Buyer Tips
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Buying a Home
Simplify Your Home Buying Experience
Buying a home can be an enormous undertaking, so be sure to retain the services of a qualified REALTOR®. You can trust our REALTORS® to always keep your interests first and foremost. As qualified professionals, we'll guide you through the entire home buying experience and assist you in being an educated buyer.
Simplify Your Search
What features would you require in a home to satisfy your lifestyle now and in the future? Once you know what you can afford, we'll help you explore your possibilities; from design preferences to neighborhood choices.
Moving Forward
Once you have found the home that is right for you, it's time to present an offer. This will consist of earnest money to be held in an escrow account, a loan pre-approval letter if you will be financing the purchase, and a written purchase agreement. This agreement will set forth your terms of the purchase and a schedule of events in order to own the property. This extremely important document is a legally binding agreement and should be carefully prepared by knowledgeable REALTORS® who are qualified to cover all of your interests.
Final Steps
Upon your complete satisfaction, arrangements will be made to attend a closing. The closing is usually facilitated by a title or escrow company that holds your earnest money in escrow. After furnishing the down payment and other applicable fees have been agreed upon prior to closing, final papers will be signed. The deed and mortgage will need to be recorded in the state Registry of Deeds, and you will be a homeowner.
Money Matters
The most important part of financing is your knowledge of the options available. Consider the following questions as a basis for determining your financing needs.
- How much mortgage can I afford?
- What down payment is needed?
- What is the difference between pre-qualification, pre-approval and approval?
- What interest rates are available?
- What is mortgage insurance and is it required?
- What type of documentation will I need?
- How do 15- vs. 30-year terms compare?
- What are points and do I pay them?
- What is the difference between a fixed rate mortgage and an adjustable rate mortgage?
- What closing costs will I incur?
- What is being "locked-in?"
- How long will the mortgage process take?
- What is included in a mortgage payment?
- What would the payments be?
- When would the payments begin?
Make Your Mortgage The Right Fit!
Mortgages to meet everyone’s needs. These summaries will help you narrow your search.
Adjustable Rate Mortgage (ARM)
A mortgage, which allows the lender to adjust the mortgage's interest rate periodically on the basis of changes in a specified index. Interest rates may move up or down, as market conditions change. The change in interest rate will result in a change in the periodic payments due under the mortgage. ARMs are attractive when short-term interest rates are trending lower.
Balloon Mortgage
Usually a short-term fixed-rate loan that involves small payments for a certain period of time with the balance due in a single, large payment at a time specified in the contract. Whenever the balloon mortgage becomes due, the entire unpaid balance is due. Generally, the homeowner must either refinance or sell the property.
Buy-Down
The payment of extra money on a loan now so as to provide a lower interest rate over either a given period or over the life of the loan. To buy-down a mortgage, the buyer pays additional points to the lender, which will decrease the interest rate for a specific period.
Conforming Loan
Conventional home mortgages, first mortgages up to loan amounts mandated by Congressional directive, which meet the qualifications for sale or delivery to either the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC).
Construction Loan
A structured, short-term loan to provide funds necessary to begin construction on buildings or homes.
Conventional Mortgage
A mortgage loan made by an institutional lender without the inclusion of government guarantees such as VA or FHA loans.
Convertible ARM
The convertible ARM is a combination of both fixed-rate and adjustable rate mortgages, allowing the best of both options in one package.
Deferred Interest Mortgage
A mortgage in which the payment is not sufficient to cover the principal and the interest and the payment portion of the interest is postponed until a certain date at which time the interest postponed is added to the principle owing.
Federal Home Loan Mortgage Corporation (FHLMC)
The Federal National Mortgage Association is a congressionally chartered, shareholder-owned company and is the largest national supplier of home mortgage funds. It is commonly known as Freddie Mac. The company buys mortgages from lending institutions, pools them with other loans, and sells shares to investors. Detailed information may be found at http://www.freddiemac.com.
Federal Housing Administration (FHA)
An agency of the federal government, the Division of the Department of Housing and Urban Development, that sets standards for the underwriting of private mortgages and insures residential mortgages made by private lenders.
Federal Housing Administration (FHA) Loans
Federal Housing Administration (FHA) low-rate loans are available to Americans with smaller incomes who are interested in modestly priced homes. Down payment requirements are usually lower than the prevailing ones.
Federal National Mortgage Association (FNMA)
The U.S.'s largest supplier of mortgages to home buyers and owners, a corporation established by Congress and owned by stockholders. It is commonly referred to as 'Fannie Mae,' this government-sponsored enterprise is chartered by Congress. This federally chartered agency buys mortgages from lending institutions, pools them with other loans, and sells shares to investors. Detailed information may be found at http://www.fanniemae.com
Fixed-Rate Mortgage
The interest rate you pay and the monthly principal and interest payments are agreed upon from the outset and will not change throughout the entire term of the mortgage.
Government National Mortgage Association (GNMA)
A government-owned corporation within the U.S. Department of Housing and Urban Development, it is also referred to as 'Ginnie Mae,’. This government agency guarantees the payment of principal and interest on all of its pass-through securities, and its guarantee is backed in turn by the full faith and credit of the U.S. Government.
Graduated Payment Mortgage (GPM)
A mortgage that usually starts the borrower with low payments that are gradually increased over five to ten years, before leveling off for the remainder of the term of the loan until the loan is fully amortized. Negative amortization usually occurs until the payment reaches the level payment stage. Usually government insured loans (VA or FHA)
Growing Equity Mortgage (GEM)
This is a long-term mortgage whereby the borrower agrees to increase his payment each year by an agreed amount. The added money per payment is applied directly to the outstanding principal on the mortgage. The mortgage thereby is paid off in a shorter number of years.
Renegotiable Rate Mortgage (RRM)
Similar to an Adjustable Rate Mortgage, this type of mortgage allows the interest rates and payments to be adjusted periodically according to an index.
Reverse Annuity Mortgage (RAM)
A type of mortgage where the property's equity serves as security for periodic payments made by the lender to the borrower. Mortgage is generally paid out upon the sale of the property.
Rollover Mortgage (ROM)
A mortgage where the payments are only guaranteed for three, four, or five years. The borrower is allowed to refinance at the end of the term at the interest rate then applicable.
Shared Appreciation Mortgage (SAM)
It is a loan arrangement where two or more parties participate in the purchase of real estate and share the appreciation and tax deduction. Similar to shared equity mortgages.
Veterans' Administration Loans
Mortgage loans to veterans by banks, savings and loans, or other lenders that are guaranteed by the Veterans' Administration, enabling veterans to buy a residence with little or no money down.
Wraparound Mortgage
A secondary financing option in which a new larger mortgage is created to encompass the first mortgage. This large second mortgage is used to preserve the low interest rate on the first mortgage for a potential buyer.
Know Your Needs
Drive To Learn
Evaluate as you drive though a community. Consider the following questions as a basis for determining your location needs:
- Where is the nearest shopping center, bus line, police station and library?
- What schools are available and school district are you in?
- What types of homes (single family, apartments, condominiums) are in the neighborhood?
- How far apart are the homes?
- How far is it to your work?
- What community resources are available?
- Generally, where are the cars parked (driveways, garages, street)?
- Do you notice a lot of noise, traffic or pollution?
- Are the homes in good repair and the landscaping well kept?
Finding The Right Home
Keep your eyes open and your notebook in hand as you walk through a potential home. Consider the following questions as a basis for determining your needs as a homeowner:
- How long has the home been on the market?
- Why is the home being sold?
- What is the asking price of the home?
- Has the price been lowered?
- Is the price comparable to other homes in the neighborhood?
- What is the down payment required?
- Is the house structurally sound?
- Is there room enough for the present and the future?
- Do you like the floor plan of the home?
- What condition is the yard in?
- What improvements must be made?
- Will the seller repair or replace any items that need repair or replacement?
Think carefully about each house you see and don’t be in a hurry. Your REALTOR® can point out the pros and cons of each home from a professional standpoint.
The Offer
Making an offer to buy a home entails many factors. You and your REALTOR® will discuss the following factors prior to putting the offer on the table:
- Amount of earnest money
- Down payment
- Price you are offering
- Details of financing
- Proposed move in date
- Proposed closing date
- Details of the sale
- How long the offer is valid
The seller will either accept the offer as presented, or make a counter offer and either you will agree to the terms in counter offer or you will submit another proposal. When all the parties involved have agreed upon the details, initialed any revisions, and signed the final agreement, then an offer becomes a contract.
Contract Review
Sales contracts may differ significantly yet all should clearly set forth the responsibilities and privileges of all the parties involved. It is a legally binding document that protects each party. Carefully review the terms of the contract. The sales contract should include the following:
- Legal description of the property and the exact street address
- Selling price of the property
- Amount of earnest money and who is holding it – Often it is held in an escrow account by a third neutral party.
- Amount due at settlement
- Specifics of the mortgage (amount, rate and terms)
- Title or Escrow company - Either a title company, escrow company, or attorney must be areed upon by buyer and seller
- Details W of the closing - when and where
- Home inspection - Recommended to ensure against structural and unknown defects, and must be completed by a specific date set forth in the contrct and completed by a cerified home inspector
- Inclusions and exclusions - Examples would include washers, dryers, drapes, etc.
- Pest Inspection - Who is responsible if there is damage or an infestation
- Warranties - Get the description of any that are included with the house
- Repairs – Unless you are accepting as-is, state who is responsible for repairs, with a date for a walk-through inspection
- Well and septic – They must pass a test, if applicable
- Date of possession – When you take possession of the property
- Acceptance date – Either an acceptance or counter offer must occur by a specified date
Processing the Sale
Once the contract is signed, your REALTOR® will continue to be your advocate and ensure that your best interests are served. Some of the details they will be available to handle are:
- Assist with scheduling all necessary pre-closing inspections
- Check finances are deposited according the contract specifications
- Keep you informed of any unseen problems that may arise and offer solutions
- Present a list of utility companies available for service
- Schedule and attend-the pre-closing walk through
- Prepare for and attend the closing