your home resource. If you have any real estate questions, concerns, need a referral or some guidance – we are here for you. Contact us at your convenience – we are but a call, text or click away!

The Caton Team believes, in order to be successful in the San Fransisco | Peninsula | Bay Area | Silicon Valley Real Estate Market we have to think and act differently. We do this by positioning our clients in the strongest light, representing them with the utmost integrity, while strategically maneuvering through negotiations and contracts. Together we make dreams come true.

A mother and daughter-in-law team with over 35 years of combined, local Real Estate experience and knowledge – would’t you like The Caton Team to represent you? Let us know how we can be of service. Contact us any time.

Email Sabrina & Susan at: Info@TheCatonTeam.com

Call us at: 650-568-5522 Office: 650-365-9200

The Caton Team – Susan & Sabrina
A Family of Realtors
Effective. Efficient. Responsive.
What can we do for you?

The Caton Team Testimonials

The Caton Team Blog – The Real Estate Beat

The Caton Team Website

The Caton Team Advantage

How to Buy While Selling Real Estate

Want Real Estate Info on the Go?  Download our FREE Real Estate App:  Mobile Real Estate by The Caton Team

Visit us at:  Our Blog * TheCatonTeam.com * Facebook * Instagram * HomeSnap* Pintrest * LinkedIN Sabrina * LinkedIN Susan

Thanks for reading – Sabrina

Berkshire Hathaway HomeServices – Drysdale Properties

Sabrina DRE# 01413526 / Susan DRE #01238225 / Team DRE# 70000218/ Office DRE #01499008

The Caton Team does not receive compensation for any posts.  Information is deemed reliable but not guaranteed. Third party information not verified.

A Reflection of “What Lies Ahead for Our Real Estate Market”

The Caton Team wanted to take a moment and comment on the article we shared : What Lies Ahead for Our Real Estate Market

As full-time, professional Realtors – The Caton Team felt the market turn late in the 3rd Quarter of 2018.

Now – let’s just be honest here – anyone trying to buy in San Mateo County was reaching their wits ends.  Every seller and Realtor knew that the top was coming because it always does.  Real Estate is cyclical.  Year in and year out it goes up and down all year-long.  It often follows the weather and holidays.  However, Real Estate wealth is acquired through holding real estate long-term – and to be frank – not necessarily selling each home but leveraging each home.  Curious how that works – come in for a sit down.

What we wanted to address here was this – though the Market is cooling here in the Bay Area – and we may have hit our peek for this cycle in Spring 2018 – it doesn’t mean we’re crashing. It’s the one thing we can graph year over year, decade over decade.  Real Estate may fluctuate in price from week to week but over time it holds its value and appreciates.

So – what I hear when the “market is down” – IT’S TIME TO BUY!  My friends, a down markt is opportunity.  No offer dates, no mutiple offers – and if you and your Relator do your homework right – maybe under list price!

I just wanted to add this reflection becuase we need to see this in perspective.  A market adjustment is a chance to get in.

Curuious if buying or selling now is right for you – contact The Caton Team for a private and personal consultation.

Need some proof – The Caton Team hopped on the #10yearchallenge for Real Estate and in just the past 10 years you can see our local growth!  That’s why the old addage applies – Don’t Wait to Buy Real Estate – Buy Real Estate and WAIT!

Let The Caton Team help you – contact us any time – Call | Text 650.799.4333 | Email | Info@TheCatonTeam.com

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Got Real Estate Questions?   The Caton Team is here to help.

We strive to be more than just Realtors – we are also your home resource. If you have any real estate questions, concerns, need a referral or some guidance – we are here for you. Contact us at your convenience – we are but a call, text or click away!

The Caton Team believes, in order to be successful in the San Fransisco | Peninsula | Bay Area | Silicon Valley Real Estate Market we have to think and act differently. We do this by positioning our clients in the strongest light, representing them with the utmost integrity, while strategically maneuvering through negotiations and contracts. Together we make dreams come true.

A mother and daughter-in-law team with over 35 years of combined, local Real Estate experience and knowledge – would’t you like The Caton Team to represent you? Let us know how we can be of service. Contact us any time.

Call | Text | Sabrina 650.799.4333 | Susan 650.796.0654

Email |   Info@TheCatonTeam.com

 

The Caton Team – Susan & Sabrina
A Family of Realtors
Effective. Efficient. Responsive.
What can we do for you?

The Caton Team Testimonials | The Caton Team Blog – The Real Estate Beat | TheCatonTeam.com | Facebook | Instagram | HomeSnap | Pintrest | LinkedIN Sabrina | LinkedIN Susan

Want Real Estate Info on the Go?  Download our FREE Real Estate App:  Mobile Real Estate by The Caton Team

Berkshire Hathaway HomeServices – Drysdale Properties

DRE # |Sabrina 01413526 | Susan 01238225 | Team 70000218 |Office 01499008

The Caton Team does not receive compensation for any posts.  Information is deemed reliable but not guaranteed. Third party information not verified.

Family Room | Craftsmans Kitchen | For Sale in Newark

Whats the most important factor is Real Estate? Location Location Location. Del Monte is in a fantastic, well established & maintained neighborhood. This home has AC, forced air heat, LED lighting, dual pane windows & sliders, hardwood, vinyl, tile, carpet & laminate flooring. Spacious living/dining combo with fireplace & vaulted ceiling. Custom Craftsman Kitchen with electric glass cooktop/dual oven range, dishwasher, microwave & custom refrigerator – all overlooking the spacious back yard. Family Room with informal dinning. Play Fort, Greenhouse & Drought Tolerant plants makes landscaping a breeze. ALL APPLIANCES INCLUDE. 2 Car Garage w Laundry, Freezer, drink fridge. All this and 4 Bed with 2 Baths including Master Suite and private office. Close to schools, parks, shopping, 880, the Bridge, Facebook & Tesla. FULL Disclosure package available – CLEAN REPORTS! Excellent condition. Worth a look – 8213 Del Monte Ave in Newark is a well maintained home, with classic features in excellent condtion.  We have a full disclosure package with home, pest and roof inspections available upon request.  Contact The Caton Team with any questions.  

See more photos at: Facebook Photo Album of Del Monte Ave 

Call | Text 650.799.4333 | Email Info@TheCatonTeam.com

Upon entry you are greeted with tall vaulted ceilings and a burst of cheerful color in the large living anddining area; appointed with dual pane windows, fireplace, hardwood floors and tile.  The double doors on your left lead you to the 4th bedroom configured as a home office.  Pass through to the family room and find an informal eating area off the Craftmans style kichen with custom oak cabinetry and beautiful green tile.  The dual oven, glass top electric range, built in regrgerator, dishwasher and microwave are all at your finger tips while overlooking your back yard.  Large sliding glass doors connect the home with the garden in the family room with space for entertainment area.  Three bedrooms and hall bath featuring a shower over tub.  The master suite is tucked at the back of the home with a on private entry into the garden.  Ample closet space in each room, not to mention the oversized two car garage with washer, dryer, freezer and mini fridge included.  The garden is landscaped with drought tolerant plants such as succulents and shrubs.  Two long time lemon trees ready for your kitchen adventures.  The greenhouse, custom fort and tool sheds come with the home.  Del Monte Avenue is in lovely Newark and ready to make your own. Contact The Caton Team for a private viewing and more information.  Call | Text 650.799.4333 | Email Info@TheCatonTeam.com

Visit our website for further details:

Info on Del Monte Ave, Newark | The Caton Team Links

MLS ML81730678

Available by Appointment

Contact the Caton Team with any questions! Call | Text | Sabrina 650.799.4333 | Susan 650.796.0654 | Email |   Info@TheCatonTeam.com

Visit our website for further details:

Info on Del Monte Ave, Newark

Realtor.com on 8213 Del Monte Ave

Facebook Photo Album of Del Monte Ave

Instagram Photos for Del Monte Ave

Redfin info on 8213 Del Monte Ave

Zillow Info on 8213 Del Monte Ave

Trulia info for 8213 Del Monte Ave

 

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Got Questions – The Caton Team is here to help. The Caton Team Links

We strive to be more than just Realtors – we are also your home resource. If you have any real estate questions, concerns, need a referral or some guidance – we are here for you. Contact us at your convenience – we are but a call, text or click away!

The Caton Team believes, in order to be successful in the San Fransisco | Peninsula | Bay Area | Silicon Valley Real Estate Market we have to think and act differently. We do this by positioning our clients in the strongest light, representing them with the utmost integrity, while strategically maneuvering through negotiations and contracts. Together we make dreams come true.

A mother and daughter-in-law team with over 35 years of combined, local Real Estate experience and knowledge – would’t you like The Caton Team to represent you? Let us know how we can be of service. Contact us any time.

Call | Text 650.799.4333 | Email Info@TheCatonTeam.com

The Caton Team – Susan & Sabrina
A Family of Realtors
Effective. Efficient. Responsive.
What can we do for you?

The Caton Team Testimonials | The Caton Team Blog – The Real Estate Beat | The Caton Team Website | The Caton Team Advantage | How to Buy While Selling Real Estate

Want Real Estate Info on the Go?  Download our FREE Real Estate App:  Mobile Real Estate by The Caton Team

Visit us at:  Our Blog | TheCatonTeam.com | Facebook | InstagramHomeSnap | Pintrest | LinkedIN Sabrina | LinkedIN Susan

Berkshire Hathaway HomeServices – Drysdale Properties Sabrina DRE# 01413526 / Susan DRE #01238225 / Team DRE# 70000218/ Office DRE #01499008

The Caton Team does not receive compensation for any posts.  Information is deemed reliable but not guaranteed. Third party information not verified.

House hunting for first-time homebuyers: is there a right way?

A lot of buyers, especially first-timers, worry about whether or not they’re going about their home search the right way.

On the one hand, buyers fret that if they find their “dream home” too early, they might be missing out on something better. But, on the other, if the process takes a while, they worry that they’ll never find a home that works for them. The FOMO is real.

Keep reading to find out if you’re on track with your home search and what you should do if you find that you need to go back to the drawing board.

How many homes should you see?

Honestly, that depends. While we understand the impulse to try and rely on hard-and-fast statistics, homebuying is a truly personal experience rather than a science.

Trust your intuition. You know your needs, likes, and dislikes better than anyone else. You’ll know when you’ve landed on the property that makes the most sense for you to call home.

That said, though, there are a few things you can do to help speed your search along:

If you’ve been looking for a while and haven’t really found anything that meets your needs, it might be time to redefine search criteria. Sit down and take some time to think about which features you really need to have in your new home versus which are more nice-to-have, wishlist items.

Narrowing your search

Sometimes, narrowing search criteria can get tricky. If you’re unsure of where to start, try using the following as a starting point.

Neighborhoods

Focusing in on a particular area is one of the easiest ways to refine your search. You can start by doing research into different neighborhoods by you. Think about what you commute to work will look like, if the area has amenities that you enjoy, the quality of the school district, and home values.

With that in mind, though, you getting too hung up on a particular zip code can also limit your criteria. The key is keep an ideal location in mind while still staying open to possibility.

Bedrooms & bathrooms

When searching for a house, you should have a firm idea of how many bedrooms and bathrooms you’re after. Whether you’re just looking to accommodate yourself and the occasional guest, are thinking about starting a family in the near future, or want the option to convert a spare bedroom into an office, this information will surely help narrow your search.

We advise against compromising on this feature because, while it is possible to put an addition on later, doing so takes a substantial amount of time and effort. More often than not, homeowners find that they would rather put their home on the market than go through the hassle of trying to renovate it to fit their changing needs.

Sale price

This is the big one. Once you have the above two details settled, it’s time to narrow your search results further to only those homes that you can truly afford. If you’ve already applied for a pre-approval, that number can be a good place to start. However, remember that a pre-approval shows the maximum amount that you can ask for in a loan. You may not want to borrow up to that amount once you factor in the rest of your monthly expenses.

To find a more comfortable sale price, we recommend using a mortgage calculator to get a sense of what your monthly payment could look like at various loan amounts and interest rates. Then, once you’ve landed on a number that works for you, try plugging that into your monthly budget to get a sense of how the payment will feel in addition to your other costs.

Now what?

The good news is that once you’ve narrowed your search down, your pool of available properties will likely be much smaller than it was before – and much more targeted to meet your needs. From here, your search will be about zeroing in on your perfect match on the basis of which property was the best fit for your personal tates.

You’ll know when a property feels like it could become home versus when you’d be trying to make the best of an imperfect situation. Keep hunting until you find the former.

 

This article originally appeared on OpenListings.

 

Got Questions – The Caton Team is here to help.

We strive to be more than just Realtors – we are also your home resource. If you have any real estate questions, concerns, need a referral or some guidance – we are here for you. Contact us at your convenience – we are but a call, text or click away!

The Caton Team believes, in order to be successful in the San Fransisco | Peninsula | Bay Area | Silicon Valley Real Estate Market we have to think and act differently. We do this by positioning our clients in the strongest light, representing them with the upmost integrity, while strategically maneuvering through negotiations and contracts. Together we make dreams come true.

A mother and daughter-in-law team with over 35 years of combined, local Real Estate experience and knowledge – would’t you like The Caton Team to represent you? Let us know how we can be of service. Contact us any time.

Email Sabrina & Susan at: Info@TheCatonTeam.com

Call us at: 650-568-5522 Office: 650-365-9200

The Caton Team – Susan & Sabrina
A Family of Realtors
Effective. Efficient. Responsive.
What can we do for you?

The Caton Team Testimonials

The Caton Team Blog – The Real Estate Beat

The Caton Team Website

The Caton Team Advantage

How to Buy While Selling Real Estate

Want Real Estate Info on the Go?  Download our FREE Real Estate App:  Mobile Real Estate by The Caton Team

Visit us at:  Our Blog * TheCatonTeam.com * Facebook * Instagram * HomeSnap* Pintrest * LinkedIN Sabrina * LinkedIN Susan

Thanks for reading – Sabrina

Berkshire Hathaway HomeServices – Drysdale Properties

Sabrina DRE# 01413526 / Susan DRE #01238225 / Team DRE# 70000218/ Office DRE #01499008

The Caton Team does not receive compensation for any posts.  Information is deemed reliable but not guaranteed. Third party information not verified.

How to Sell and Buy Real Estate in Today’s Market

Are you a Move Up Buyer in Silicon Valley?   Then you know how hard it is to take that goal and realize it.  It is much harder to sell and buy today than ever before!

If you’re a Buyer in the Silicon Valley – then you are well aware of how competitive it is to get a house in this market.  A Buyer may have started off with big dreams, the want list, the wish list and then quickly condensed the list to one thing – I want a house – any house in the Bay Area.

It’s that nuts.

Why?

The Bay Area has limited space to build.  Land is the gold of Real Estate, without land you cannot build more homes.  So if you want to own a home around here – get ready for the bidding wars.

But if you’re a Buyer with a home to Sell first – then you’re really up for a challenge.  

Seller EXPECTATIONS

If you’re a Seller these days – you have some expectations.  With multiple Buyers for each home – a Buyer pretty much has to do the following to be a candidate:

  • OFFER OVER LIST PRICE – sometimes even more than the Comparative Market Analysis (CMA) warrants.  This can be frightening and can setup a Buyer for some surprises*.  The Caton Team always prepares a CMA and gauges market activity to help a Buyer determine their right price.
  • WAIVE ALL CONTINGENCIES – These days a Buyer cannot ask for repairs, or request time to sell their current home .  If a Buyer wants to be a contender – they must come in Non-Contingent and ready to close.  Let me re-phrase that.  A Buyer must write THIER best offer and if that includes a contingency – the Buyer must do what is best for them.  Just know – if there is a contingency – generally that offer goes to the bottom of the stack because in this market, the Seller has plenty of offers to choose from and does NOT have to accept a Contingent Offer – no matter how cute the letter is.  (Note, in cooler markets Buyers have more leverage and will have the opportunity for Sellers to accept contingencies.  It’s just not that market today.)
  • PROOF OF FUNDS – A Buyer MUST HAVE ALL their down payment, closing costs and reserve monies ready from DAY 1!  Not only for their bank loan approval – Buyers need proof of funds just to write a contending offer!  To be frank, sometimes a great offer is beat out by an offer with “better” proof of funds – IE – money in the bank.
    • Each Seller and their Realtor will REQUIRE Proof of Funds to be submitted WITH the Offer.  Meaning your Realtor needs recent copies of all your bank statements to be provided in your Offer Package to show money for the downpayment, closing costs and reserves.  You would too if you were in the Seller seat.  Our job as Realtors is to protect OUR Clients best interests.  Meaning, while reviewing offers, not only does The Caton Team call each lender to verify loan strength – we also want to see Proof of Funds totaling at minimum the monies for said deal AND reserve funds which are healthy and liquid to ensure –  if things go awry – there are funds to close on time.  In other words, the strongest reserves has an impact on what is considered the “Best” offer.  It is not always price that equates as “Best”.  (Curious why?  – Ask us anytime – it is another blog post.)
      • An example of a Buyer surprise* is when the appraised value is lower than the offer price.  The Buyer may need to pay the difference between the appraised value and offer price because there are NO Contingencies – a Buyer must perform or quit.  Quitting on a Non-Contingent Offer means the Buyer could forge all or a portion of their good faith deposit – which is 3% of the total purchase price.  Note – each case is different and this is just an example.  Bottom line – selling Real Estate is serious business and being prepared is the first step.

There are several more items that make the perfect Offer Package – so if you’re curious – contact The Caton Team.

Ok, so now you have an idea of what it takes to buy a home around here.  Now what do you do if you have a home to sell first?  Bear with me on this – it is the hottest topic in Real Estate today.

HOW TO SELL THEN BUY

If you’re lucky enough to already be a Silicon Valley homeowner – congratulations!  You’re ahead of the game.  Right?  Unless you need more space and want to move up.  The Caton Team has met many clients who opted to add onto their existing homes.  Great!  Unless that is not an option.  Then we are back to square one – How does a Buyer sell then buy in this market?  

As I stated above in Seller Expectations, the “requirements” for contention can feel like a tall order.  If your down payment funds are tied up in the equity of your home – you have several options but only a few are viable in this market.  

DREAM OPTION

Rich Aunt Sally gifts you the money you need for the purchase of the home.  Thank you Aunt Sally.  But what if we don’t have rich relatives?

SELL FIRST OPTION

This is the cut and dry option.  Sell the home.  Close Escrow.  Move out and into a short term rental or with relatives.  Bank the  proceeds of the sale – aka: the downpayment and enjoy the Home Buying Experience at your own pace knowing you can A) Prove your Funds and B) Go in Non Contingent. 

Oh – Did I mention this option is also terrifying?  A Seller feels as if they are loosing their only piece of California – the “what if we don’t get the next one” can be frightening.  That’s why this option that is often chosen last.  Next up…

SELL FIRST WITH RENT-BACK OPTION

Similar to the first scenario – except instead of moving out at Close of Escrow – the Seller is granted Rent Back to live in the home for an agreed timeframe and cost, then move out – whether or not the Seller has acquired their next purchase.  The advantage to this is the Closing – the Seller has the proceeds in the bank and can write a non-contingent offer on their next home.  The down side – it is a short term solution – if the Seller doesn’t find their next home within the time frame – they will have to move out when the tenancy is over no matter what.  

OBTAIN AN OFFER TO PURCHASE

This option is often the first step – the proverbial toe in the water.  We, as your Realtors will try to find a Buyer willing to do the following:

  • Offer to Purchase the home with an Extended Close of Escrow, giving the Seller time to acquire their next property then quickly close on one then the other – a Domino closing effect.  The downside, their proceeds are not in the bank; therefore the Proof of Funds will be short AND even if the Seller writes a Non-Contingent Offer – we as Realtors know – it isn’t over until it’s over.  In other words, when comparing offers – the one with less strings attached wins.  Even Non-Contingent Offers in this scenario are not as strong as Buyers ready, willing and able to close on time.  IE:  Don’t have to close one house before they can close on the other.  Confusing right?  

That’s why inevitably, if a Client truly needs more space and cannot add on – they often are forced to sell first, rent then buy because this market is too competitive to request contingencies from the seller.  – Please don’t shoot the messenger – 

THE LONG ROAD

Now here’s my idea – but it takes a few years and you truly need to ask your CPA.  The idea is – the Seller moves out into.  (Where?  That is not part of my scenario.)  The Seller then converts their personal residence into a rental – renting it out for a minimum of 2 years.  (I cannot give tax advice, so please verify with your CPA).  After those two years, the Seller sells their home as a 1031 exchange, then buys their next home – as another investment.  The caveat – the Seller cannot move into their new home until it’s been rented for at least 2 years. Again run this by your CPA as tax laws change and I am not a CPA.  Anyway, this is the long term approach.  The good news, especially if you’re buying in the same community, even if prices rise – hopefully so will the value of your current investment.  Anyway, can you tell I have several clients in the same boat?  This blog post was really just me organizing my thoughts then I figured – why don’t I just share this – if I can help someone make a better decision for their future – then I did my job today.  

THINGS TO CONSIDER

Right now – the forecast is Interest Rates will rise.  This can diminish a Buyer’s buying power.  As the interest rates rise the amount of the loan reduces.  To remedy this – a Buyer will need to bring in more monies towards the downpayment.  Easy, if we have Aunt Sally on speed dial.

The Caton Team cannot forecast the future but we have endured all sorts of markets.  We always worry about our Buyers waiting themselves out of the market and in this still inclining market – that can happen faster than you think.  Ask us anytime – we’re in the trenches, we know what homes are selling for before the internet gets wind.  It’s wild out there but we’ve got you covered.  Susan and I have over 35 years combined, local real estate experience.  We represent our clients with integrity.  Our offer packages stand out and often times just the edge a Buyer needs in this market.  Our Seller Package is successful, our negotiating is skilled, kind and focused.  We pride ourselves in being effective, efficient and responsive.

Real Estate is multi faceted and this blog is just the tip of the iceberg.  Each family has a unique set of needs.  We value the sit down time to get to know what you need whether buying or selling a home in the Bay Area. 

What Can The Caton Team Do For You?

Thank you for reading and forgiving my typos,

Sabrina

 

I wrote this…

Got Questions – The Caton Team is here to help.

The Caton Team strives to be more than just Realtors – we are also your home resource. If you have any real estate questions, concerns, need a referral or some guidance – we are here. Contact us at your convenience – we are but a call, text or click away!

Email Sabrina & Susan at: Info@TheCatonTeam.com

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Thanks for reading – Sabrina

 

Berkshire Hathaway HomeServices – Drysdale Properties

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