As a first-time homebuyer, it may seem as though every friend and relative feels the need to warn you about breached contracts, leaking roofs, and anything that could go wrong when buying a home. Don’t let them dampen your enthusiasm and excitement. 

Instead, find an experienced real estate attorney to guide you through the legal issues you’ll face during the transaction and a real estate agent to help you find and buy the home of your dreams. Before you set out with your agent to find a home, take a look at these legal tips designed to avoid the horror stories people will be passing on to you.

Obtain a mortgage preapproval before looking for a home

It’s generally a good idea to get preapproved for a mortgage before your real estate agent takes you out to look for a home to buy. If your quest for a home in a marketplace where inventories of homes are low and buyer demand high, sellers may refuse to show their homes to buyers who do not have a preapproval letter.

Sellers want to know that the person making an offer to buy their home has the ability to complete the transaction. They don’t want to wait 30 days or longer for a lender to make a decision on a buyer’s mortgage application. 

You get preapproved for a loan by providing a lender with your personal information along with proof of the assets that you own and your income. The lender reviews the information along with your credit report to decide if you qualify for a mortgage and the amount it will lend you.

The lender must go through its formal approval process, which includes doing an appraisal of the home. Even though you were preapproved, the following could cause a lender to refuse to give you the mortgage:

• The appraised value of the home is not enough for the amount you’re borrowing.
• You lost your job or your income has decreased from when you got the preapproval.
• A change occurred in your credit report since the preapproval letter.

Buying furniture for your new home on credit or missing credit card payments before closing on the home purchase could be reflected in an updated credit report that causes the lender to decline the mortgage.

Negotiating the terms of the purchase contract

The laws that apply to real estate transactions may depend on the state where the home is located. Many states authorize real estate agents and brokers to prepare the purchase agreement or contract, but some states continue to use contracts prepared by the seller’s attorney. 

Regardless of the law or local custom where the home you buy is located, the real estate attorney representing you will review the terms of the contract to ensure that it protects you. Do not sign contracts or any documents related to the transaction until it has been reviewed by your attorney.

A seller’s property disclosure does not substitute for a home inspection 

State and federal laws require that sellers fill out and present buyers with forms that disclose the condition of the property being sold. The trouble with a disclosure form is that it is only as reliable as the knowledge of the person preparing it. 

A better option for a buyer is a home inspection. Your lawyer will include a clause in the contract making it contingent upon your right to have a professional inspector go through the home and identify any repair issues that need to be taken care of prior to closing. The inspections include the following:

• Plumbing, heating, cooling and electrical systems
• Roof
• Foundation 
• Appliances

Required repairs can be negotiated with the seller unless waived by the buyer. Depending upon the company conducting the home inspection, it may include a termite and other wood-boring insect inspection.

Purchase title insurance

Title insurance protects you and the mortgage lender against defects in title that are not disclosed when the title insurance company conducts a search of title prior to the closing. The insurance protects against open judgments and mortgages against prior owners that could affect your ownership rights and impair the lien the mortgage lender holds against the property.

Clearing an old judgment or mortgage requires a great deal of work and a court proceeding to remove the cloud it creates on your title. Talk to your lawyer about the benefits of title insurance.

Conclusion

A recent report indicates some good news for homebuyers as median sales prices of homes showed a slight decline. If you decide the time is right to buy your first home, get in touch with a real estate attorney and a local real estate agent to get you through the process and ensure a favorable and pleasant outcome.