Weston Miller's blog  ~  Buying a Home

This guide is California centric; the process you experiance in other areas may vary.

In January 2024 I purchased my first home after discovering that there were few options to rent that didn't cost me an arm and a leg. November 15, 2023 I reached out to the realtor, got pre-approved, and looked around at five or so homes, then jumped into making an offer on December 12^th, and closed on January 5^th!

During this time I felt I was signing papers left and right while not really having the foggiest idea what I was doing. This is a short guide containing the key points of the home buying proces: most of which were not immediately obvious to me at the time. For you, the new homebuyer, it is in your best interest to get a realtor that you can trust in advising you through this process.

Lender

• I used Scenic Oaks Funding at the recommendation of my realtor. The rate seemed to me to be much higher than online lenders, but I do not think I could have purchased a home, especially in the timeline I did, if I had tried going with them.
• It really is the best if the lender is local and has a relationship with your realtor. There is a certain amount of talk that goes on behind the scenes, and you having a lender with an unknown reputation has a much higher possibility of sinking a deal. Your agent and the seller may not want to go through the work to get a deal that has a much higher change of falling through. https://kandaproperties.com/blog/online-lenders-what-you-need-to-know
• As far as online lenders are concerned, I would use AimLoan and work with one of their loan officers when refinancing. Mileage may vary when financing a house.

Pre-Approval letter

• Get one for the highest amount you can or want to afford.
• Your lender wants to see less than 45% DTI (debt to income ratio), I'm told this used to be lower. You will need to submit the following documents:
  • Two months of bank statements showing "seasoned" money to prove that someone didn't just give it to you.
  • Two Years of W-2 forms
  • Last 30 days of paystubs
• When you make an offer, or counter-offer, you'll need your realtor to send an updated approval letter to the seller with the offer amount. Your agent will likely be used to working directly with the lender on this, and will request updated approval letters when needed.
• If you pay less than 20% down, you may get a cheaper rate, but you'll have to pay PMI which really can't be removed without a refinance.

Realtor

• It is in your best interest to have a realtor with a good reputation that knows the area and other realtors around.
• You're paying enough money in commission that you might as well pay it to someone you know.
• Get your pre-approval letter to your realtor and start looking at homes!
• Try to look around at as many homes as you can before making an offer. The more you look at, the more confident you will feel about your decision to place an offer on a house.

Making an offer

• California favors the buyer, so there are a lot of ways to exit a contract once one is made.
• Select Contingencies (less is better in competitive market) and timeframe to remove them - we did 10 days.
• Initial Deposit Amount/Earnest Money - Roughly 1-3% of purchase price into Escrow due within (3 days) of offer acceptance (they keep it if you leave the contract, otherwise goes towards down payment).
• Select all items that look like they are coming with the house, refrigerator, mirrors in bathrooms, etc...

Contingencies

• Select Contingencies
  • Inspections - Home, Roof, and Pest Inspection, and any others if you want
  • Mortgage Contingency
  • Title Contingency
  • Appraisal Contingency
  • Homeowners Insurance Contingency
• As contingencies are removed, your realtor may send you a contingency removal form to sign which gets sent to the seller.
• Your realtor should be able to schedule inspections for you and open up the house, etc... Give him a check to pay for it...

Counter Offer

• You have 3 days to respond; raise offer amount or change of terms if needed.
• You can ask the seller if they will split the costs of resolving costs for the roof and pest inspection (send them with the counteroffer).

Loan Approval Process

• As your loan progresses beyond pre-approval, expect them to keep sending you Disclosure Packages to sign as they draw loan documents and finalize closing costs including title insurance, estimated tax, homeowners insurance, etc.
• You will likely need to send new paystubs and more bank statements to prove your money and income has stayed stable since you got the pre-approval letter.
• I did not incorporate property tax and homeowners insurance although you can get cheaper rates if you do.
• Once your loan gets "Clear to Close" approval, they will schedule a date with a notary and prepare loan documents foy you to sign.

Title Insurance

• Articles I've read indicate that this is mostly a scam. I paid for title insurance however, the title was very clean and was probably unnecessary looking back.
• https://www.bitsaboutmoney.com/archive/working-title-insurance/
• https://www.texasobserver.org/entitled-to-profit-in-texas-title-insurance-is-a-total-scam/

Homeowners Insurance

• You basically have two options or less depending on where the house is: AAA or the California Fair Plan (overpriced state home insurance).

Signing Day and Closing

• Get ready to sign all the papers you already signed all over again and all at once with the notary. (I'm not sure how this would work with using an online lender)
• After signing, you need to wire the remaining down payment and closing costs to the escrow account.
• After the escrow account receives your wired funds, the home purchase will close soon after and you will get the keys! (for me, two days after signing, one day after wiring funds)

Gotchas

• Expect a transfer of servicing right after you buy the house. After you sign the documents, the lender will likely sell the mortgage and the new lender will reach out to you in enough time to pay the first payment.
• Expect Supplemental Taxes about 6 months after you purchase the house. You are basically paying a one year difference of the new taxes based off the new appraisal vs the old taxes the last owner was paying.

Other things

• Your realtor might try to sell you on a home warranty which is basically an upfront payment for a year warranty on the AC and other miscellaneous things. I was first under the impression that the seller pays for it. Later I learned that if I wanted it, I would be paying for it. After reviewing the value for the cost, I decided it wasn't worth it.

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