First Time Home Buyer - Eliminating The Mystery Of Purchasing Your First Home - Part 1

There are four things that every first time home buyer in Colorado should know. The first of these concern Loan Contigency. Loan contingency is the period of time the seller is giving you to obtain full, formal loan approval. This contingency is typically between 15 and 21 days depending on what you and your Real Estate Agent have negotiated on your behalf in the contract. The earnest money deposit that you set into an escrow account at the time the offer is accepted will be put in jeopardy as soon as that contingency for the loan has expired. In fact, according to the terms of the contract, if the loan contingency has expired and you fail to close the purchase transaction, you can lose your earnest money deposit. For this reason it is extremely important to make sure you are not agreeing to a loan contingency in an offer negotiation unless you are absolutely positive you will be buying the home and you know you do not need to depend on financing approval to close the transaction. Formal pre-approval will help to eradicate any issues in this area.

Seeking complete pre-approval for financing prior to making an offer on a property is the best strategy for any home buyer in Colorado that can help you get the best deal possible, especially if you plan to make minimal down payment. The seller is often wary of the stability and reliability of the buyer if the buyer is only capable of providing a down payment of 10% or less. This can cause the buyer to forfeit a significant amount of negotiating ability, by being perceived as weak buyer rather than a strong one. This is why it is very important to get full loan approval in advance and provide a written confirmation of the loan approval when an offer is turned in. This shows it is a done deal, and you are regarded as a cash buyer.

The contract period is the duration of time in which all due diligence must be completed, including obtaining loan approval, property appraisal, home inspection reports, termite inspection, etc. Give yourself enough time for all due diligence to be completed for this very important purchase you are about to make. Typically, purchase contracts are created for a period of 30 days, 45 days or 60 days. However, it is really not uncommon for a purchase contract to be crafted with terms greater than 60 days if the parties involved need that long of a grace period to complete all aspects of due diligence.

As part of the negotiation in your purchase contract, you and the seller will mutually agree upon the amount of time called for to complete all the home inspection procedures that are required. Choosing an external third party service to complete these inspections is highly recommended, especially for a first home buyer in Colorado. You will be provided with a report by the home inspection company that you should review very thoroughly to make sure there are no material flaws in the property that you were not aware of, and which could therefore have an impact on the worth of the property. If there are material defects, you and your Real Estate Agent should go back to the negotiating table and discuss an ample reduction in the purchase price to offset the cost of any necessary repairs. Once your home inspection contingency has ended, you no longer have the leverage to go back and renegotiate the purchase price to correct any issues revealed by the home inspection.

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