Home Buyer's Guide

Buyers Guide

Getting Started

The first step toward owning a home is to look at all the possible roads available to you. This first section covers the basics that concern all home buyers - from developing a house-hunting strategy (by figuring how much you can afford to spend, and how to line up your finances) to actually starting out on your search.

Where do I Start?

First things first. After you've browsed through the handbook awhile ,ask yourself why you want to buy a home. To stop paying rent? To start building equity? To have a place to call your own? To move up to a bigger home?

Next, list what kind of home you'd like and where you would like it to be. Be specific. Separate the "must haves" from the "want to haves". Rate both lists on a scale from 5 (high) to 1.

Think of yourself as zeroing in on a target, going from the general to the specific. Consider area (city, suburban, country); community (north, south, east or west side); neighborhood (older and settled or sparkling new; a particular school; recreational facilities; and other community services , such as transportation, day care, library, stores, entertainments.) Ask yourself how many minutes you're willing to commute to work.

Think about home styles ( 1-story, 2-story, townhouse, condominium, etc.). How much space do you need, and how much will you need in the foreseeable future (number of bedrooms, baths; kind of kitchen; total rooms)? Consider size and kind of property. Do you want a new home, an older one to fix up? Is the community a good area for resale? Someday you or your heirs will want to sell. Consider how long you expect to live in this particular home. Keep going with whatever you want to add.

Knowing exactly what you think you want makes house-hunting and later decisions easier when you get into the nitty-gritty aspects of buying. Many people like to start a "house-hunter's notebook" to keep their requirements clearly in mid and to compare specific properties. You'll find as you return again and again to your original thinking that your preferences become clearer - and your search becomes more efficient.

Exactly how will a real estate agent help me buy a home?

Brokers and agents make it their business to provide every service connected with your home search, from expert advice in the early stages though careful monitoring of your settlement (also "closing" or "escrow" ). The more closely you work with one agent, the better your needs are known and the more effectively you can be served - saving you time and possible grief.

All agents are bound by law to deal fairly and ethically with both buyer and seller. You benefit from an agent's services in many ways such as:

• Helping you set up a plaon of action through an analysis of your need and your finances, the current housing market, homes available in your price range, and lenders' mortgage options.
• Personally conduction your search to find neighborhoods and homes that fit your requirements
• Guiding you through the intricacies of making an offer on a home and presenting your offer to the seller.
• Providing leverage with solid negotiating skills from the start through end of escrow
• Ensuring you receive proper disclosure regarding all known facts about the home

What do people mean when they say home ownership is the key to financial security?

The benefits of home ownership are both financial and psychological:

• Home ownership is a durable (real) investment. Historically, housing has appreciated in value for decades. Although no one can say a specific home in a specific location will increase in value, generally speaking the odds favor most homeowners. Also, monthly mortgage payments (the part that reduces the principal loan balance) becomes a solid form of savings.
• Numerous unique tax advantages are available to homeowners. Unlike other investment tax shelters, home ownership works for you even as you live in your investment. Fore example, the thousands of dollars you pay in mortgage interest (discussed below) are deductible. The tax deduction alone can sometimes make owning your own home cheaper than renting with "after-tax" take-home dollars.
• By accumulating equity in your home, you can later "move up" to another home, with a good down payment on hand.
• Home ownership offers you the opportunity to take control of your housing costs. Mortgage payments (even on adjustable-rate mortgages) are more predictable than rent.
• Owning your home allows great freedom of choice in choosing yoru community, architecture, interior décor, appliance selection, plus whatever method of financing best suits your situation.

What Price Home Can I Afford to Buy?

The easy answer to this all-important question of price is simply adding how much you can afford to borrow to how much you have available for you down payment investment. The total is your maximum affordable home price. (Remember to keep enough cash or credit left over for move-in expenses and an emergency reserve.) The harer answer is how much you are qualified to borrow.

For starters, you can put the most frequently used lenders' rule-of-thumb to work: the 28% and 36% formulas. This is the test many lenders use to qualify applicants for conventional mortgage loans (though some lenders and mortgage plans apply stricter codes, such as 25% and 33%, especially if your down payment is less than 20% of the sale price).

The 28% test permits you to spend no more than 28% of your gross monthly income on your total monthly housing costs, including principal, interest, taxes and insurance (P.I.T.I.) and condominium fees, if any. For example: 28% of a $3,600 gross monthly income would qualify a buyer for a $1,008 per month payment.

The 36% limit cover both your P.I.T.I and long-term debts (more than 10 months) such as alimony, regular household expenses (mortgage insurance and/or condominium or association fees), outstanding loans (car, appliances, school), support for children (resident or living separately). For example: 36% of $3,600 would qualify for a $1,296 payment t per month less monthly payments on any long-term debt.

In our examples, the affordable loan payments for an income of $3,6000 per month is a range between $1,008 for the home payment alone and $1,296 a month less any debt payments. (Strict lenders may use only the 28% standard, even with no debts, or ask you meet both standards. Other lenders may use less strict standards for borrowers with excellent credit ratings.)

In addition to your loan, the cast you have on hand (plus the cash you can acquire) is an important factor. You will need cash for a down payment (ranging from 0% - 20% or more for the sales price), settlement or closing costs, moving expenses, possible immediate repairs, remodeling, new appliances or furnishings. Also be sure to budget for utilities and maintenance. This takes some figuring.

an agent can help translate your affordable monthly payment into a total loan amount. Add this loan amount to your desired down payment amount and you get the approximate range of home prices you can afford.

Your next step is to shop carefully for the loan that will keep your mortgage payments in line with your budget. Different mortgage plans can dramatically affect your monthly payment - and thus the priced home you can afford. Also other plans, especially FHA and VA mortgages, may offer you much more liberal qualifying standards - again allowing you more home for you income.

Today's Financing Techniques Can Be Confusing. What are the Basic Types of Loans I Should Know About?

Here is a brief rundown of four major mortgage plans.

Fixed-Rate Conventional Mortgage. A conventional loan is without a third-party participant, such as VA or FHA. Fixed-rate conventional loans are typically paid off in equal monthly payments spread over 15, 20, or 30 years. The interest rate stays the same for the life of the loan; therefore the monthly principal and interest payment remains constant. Shorter terms mean somewhat higher monthly payments. Shorter terms also mean more rapid equity growth, mortgage pay-off and dramatic savings on total interest payments.

Terms of a conventional loan vary among lenders, but many can be obtained with as little as a 5% - 10% down payment. When the down payment is less than 20%, it is necessary to obtain private mortgage insurance (PMI) to protect the lender from a buyer's default.
Advantage: Quick processing and stable payments.

Adjustable-Rate Mortgage (ARM; also "variable rate"). The interest rate may go up or down over the years and is tied to a financial market index (such as one-year Treasury bills). Monthly payments may also be adjusted on a periodic schedule. Most ARMs set a maximum adjustment (or "cap") on possible increases to interest rates, monthly payments, and/or maximum cap on rates for the life of the loan.
Advantage:The lower initial interest rate and monthly payment allow the buyer to pay less in the early years for a larger loan and help buyers qualify for a more expensive home than with a fixed-rate loan. Caps offer peace-of-mind rate ceilings.

FHA Loan. Strictly speaking, FHA (Federal Housing Administration) does not make loans; rather it insures loans, with increases lenders' willingness to make low-down-payment loans.

With an FHA-insured loan, a home buyer can make a small down payment, a feature particularly attractive to first-time buyers. The minimum down payment depends on the size of the loan, but it is usually smaller than other loan programs. Second mortgages are permitted within specific guidelines.

Points (prepaid interest) can be charged by the lender. The purchaser may negotiate the interest rate and points with the seller. FHA buyers of single-family homes can finance 100% of closing costs.

FHA charges an advance mortgage insurance premium (MIP) fee, as well as a monthly charge for all loans. Ask an agent how much the fee would be in your situation, and if you can borrow some of the fee and add it to the loan rather than measurable increasing your closing costs.

FHA-insured mortgages offer a maximum loan amount that varies area to area.
Advantage: Low down payment; low interest rates; long terms; many are fully assumable loans; no prepayment penalty; second mortgage permitted under certain circumstances.

The VA Loan. Qualified veterans can take out loans up to a specific limit with no down payment. These limits occasionally change; check with an agent for current rules. VA-guaranteed loans can be combined with second mortgages and are fully assumable by any qualified buyer. Rates and points may be negotiated with the lender

VA/FHA qualification guidelines are more flexible than those for conventional loans. Actual income qualifications are dependent on the type of loan requested.
Advantage: Usually no down payment; points and other closing costs may be paid by the seller; the buyer may be charged a loan origination fee (tax deductible); no prepayment penalty; assumption may make your home very attractive to buyers when you decide to sell.

How much down payment should I make?

There are advantages to both large and small down payments, and which you choose depends on both personal choice and your financial circumstances.

Advantages of large down payment: Less mortgage to pay off, smaller monthly mortgage payments and greater opportunity to find lower interest rates.

Advantages of a small down payment: Less cash out of hand, therefore more money for other costs; a larger mostly mortgage payment means a larger tax deduction for mortgage interest.

With an FHA loan or less than a 20% down payment on a conventional loan, you will be required by the lender to take out mortgage insurance. The FHA calls it MIP (Mortgage Insurance Premium), while private companies call it PMI (Private Mortgage Insurance).

What are the best sources of cash for a down payment?

If your own band account isn't large enough, you have several options. For example:

• Receive a tax-free gift from your parents (or others) documented by a "gift letter" stating no repayment is required (thus your debt burden is not increased). Some lenders may require you to use some of your own money in addition to the gift.
• Borrow against a life insurance policy
• Borrow against a company pension plan
• Cash in a retirement savings plan (even though you may have to pay a penalty for early withdrawl).
• Ask for cash payment from your employer instead of next year's raise
• Use your own business as collateral.
• Team up with friends, relatives or investors as partners in return for equity in your home. (You can, if you like, buy them out later.)

Should I shop for a loan before or after I find a place to buy?

It's a good idea to let an agent help you look for financing before you find a home. We are in constant contact with many lenders, and can act as an invaluable "clearing house" of information. If you're actively house hunting but have not found the right home yet, ask the lender to do a "screening application." This details your income, debts and assets.

 

Knowing where you stand concerning how much money a lender will lend you (based on your income and credit rating) puts you in a good bargaining position. Sellers faced what deciding between two buyers - one who is "pre-screened" by a lender - may favor the offer of the buyer for whom getting a long is almost a sure thing.

On Your Mark. Get Set. Go!

Now that you've mapped out your strategy, dtermind what you want to lok fo in general and lined up a real estate agent, you'll want to discover all you need to know about intelligent, time-saving house hunting. That's what our next section is all about.

 

What should I look for in a neighborhood?

Some neighborhoods speak loud and clear at first glance; the quality of life is apparent in its streets, parks, building, homes and yards. You get a feel for it (either for or against) just by looking.

As real estate professionals we can, of course, fill you in on community details not so obvious at first glance:

• Where schools, supermarkets, libraries, hospitals, places of worship, fire and police stations are located.
• What zoning regulations apply.
• What community services are available.
• What construction plans are in the offing.
• What shifts in transportation facilities are occurring.
• Whether home values have appreciated or depreciated.
• What tax rates prevail.

For a more intimate impression, you should walk around a neighborhood that looks attractive to you. Visit the schools your children will attend to confirm district boundaries and comparison with other schools. Talk with people at bus stops (ask about commuting schedules and costs), in shops (chat about where the best stores are), in parks (get folks talking about recreational programs), in front yards (ask what they like and dislike about the neighborhood). You might take digital photos as you tour different locales. They'll help you later when you want to keep different streets and homes separate in your mind. Also take notes to later compare, especially addresses and prices.

Inspection a neighborhood is as necessary as inspecting the home you may buy. An old real estate maxim says, "The best time to think about selling your home is when you're buying it." That's because location will be a prime factor influencing future buyers when it comes time to sell your home.

What features make one home style different from another?

Style preference involves personal taste, family needs and your budget. This section is designed to illustrate some of the most basic home styles. Space doesn't allow us to show the numerous variation and many other unique styles available in today's market; however the images on the right will give you a basic knowledge of home styles

	Colonial (New England, Federal, Dutch, etc.): A good separation of space in these roomy, two-story homes with center-front or side entries; living room, dining room, kitchen on one floor; bedrooms upstairs. Privacy is possible but stair-climbing is inevitable.
	Ranch(also "rambler"): Typically, one-story homes with bedrooms separated from living quarters and kitchen, often in wings. May or may not have a basement.
	Cape Cod: Cozy living in one-and-a-half story homes. Steep roof lines make slanted ceilings in upstairs rooms, which often have dormer windows. A good bet for handy buyers who can finish the upstairs by themselves if needed.
	Country (also "farm house"): Popular in both rural and suburban areas, this rustic one-and-one half or two-story style features simeple room arrangements, large kitchens and front porches.
	Split Level (also "trilevel," "four level"): Part of the home is two-story, joined to a one-story section by short flights of stairs, sometimes giving each room a floor of its own. Compact use of space and a good design for sloping property.
	Victorian: Unexpected nooks and crannies in older homes; modern adaptations of Victorian design use space more conservatively. Special features: wide porches, sometimes turrets and gingerbread trim.
	Contemporary: Out of the ordinary, often striking use of space in these homes that feature dramatic shapes and unorthodox use of materials (concrete, diagonally-slanted wood siding, glass, etc.).
	Townhouse (also "patio home," "row house"): Attached homes of a similar style (Colonial, Spanish, contemporary, etc.) share common walls, offer two or three floors of living space often comparable in size to detached homes. They feature small, easy-to-care-for yards. (Some duplex townhouses look like single-family homes, with the entry to one home at the center-front, to the other home at the side.)
	Condominium: Technically not a style, but a form of ownership. Condominiums can be townhouses, clustered units, low-rise (up to four stories), high-rise or even detached homes. You own both your private quarters and a share of common land and areas. A monthly condominium fee is charged to each owner for maintainance costs.

What should I specifically look for in a new home?

New home construction is changing all the time as builders try to adapt designs to today's lifestyles, make the most of living space and incorporate new technology, building materials and equipment, while keeping prices affordable. Buying a new home is attractive because everything's new, from floors to appliances. Energy efficiency (insulation, weather-stripping, energy-saving heating / cooling systems and electricity) is required by building codes. Buying a new home while it's under construction often lets you choose paint, wallpaper, tiling ,etc.

Newness itself is a virtual assurance that your maintenance costs will be predictable, and a builder's warranty (highly desirable) guarantees freedom from structural flaws.

Here are some of the signs of good construction to be checked out at the site:

• Good carpentry throughout (well-fitted windows and moldings, non-squeaking wood floors, even wall surfaces).
• Solid structure with sturdy support.
• Basement floors and walls that have no cracks or damp spots.
• Insulation that measures as advertised.
• Everything in good working order (faucets, heating/cooling systems, electrical outlets, etc.).
• A yard free of low, wet spots; grading that slopes away from the home for good drainage.

How do I evaluate a resale home?

Homes with a past have special appeal. An existing home is settled place (literally): the foundation, the landscaping, the neighborhood, including its services, are about where they're probably going to be for some time.

The home has a lived-in look. Some rooms may be larger than in new homes, woodwork has mellowed, the yard is a generous size. Its price may be lower (per square foot) and its financing possibilities more flexible than in new homes, especially if you can pick up an assumable mortgage.

The thing to be on the look-out for is wear-and-tear:

• How firm is the foundation?
• How sound are the sills, walls, floors, ceilings and roof?
• What kind of plumbing was installed, when?
• What's the shape and extent of the electrical system?
• What shape is the heating/cooling system in?
• What are monthly energy costs?
• How well does the insulation protect the indoors?
• What will it cost you to remodel if necessary (especially kitchen and baths) or to make necessary repairs?

If in doubt - or just for your peace of mind - you can hire a certified home inspector for a professional opinion.

What can I expect from a professional home inspection?

The job of a professional inspector is to look over every major part of a home, and write a report that judges the home's quality and condition.

A well-qualified building inspector who has adhered to federal licensing standards can spot problems that you might not be able to see or get to. However, it's wise for you to accompany the inspector so that you don't have to get the report secondhand. Expect problems to be clearly explained, repair expenses closely calculated, maintenance costs estimated and a written report delivered within a day or two. Remember you are buying a resale home; the price reflects the fact that nothing is new.

The territory covered by inspection includes:

Exterior: the foundation (for holes, cracks), the gutters and down spouts (for gaps in joints, sagging), siding (for warp), paint (for peeling, blistering), windows and doors (for cracks, loose caulking), roof (for worn or bald spots), chimney (for tilting, loose bricks or stones), driveways, retaining walls and walks (for holes, sagging, cracks), grounds (for proper grading and healthy landscaping).

Interior: general structure (for soundness, rot), floors and stairs (for speaking, shaking, bowing), plumbing system (for condition of pipes and fixtures, leaks, clogging), heating/cooling system(s) (for condition and capacity), electrical system (for age, condition, adequacy of voltage and outlets, proper grounding, signs of wear), insulation in walls, attic and basement (for thickness and efficiency), walls (for cracks, loose plaster, signs of leakage), kitchen (age and condition of appliances and plumbing).

What's the secret to making a good condominium buy?

Buying a condominium means, in most cases, buying amenities - neighborly lifestyle, sometimes complete with shopping, entertainment, playgrounds and/or sports facilities. Condominiums serve almost every possible kind of home buyer: singles, families with children, retired people. First-time buyers are particularly drawn to condominiums because of the amount of space available at a reasonable price.

Each condominium association has its own rules, and as a member of your community you help govern what can be done to the outside of units, whether or not pets are welcome, what landscaping and community improvements are made and what by-laws are passed or amended. Because the owners' association can spend for amenities or limit spending to save expense, it is important for you to know if existing owners are in tune with you financial position by check recent budgets.

Shopping for a condominium means looking for the same things you look for in buying any home: a neighborhood on the upswing (for maximum enjoyment and for appreciation possibilities), good construction (especially in sound-proofing of walls), good style and sound financing.

An agent knows the local condominium market and can assist you in evaluating the different communities, looking at sales contracts, maintenance charges and condominium management.

Planning Table to Settlement Table

You've now zeroed in on the home that's ideal for you. You've threaded your way through the maze of home and neighborhood choices and established your own financial affordability. This is it. You're ready to step over the line from house hunter to home buyer and to make the actual purchase of a particular home.

 

Making a Purchase

At this point you've narrowed your possible choices to none specific home. You're ready to make your first offer, negotiate with the seller, sing a contract, secure the best mortgage loan and actually buy your home. An agent know the way, and with that experienced assistance you can navigate with confidence. Remember, you and the seller want the same ting: a smooth and satisfactory transaction. With that understanding, there's rarely an obstacle too big or too complicated to keep a qualified home buyer from the ultimate goal - homeownership.

What is in a sales contract?

Your signed offer to purchase is the document you draft with present your price and terms to the seller. This purchase offer must be complete because when the seller signs it, the document becomes the binding "sales contract" which contains the conditions of the sale. If you forget something in the offer, you can't add it to the sales contract later with out mutual consent between all parties.

Terms and condition of the contract vary depending on the situation. The following are typical matters you and a seller may negotiate and agree on:

• What items convey with the home, such as chandeliers, appliances, personal property, swimming pool chemicals, etc.
• The sales price.
• The amount of your deposit ("earnest money").
• The amount of your down payment and/or the amount of mortgage loan you intend to obtain.
• The date, time and place of settlement or closing, when you take possession of the home. Be sure you and your seller have a clear agreement about the date of occupancy.
• Any contingencies (agreed upon by you and the seller) which must be met before settlement or closing can take place, such as: termite inspection; proof of clear title to the home; legal review of the contract by either or both buyer's and sellers layer(s); your ability to obtain a specified mortgage loan within a specified time at agreed-upon interest rates and points, and/or specified seller financing.

How do I make an offer on a home and negotiate with the seller?

The first step is to get together with your agent and draft an offer with the price and terms you desire. Understand the seller has three basic options: to accept your offer, counter offer on specific details or reject your offer. If there is any negotiation, it usually takes place trading counteroffers if the seller doesn't immediately accept or reject the offer. Keep up the dialogue until you arrive at the price you can pay and the price and terms the seller can accept.

This is where our help is invaluable. The agent keeps the negotiation process running smoothly. With a knowledge of both your situation and the seller's, plus a complete understanding for financing options, an agent can suggest strategies that bring about a satisfactory transaction.

How do I shop for a mortgage?

We would be happy to help you compare interest rates and terms to find out which mortgage plan is best for you and can refer you to the best lenders in the area.

However, each buyer's circumstances are unique, and once you've narrowed the field, you will want to discuss your case in detail with the lender. You'll determine for instance:

• What kinds of loans the lender offers (both fixed rate and adjustable rate).
• What terms are offered on adjustable-rate loans: rate adjustment frequency, maximum limit on each rate change, frequency of monthly payment adjustment, ceiling on payment adjustments, possible extension of the length of time on the loan pay-off, life-of-the-loan interest rate cap, conversion privilege, positive or negative amortization, etc.
• What amount of investment is required for a down payment.
• What is the term (length of time) to repay a loan, and whether there is a prepayment penalty if you pa off you loan before its due date. In some areas pay-off penalties are illegal, while in other areas common.
• What fees are involved (credit report, appraisal, survey, legal costs, "points", title insurance, etc.)
• Whether the lender can furnish you a second mortgage, if needed, at a pre-determined interest rate.
• How long it will take to process your application.
• What inspections the lender will require.
• What kinds of insurance and how much coverage you will be required to carry.

What information specifically will the lender ask for when I apply for my loan?

Lender's loan application questions vary, but, in general, they will include :

• The kind and amount of mortgage loan you wish to obtain.
• The verifiable source of your down payment money (bank account statement, gift, etc.).
• The length of time you wish to borrow the money for.
• Your current address and the length of time you've lived there and at your previous address.
• Your employment history, your current employment and income and your employer's name and address.
• Your Social Security number.
• Your assets, including your gross monthly income, your bank balance(s), your possessions (car, furnishings, jewelry, etc.).
• Your debts and account numbers (including care payments, credit cards, etc.).
• A copy of your sales contract.

What dose the lender do to approve my loan?

Typically the lender will give or send you an application "package" with instructions and necessary forms. You complete these in detail, including the financial data and account numbers, and present them to your loan officer when ready. A loan application fee will be required by most lenders to cover a credit report and appraisal.

A lender takes several steps in processing your application, and different procedures exist in different areas. Primarily, you lender is busy:

• Getting an appraisal of the home you want to buy, to determine if it's worth the price you are paying.
• Getting reports on your employment, income and debt-paying ability, to determine if you are a good credit risk.
• Verifying bank deposits to satisfy down payment and closing cost needs.
• Ordering inspections, such as:
• • Housing or building code compliance.
  • Completion of repairs the seller agreed to make.
  • Termites or other wood-boring insects.
• Ordering the title search (sometimes by the lender's lawyer or a title insurance company), to determine if the seller can convey clear title to you.
• Verifying hazard insurance coverage, to make sure the home is protected against major losses.

Once all the documents are assembled, a review of your application by the lender's loan committee will determine whether or not your loan is approved. When your application is approved, your lender will send you a loan confirmation letter to put the loan amount, interest rate and monthly payment in writing.

How long dose it take to get a mortgage approved, and can I do anything to speed up the process?

How long it may take before you loan is approved depends on what kind of loan you apply for, the efficiency of you lender, the lender's workload and your own diligence in supplying required information.

Here again is where our knowledge of what your lender needs and where the information comes from can help prod the process along - even to carrying paper from one place to another.

We will keep tabs on the different sources of information and needed action: Has your bank supplied your account information? Have your credit card companies produced reports? Will your insurance policy be guaranteed to be in effect by settlement day? Have your parents, relative or friends provided the "gift letter" that must accompany cash donation? Has your employer verified your income, etc?

What kind of homeowner's insurance should I carry?

Your lender requires you to carry a homeowners insurance policy (also "hazard insurance"), protecting your home (and the lender's money) against such hazards as fire, smoke , wind, hail, explosion, riot, theft, glass breakage (if the glass is part of the home), and damage caused by aircraft, vehicles or vandalism. A basic policy also protects you against injury to a visitor on your property.

An "all-risk" policy reimburses you for the major hazards plus damage due to lesser catastrophes such as burst water pipes. But, to insure all your equity and personal property, you may still need additional coverage.

A "guaranteed replacement cost" policy covers your home and contents for the full replacement value, rather than the actual cash value (the replacement cost minus deprecation).

Consider a policy with an "inflation guard" to adjust the amount of coverage based on the inflation rate.

What are "closing costs," and how much should I expect to pay?

Depending on your area, the price of your home, your lender's term sand other factors, your closing costs will vary. An agent can provide a rule-of-thumb figure for your situation. Also, your lender will give you a pre-settlement "good faith" estimate of specific costs. this estimate is sometimes low. Take extra funds just in case.

Closing costs typically include:

• Loan origination fee, usually 1% of your mortgage amount.
• Discount point (or points); each point is 1% of your mortgage amount.
• Assumption fee if you assume the seller's loan.
• Cost of a title search.
• Lenders' title insurance fee.
• Owner's title insurance fee (optional but advisable).
• Survey fee (if applicable).
• Transfer tax (state and/or local tax and tax stamps in some areas; sometimes split with seller).
• Lender's appraisal fee.
• Recording fees for settlement documents
• Prepaid interest on your mortgage, covering the time between settlement and yoru first monthly payment.
• Homeowner's hazard insurance premium.
• Property tax escrows.
• Lawyer's or escrow company's fee.

What happens at settlement?

In some areas, you and the agent meet with the sellers, their agent, a settlement officer and often attorneys representing the seller and/or you, to settle the transfer of the property and close the transaction. In other areas, an escrow office does all the preparations for closing, and contacts the buyer and seller to come in individually and sign their respective documents.

In either case you will need to provide:

• Your homeowner's insurance policy and paid receipt for one year's coverage, sometimes paid at closing.
• A certified or cashier's check (payable to yourself and ready to be endorsed to the seller, attorney or escrow company) for the balance of your down payment and your closing costs.
• Your regular check book so that you can pay any incidental costs. Typically all closing costs are calculated in advance and your certified check is usually sufficient.

You go over a list of adjustments presented on government-standard "Settlement Statements," to settle what you and the seller owe one another in cash, taxes, etc. You sign the mortgage and a mortgage note (denoting your monthly principal and interest payments). After recording all signed documents, you then pay the seller, and the seller gives you the title (or deed).

Finally

Now that you've finished the Home Buyer's Guide Contact a REALTOR today so that you receive the representation you need when purchasing a home.

If you know someone who is planning to move soon, please bookmark this website and forward our web address to them. We would be glad to share with them our experience as much as we've enjoyed working with you. Again, thank you!