There are four things that every first time home buyer in Colorado should know. The first of these involves Loan Contigency. Loan contingency is the period of time the seller is providing 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 place into an escrow account at the time the offer is approved will be put in jeopardy once that contingency for the loan has expired. In fact, according to the terms of the contract, if the loan contingency has expired and you neglect to close the purchase transaction, you can forfeit 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 sure you will be buying the home and you know you do not need to count on on financing approval to close the transaction. Formal pre-approval will help to eliminate any complications in this area.
Seeking complete pre-approval for financing prior to making an offer on a property is the most effective tactic 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 doubtful of the stability and dependability of the buyer if the buyer is only capable of making a down payment of 10% or less. This can cause the buyer to waste a significant amount of negotiating ability, by being perceived as feeble buyer rather than a strong one. This is why it is extremely important to get full loan approval in advance and provide a written confirmation of the loan approval when an offer is provided. This shows it is complete, and you are perceived to be a cash buyer.
The contract period is the span of time in which all due diligence must be completed, including achieving loan approval, property appraisal, home inspection reports, termite inspection, etc. Give yourself ample time for all due diligence to be completed for this very important purchase you are about to make. Typically, purchase contracts are drafted for a period of 30 days, 45 days or 60 days. However, it is really common for a purchase contract to be written with terms exceeding 60 days if the parties involved need to have that long of a grace period to perform 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 required to complete all the home inspection things that are required. Utilizing an external third party service to complete these inspections is highly advised, especially for a first home buyer in Colorado. You will be given a report by the home inspection company that you should review very thoroughly to make sure there are no material problems in the property that you were unaware of, and which could subsequently have an impact on the worth of the property. If there are material defects, you and your Real Estate Agent should head back to the negotiating table and talk about an ample reduction in the purchase price to offset the cost of any necessary repairs. Once your home inspection contingency has run out, you no longer have the power to go back and renegotiate the purchase price to resolve any issues revealed by the home inspection.
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