Bi-weekly and weekly payments
Most mortgages have the option to allow payments to be made on a weekly or bi-weekly basis. This option may be desirable for two reasons. The first is it can save you money as you can expect to pay off your mortgage about 4 years sooner. This can save you dramatically over the life of your mortgage. The other reason why these options are so popular is that if your employer on a weekly pays you or bi-weekly basis you can simplify your budgeting by making the payment line up with the way you are paid.
Making Extra payments
Paying extra amounts on your mortgage can make a big interest saving over time. When we select a mortgage company, privilege payments options are something that we look for. A 20% privilege payment will allow you to pay off up to $20,000 per year on a $100 000 mortgage. It is important that the privilege payment also be flexible to allow you to pay smaller payments on the mortgage and as often as you wish. An extra $1000 periodically paid on a mortgage can help you become mortgage free faster.
Reducing the CMHC fees on your purchase
When you require a mortgage for more than 75% of the purchase price of a property, that mortgage must be insured by Canada Mortgage and Housing (CMHC) or GE Mortgage insurance. The premium charged by these company`s decreases as the down payment increases. When you finance your property at 95%, a premium of 3.75% is added to the mortgage. By increasing the down payment to 10% of the purchase price the premium can be reduced to 2.5%. If you can put down 25%, you can avoid any additional insurance fee. Depending on your situation there are ways that you can structure this financing to avoid the CMHC or GE insurance premium.
Advantages of Bigger Down Payments
As mentioned above, when you put a 25% down payment on your purchase you can avoid the CMHC premium. More importantly the larger the down payment, the lower the amount of interest you will pay over the life of your mortgage. It is important to note that it may not be wise to stretch yourself to increase your down payment and end up borrowing on credit cards or a line of credit at a higher rate.
Short Term Rates vs. Long Term Rates
The options for mortgages available can be very confusing for most mortgage shoppers. Terms for mortgages vary between variable and fixed rate, 6-month terms to 10 year terms. Taking a variable or floating rate mortgage can have savings. Typically the shorter the term or guarantee of the rate, the lower the rate will be. This does not always happen, depending on the market place and the economy, but history has shown that short-term rates tend to be lower than long-term rates. The up side of variable rate is the strong potential for interest rate savings. The down side is the fact that you are accepting the interest rate risk without a guarantee. If you are considering a variable rate mortgage you need to look at your own risk tolerance, and your cash flow available to deal with potential increased payment. Considering projections of rates and where we see interest rates heading can also be important in this decision. Make sure you talk to an expert when you are making this decision.
Owning your own home is a universal and timeless dream.
In many ways, this dream is more accessible today than ever before. However, one of the first realizations a prospective home buyer often comes to is that the "dream home" does not always seem affordable.
Buying a home has changed in the New Millennium. Before, buyers usually shopped for the best house they could find, then "took out” a loan to pay for it. Today, prospective buyers must shop as thoroughly for the best financing as they do…
No One Treats You Like The Folks At HomeLife
Making its Real Estate debut in 1985, HomeLife Realty Services Inc. is one of the World’s leading Real Estate Franchisors with hundreds of affiliates and thousands of Sales Representatives serving the Real Estate needs of consumers and businesses alike. HomeLife has businesses in a variety of countries worldwide, including Canada, The U.S.A., Germany, Portugal and China. Presently, HomeLife continues to expand one town, one city and one country at a time.
At the core of HomeLife’s remarkable success is the company pledge of Higher Standards. Instilled in each and every one of our Higher Standards Sales Representatives, HomeLife’s pledge is a unique commitment to professional conduct and excellence in customer service. That pledge, along with a strong dedication to community involvement, assures clients that they are dealing with ethical, knowledgeable and caring Sales Representatives. What differentiates us from our competitors, is our Higher Standards Five Star Marketing System.
There Are Many Good Reasons To Buy Your Own Home
Buying a home is a wise decision because property is one of the best and most secure investments available. Rarely, if ever, does Real Estate decrease in value. Depending on the area in which you live, buying a home may boast significant tax advantages over renting. Equity is another consideration. The equity you build as your home appreciates in value will allow you to borrow for expenses like a new car or college tuition. Your home’s equity is also the ideal down payment on the purchase of a second home or an "escape property" or vacation residence.
Buying a home also has several emotional advantages. The independence of ownership means that you’ll no longer have to worry about rent increases and the demands of a landlord. Another advantage is a homeowner’s power to personalize! When you own your own home, you can paint and decorate as much as you want. It’s your place!
An Important Question Before You Start Looking
Many potential homebuyers may wonder, do I really need a Sales Representative? In a word: Yes! A committed and professional Sales Representative will make the complex process of purchasing a home both simple and painless. A good Sales Representative should:
- Know market conditions in your community.
- Show updated knowledge of financing and mortgage rates.
- Know what is negotiable in a contract and what is not.
An experienced Sales Representative will also understand the complexities and importance of:
- Zoning and building laws
Buyer Agency Relationship
A written contract called a Buyer Agency Agreement establishes "Buyer Agency". It explains services the company will provide, establishes a fee arrangement for the Sales Representative’s services and specifies what obligations a buyer may have. The buyer’s Sales Representative works for the buyer and is legally obligated to look after their best interests throughout the entire real estate transaction. This Sales Representative owes full fiduciary responsibilities, duties and loyalty to the real estate buyer.
HomeLife Higher Standards Sales Representatives Know Your Community
Living and working in your area, we are in an ideal position to help you find exactly what you are looking for. We are knowledgeable of area market conditions, including prices and availability. Additionally, HomeLife Higher Standards Sales Representatives have access to the latest financing and mortgage rates, helping to ease the stress of buying.
HomeLife Higher Standards Sales Representatives also understand the many legal complexities of buying, including titles, taxes and surveys. HomeLife Higher Standards Sales Representatives know what is negotiable in a contract, helping you secure the best possible terms on the home’s purchase.
How do HomeLife Higher Standards Sales Representatives know as much as they do? Knowledge and Experience. Continuous training at HomeLife University ensures that our team develops the Higher Standards of knowledge needed to satisfy our clients. Experience makes HomeLife Higher Standards Sales Representatives experts in their field, as they make more Real Estate transactions in a few months than most of us will make in a lifetime.
It is also comforting to know that the performance of your HomeLife Sales Representative will be fully accessible. In fact, each HomeLife Higher Standards Sales Representative gives you their personal "Pledge of Availability", which states that they will be available when and where you need them, including evenings and weekends.
The Power Of MLS
Through their association with HomeLife offices, our Higher Standards Sales Representatives have access to resources not readily available to the public. One such resource is the Multiple Listing Service (MLS), an electronic Real Estate database. The MLS offers much more information about a home then one could find anywhere else, including utilities and Real Estate taxes. The MLS also contains the recent sale prices of homes in a specific area or community. This information will help you determine the true value of any home you may be interested in. The MLS is updated in real time, meaning that your HomeLife Higher Standards Sales Representative has access to homes the minute they’re listed. Best of all, The MLS includes many houses never promoted for sale by a lawn sign or advertised in a newspaper, giving you access to homes you may never have considered otherwise.
When Looking For A Home, You Should Seek Out:
- A Home That Fits Your Needs
- A Suitable Location
- The Best Possible Terms
- The Best Possible Price
- All Of The Above In The Most Convenient Way Possible.
Finding you a great home, in a good community, with the best possible terms and at the lowest possible price, is what we do. The Homefree Buyer’s Guide is how we do it. Homefree, HomeLife’s eight-step buying program will ensure your new residence is exactly what you’re looking for.
Our Secret To Finding You The Home Of Your Dreams
- Home Buyer Information
This is where your HomeLife Higher Standards Sales Representative learns everything they can about you, including:
- What you want in a home?
- What you need in a home?
- When you want to move?
- Property Information
Your HomeLife Higher Standards Sales Representative will walk you through an examination of your current residence and discuss your likes and dislikes.
- Area Selection
This is where your HomeLife Higher Standards Sales Representative will help you determine the areas that are the most convenient for your lifestyle.
- Financial Information
By considering your income, equity and debt, we will help you determine a suitable price range and financing requirements.
- Property Selection
We will evaluate specific homes to determine if they meet your needs. Together we will find a home perfect for you.
- Purchase Analysis
We will prepare a Purchase Analysis to ensure that the home you’ve selected is appropriately priced.
- Negotiations and Closing
In this important period, your HomeLife Higher Standards Sales Representative will monitor each step leading up to closing, including:
- Preparing the offer
- Loan applications
- Title reports
- Home inspections.
- Relocation and Moving Following the closing of your home’s sale, your HomeLife Higher Standards Sales Representative will help you coordinate every aspect of your move.
Pre-qualifying Your Purchase
House hunting begins, not by combing through different communities with a map and a dream, but by first sitting down at home and considering your present circumstances. We call it "pre-qualifying". Simply, it’s determining how much house you can afford to buy. Knowing your affordable price range will bring your house hunting into focus.
How much house you can afford to buy depends upon two things: how much you can afford for the monthly housing payment, and, how much you can invest in the down payment. Monthly payments include principal and interest on the mortgage loan, and property taxes and insurance against fire and other hazards. These four costs are often abbreviated P.I.T.I. (For some buyers and lenders, monthly housing costs may also include homeowner association dues, condominium fees and mortgage insurance).
Factors In Qualifying
In today’s market an "affordable" home is not so much determined by sales price as it is by the financing which translates that price into a monthly payment. A house hunter’s first step is to set a housing budget, then go shopping for the house (price) and payments (PITT) that fit that budget.
How Much House Can I Afford?
The key items to consider are the size of the down payment and the amount of the mortgage. A HomeLife Higher Standards Sales Representative will work with you to determine exactly how much house you can afford.
Sources for Your Down Payment
The obvious source of money for your down payment is either your savings or the proceeds from the sale of a home you already own. But there are some other not so obvious sources. In recent years, for example, "parent power" has taken some new twists for first-time buyers.
Home Equity Loan. Parents often have considerable equity built up in their own homes and many are tapping that asset through home equity loans to make a gift to their children.
Shared Equity/Profit-Sharing. In return for providing a part of the down payment the lending party shares in the "profit" or net equity of the house when the homeowners eventually sell it.
Stocks and Bonds. If you feel the market doesn’t warrant selling your stocks or bonds now you may be able to secure a bank loan using your portfolio as security.
Mortgage Insurance Can Reduce Down Payment
If you need a conventional loan, there is a way to put down only 5 or 10 percent. Through the lender, you will be required to buy private mortgage insurance (PMI). This insurance provides protection for the lender in case of default, and allows the lender to approve a larger mortgage amount.
In a common approach, you’d pay an initial amount at closing. Then, included in your monthly payments for your mortgage, you would pay an additional amount of the mortgage balance. This payment will usually continue until dropped at the discretion of the lender unless a stop point is specifically written into the deed, such as accumulating a 20% equity. Ask your lender for specific figures for any loan program you are considering as the amount of mortgage insurance varies by the type of loan.
The larger the down payment, the less money you need to borrow, which means a lower monthly payment. However, remember that in addition to your down payment and monthly payments you will need money to pay for closing costs, moving, appliances, household setup, a reserve for family emergencies and other miscellaneous items. So don’t plan to put your last penny down on the closing table.
More Mortgage Help
New types of mortgages such as graduated payment mortgages, flexible payment mortgages and deferred interest loans, feature monthly payments that start lower than usual in the early years, and thus help home buyers "afford" more house and buy sooner by qualifying on a lower mortgage payment.
What to Look For
Choosing a place to live can be one of the most exhilarating experiences of a lifetime. We’ve learned through the thousands of home seekers we have helped that the best approach is to be prepared. Our observation is simple. Your move can be an improvement if you duplicate what you like in your present community and avoid what you dislike.
Initial Buyer’s Consultation
A HomeLife Higher Standards Sales Representative can give you many initial pointers.
House Hunting Begins at Home: The search can begin in your present home, so we’ve developed some questions to stimulate your thinking and help you identify your needs and preferences. Once you’ve clarified what you like in your present community you will have a better idea of what you want to find. Plus, you will be able to express your preferences clearly to the HomeLife Higher Standards Sales Representative who can help you find it.
One hint to keep in mind as you go house hunting is: "The best time to think about selling your home is when you’re buying it". In other words, what appeals to you as a buyer today will probably also appeal to buyers tomorrow. A careful house hunter will benefit years from now when it’s time to sell to an equally value-conscious buyer. Build your buyer’s savvy by reading classifieds and homes-for-sale magazines, and also by visiting open houses.
Area & City Questions
Would you characterize your present area as urban, suburban, semi-rural or rural? Is the population density low, medium or high? Is the population decreasing, stable or increasing? What natural features are the most significant? Woods? Hills? Flat land? Rivers? Ocean shore? Man-made lakes? Streams and ponds?
How do you commute to work? Do you walk? Drive? Car pool? Taxi? Bus? Train? How far must you travel and how long does it take in the morning and evening? Do you use available public transportation for local trips or to visit close by communities? Can someone reach your home on public transportation?
Where do you do your shopping? Central commercial districts? Shopping malls? Supermarket shopping clusters? Community shops or home delivery? Imagine a list of typical stops in one week. How many miles and how much time would visiting the entire list require? Do you want greater convenience?
What types of schools does your family attend now? From grade school to graduate school, and from day care needs to special vocational training, what facilities will you require in the next few years? Are there any special needs or plans? Although it’s extremely difficult to compare quality of education, especially when the most important ingredient is the relationship between teacher and student, some statistical indicators can be helpful. Average class size at grade level. Comparative standardized test scores. Average salary of teachers. Percentage of high school graduates who go to college or university.
What does the area offer for recreation and entertainment? Music? Movies and live stage? Sports arenas? Museums? Nightlife? What types of indoor and outdoor sports facilities are available? Are there public parks, private country clubs, athletic clubs, fraternal groups? Do any of your hobbies require facilities?
Choosing a Community
After you take stock of the larger view of the area and city, this section helps you zero in on your community preferences. In real estate an old maxim says there are three criteria that determine market value: "Location, location, location". The fact is that the same boards and brick may be used to build two houses at two sites, yet the identical house across the area will bring a price thousands of dollars higher. The difference is location … or community.
The concept of community isn’t as precise as county or city. Some people consider the boundaries to be the district around a grade school. Others consider it "walking distance", more or less within a half mile radius. Wherever you draw the line, a community is the immediate area around your house.
To determine if a community is for you, spend some time in the area. Talk to area residents, visit area shopping centers, walk around and meet people. Get a feel for the kind of people who live in the community and whether you’d like to be a part of it.
Choosing a House
We’ve saved the best for last. In many ways home finding is easier than choosing a county and a community because you are considering tangible details. Yet our experience suggests that many people "decide" with emotion and "justify" with facts. This section will help you strike a better balance.
First, one should realize that thousands of houses are sold in the area every year. Inspecting the thousands of houses on the market is obviously impossible. But you can turn this overwhelming selection to your advantage. If you can clearly describe the features you require a HomeLife Higher Standards Sales Representative can make a preliminary screening for you. After you select the best houses you can concentrate on inspecting your top choices. The key is knowing what you need.
How many people will be living in the house? Do you prefer a new or resale home? What is your preferred housing style? Town house, Colonial, contemporary, split level, split foyer, Cape Cod, or something else?
How many total rooms do you need? Bedrooms, bathrooms? How strongly do you require features such as separate living room, dining room, laundry room, basement or attic, family room, fireplace, workshop area, garage? (Some people consider central air conditioning a summertime necessity.) How much property do you require? Do you have preferences for any particular natural features?
Many of our customers find it helpful to keep a record of the houses they inspect. A large notebook (8.5 x 11) is handy with pages large enough to record vital information as well as hold stapled instant pictures of attractive houses and communities or clipped advertisements.
Asking price? Original asking price? Has the price been reduced? What price did the house last sell for? In what year?
Is the asking price comparable to other houses in the community? Higher or lower? However, when carefully comparing properties be sure to take into account unique features and improvements that vary house-to-house, and consult the HomeLife Higher Standards Sales Representative who is experienced in market comparisons.
Is the existing mortgage assumable? Required down payment amount? What financing method is acceptable to the seller?
What are the annual property taxes? Will the taxes increase with transfer of deed and a new market price? Any local bonds or assessments?
Outside. Address of property? House style? Lot size? Landscaping details? Degree of grounds maintenance required? Age of house? Structural condition? Are any major repairs or improvements necessary? Maintenance of building?
Inside. Make a sketch of floor plans. Total number of rooms and baths on each floor? Any extras such as intercom, fireplaces, phone jacks? Built-in appliances: dishwasher, garbage disposal, trash compactor? Adequate storage space?
Construction. Inspect quality of materials, present condition, craftsmanship both inside and outside. Insulation? Weather stripping or storm windows?
Major systems. Plumbing, electrical, heating and cooling. What type of fuel does heating system use? Approximate annual cost? Perhaps a professional inspection of the major systems would be a good investment for a house that you are interested in purchasing.
Computerized House Hunting
At any moment, a complete description of homes presently listed for sale is available through the Multiple Listing Service (MLS) system in all HomeLife offices. Here’s how it works. When a house is listed for sale by any area broker, the home’s vital statistics are fed into the computer: the lot size; the age and kind of home (condo, townhouse, single-family); style (colonial, contemporary, Cape Cod, etc.); material (brick, stone, wood); the number, size and use of rooms (4 bedrooms, 2 1/2 baths, kitchen, living and dining rooms, family room, finished basement and attic, foyer, utility room, garage).
Also included are features (fireplace, walkout deck, patio, wooded lot); equipment (stove, dishwasher, carpeting, etc.); the heating and/or cooling systems; the water and sewage systems; the annual taxes; the mortgage balance, monthly payments, and the amount of cash a buyer would need to assume the existing mortgage (if it’s assumable), or the amount of cash required if the seller offers to take a second mortgage; and, finally, the selling price.
Finger-Tip Home Search
A buyer’s requirements can be fed into the computer by a HomeLife Higher Standards Sales Representative: particular communities; kinds and styles of homes; the number and kinds of rooms, and the price range. In minutes, the computer makes a quick search among the houses listed, and prints out all the houses that meet the buyer’s criteria.
The computer also helps buyers determine which home sellers will offer seller financing. It can calculate the amount of mortgage payments at various interest rates, under various financing plans. It can also help evaluate the investment and the financing that is right for the buyer. Plus, it’s updated each morning, as hundreds of houses enter and leave the market. In short, it’s the only way a buyer can check out almost everything that’s "out there".
Negotiating the Purchase
You’ve found it– your "dream" home! You want to buy it. Now what? You make an offer by submitting a signed real estate offer to purchase with the type of financing you desire. This is it, this will be the sales contract if the seller accepts it. Once you and the seller sign the paper, you are agreeing to the contract conditions. Before you sign it, read it carefully and make sure you understand it in every detail. Ask questions. Verbal agreements should be written into the contract. If you plan to have a lawyer represent or advise you, retain one as early as possible. This is where the HomeLife Higher Standards Sales Representative and an attorney can give you the assistance you need.
Offers and Counter Offers
The HomeLife Higher Standards Sales Representative will take the offer to a "contract presentation" with the home seller and the listing Sales Representative. In some areas, the three of them will discuss the offer, and the seller will accept it as written, or make "counter offers" on unacceptable aspects, or reject it. The selling Sales Representative will then bring back the offer to buy to the home buyer, who can accept it, counter the counter offer, or reject it. The offer to buy only becomes a contract when all parties have initialled every "counter offer" and signed the offer. When you sign the offer to buy you also will have to submit a deposit to show that you are serious about your desire to buy.
Making Sure Your Contract is Complete
Sales contracts differ, depending on circumstances, but there are several provisions you may want to include in a contract for the purchase of real estate.
- Deposit. The amount of "money put down" should be clearly stated, plus the amount of money you will be paying at settlement and your sources of financing. A common purchase deposit in many areas is 5% of the purchase price, deposited in trust and returned to you if the sale does not go through (for example, if you are unable to obtain the financing described in the contract) or forfeited if you decide not to buy.
- Contingency on Financing. Be specific about the total loan amount, the date a second or third mortgage is due, and the exact financing terms (for instance, a buy-down mortgage rate at 10 1 / 2% for 3 years and 13% thereafter for 22 years.) Many contracts have an "alternative financing clause" that allows buyers to accept different financing than that which is written in the contract, as long as it doesn’t affect seller’s net proceeds.
- Contingency on Inspection. If you feel the property may have structural or other defects, you may make the contract contingent on a building inspection report, satisfactory to you. You will usually have to pay for this inspection, but the peace of mind or detection of a problem may be worth the cost of inspecting.
- Personal Property.Light fixtures, drapery rods, chandeliers, washers, dryers, refrigerators, heating oil in the tank, storm windows and doors, firewood, even swimming pool chemicals and other items not physically attached should be specified in writing if they’re to be conveyed to the buyer. Misunderstandings based on verbal agreements can delay settlement as well as cause friction.
- Repair Work.Sellers are responsible for plumbing, heating, mechanical, and electrical systems to be in working order at time of settlement, unless you agree to accept the property in "as is" condition. You and your HomeLife Higher Standards Sales Representative should con duct a "presettlement walk-through inspection" which should be made several days before or no later than the day of closing.
- Title Transfer. Title Transfer is a complex procedure that should always be negotiated by a lawyer. You should shop and compare prices before deciding what attorney will conduct your closing.
- Closing and Occupancy Date. You may want to include an arrangement with the seller in the event you can’t secure possession on the agreed date, such as a daily rent-back agreement for "post settlement occupancy".
Locating the Right Loan
Your HomeLife Higher Standards Sales Representative can be very helpful in finding a mortgage for you. You also have the option of shopping around for the best terms you can obtain. Generally, a mortgage acceptance requires a time period for approval.
Shop Smart for Mortgage Money
It used to be that qualified home buyers simply went to their nearest bank or savings and loan for the standard, fixed-rate or 25 year mortgage. Interest rates were not greatly competitive. Now, of course, things have changed. Competition among lenders is lively, and smart borrowers shop carefully to find the deal that best suits their circumstances and needs.
Here’s where to shop:
Mortgage Bankers. Mortgage bankers issue mortgages to borrowers. They then process and sell the mortgages to large investors or into the secondary mortgage market.
Mortgage Loan Brokers. Some individuals or groups charge a fee (usually to the borrower) to match borrowers with lenders. Sometimes they make direct loans. An advantage of working with mortgage brokers is that they often represent many investors and can provide you with many more financing alternatives, usually at the same price as the mortgage banker.
Financial Institutions. Mutual savings banks, savings and loan associations, insurance companies and some commercial banks are the traditional sources of mortgage loans. Savings and loans often grant favorable terms to their own account holders.
Private Lenders. Individuals (often home sellers) and groups (sometimes sellers’ employers if the seller is being transferred) lend money. This source is especially helpful in arranging second mortgages, but can also assist with first trusts, wrap-arounds and other mortgage plans.
Credit Unions. A good possible source for credit union members. Credit unions can write 25-year conventional and government insured mortgages. Some will make loans; others will not.
Finance Companies. To compete with the more traditional lenders, some finance companies promise quick service and some do not charge mortgage "prepayment penalties".
Ten Questions Most Lenders Will Ask You
Unless you’re prepared, applying for a mortgage loan can be something like going into a strange supermarket without a shopping list or your wallet: bewildering, time wasting and frustrating.
Here’s the information most lenders will need:
- The amount of money you wish to borrow and the length of time you will need the money.
- Your current address and, if you’ve been at your present address less than two years, your previous address.
- Your Social Security/Social Insurance Number.
- Your present employer’s address and, if you’ve been at your present job less than two years, your former employer’s address. 5. Your gross monthly income.
- Your bank account numbers and your approximate balances.
- Your assets (real estate, personal property, paid-up life insurance, etc.)
- A complete list of your debts, with their account numbers.
- A copy of the sales contract.
- An account, in writing, of any problems concerning your application.
With this information in hand, here are the steps the lender will take to process your application:
- Verify the facts.
- Get a credit report.
- Make a property appraisal.
- Review your application.
- Decide whether or not to make the loan.
Some Questions You Should Ask Most Lenders
- Are both fixed-rate and adjustable mortgage loans available?
- What is the interest rate?
- How long can I "lock-in” the financing at the current interest rate?
- What are the other fees a lender may charge me in conjunction with my loan?
- Are funds for a second mortgage available?
On adjustable loans:
- How often will the interest rate be adjusted?
- Is there a maximum limit on each rate change?
- How often will the monthly payment be adjusted?
- Is there a ceiling on payment adjustments?
- Can the term of the loan be extended?
- Is there a prepayment penalty clause? This involves extra charges for paying off the loan before maturity.
- Is it an open-end mortgage? (An open-end clause in a mortgage allows you to borrow in the future for home improvements or other purposes, up to the amount of principal you’ve paid off).
- What is the "grace" period? How late can a monthly payment be made before a late charge is assessed? What will happen if a payment is missed?
- If you sell your house, will the new buyer be able to assume your mortgage at the same interest rate?
- Will the lender require mortgage insurance?
Most lenders require a homebuyer to provide at closing a one-year paid receipt for a Home Insurance Policy. These policies are available from leading insurance companies. Fire and hazard insurance provides protection for fire and other perils to your home and its contents.
An Expert House Inspector
What can homebuyers expect from a home inspector besides a bill for $150-$350 (depending on size of property and/or complexity of the inspector’s report)?
- First of all, require proof of membership in the Society of Home Inspectors.
- Expect a quickly delivered (one or two day) written report
- Expect practical returns. While you can see for yourself many flaws in a house, the practiced eye of a professional inspector can probably spot more, especially in areas not easily accessible to a home buyer.
- Specific information could even reduce the price of a house if the seller will agree the price has not already been discounted for defects
- Possible Repairs:
- Serious problems (heating, roofing, plumbing).
- Medium problems (insulation, paint).
- Minor problems (electrical outlets, kitchen sink).
- If no serious problems are found, inspection can pay off indirectly in assurance that you are making a sound investment.
Title insurance provides protection in the event any of a number of past actions threaten the title to your property. Most lenders will require title insurance to protect their interests.
As a home buyer, you may be able to save money with a "reissue rate" for title insurance, if the property changed hands within the last several years. The title insurance may allow a lower "reissue rate" premium because the recent title search is still valid. Consult your attorney and insurance company.
After Loan Approval
After the lender approves the mortgage, the buyer will receive a "loan commitment letter" stating the mortgage amount, interest rate and length of loan term. The buyer should check it carefully, and return a signed copy to the lender or follow other specific instructions.
The purpose of the walk-through inspection several days prior to closing is to determine if all conditions in the contract are satisfied. The time for the buyer to inspect and note defects for correction by the seller is during the contract negotiations and prior to signing the sales agreement. Repair or replacement items should be noted in the contract or contingent on a house inspection, otherwise most resale homes are sold in "as is" condition.
It is up to the buyer to perform the walk-through inspection, not the seller, who may or may not be present. The buyer should be accompanied by the selling Sales Representative. The home seller should be sure utilities are on so that equipment can be operated.
Room By Room
The buyer should try all lights and switches; turn all faucets on and off, run the shower, flush toilets; turn on the furnace and central air conditioning (in the off-season, buyer should hire a professional to certify proper functioning of both heating and air conditioning); test all stove burners, oven at bake and broil; run some ice cubes through disposal to test blades; run dishwasher, washer, dryer through complete cycle; open and close all windows and doors. In short, try everything, even keys and fireplace flue.
All deficiencies should be noted, and funds may be withheld from the home seller by the attorney for repairs, if seller does not correct problems prior to closing. The selling broker will coordinate with the listing broker and seller to make repairs before closing, if possible. Upon receipt of bills and notification that repairs are complete, the attorney will release balance of funds to the seller, if money is “held back” for needed repairs.
The Big Day!
The big day is here! Tonight you can pop open the champagne, but today there will be a lot of paper signing and a poignant passing of the keys (don’t forget the garage keys, and electric door opener, too).
The attorney will have searched the title, provided title insurance and obtained old and new lender instructions. First, all unresolved walk-through deficiencies are resolved.
With the buyer, the attorney explains the deed of trust or mortgage; the deed of trust note or mortgage note; lender forms; and settlement sheets. Buyer signs all these, and pays the balance of the down payment and buyer’s closing costs with cashier or certified check.
Open Look at Closing Costs
"Closing costs" have lost much of their mystery in recent years. By formal legislations, in most areas, the homebuyer is furnished an estimate of closing costs by the lender, in advance of the closing. In some cases, some of the closing costs may be paid by the seller; this is particularly true for new housing, where the seller is the builder.
Settlement fees vary widely depending on price, location and other factors but overall the buyer’s costs usually average between 3% and 7% of the sales price. Items that are usually included in the settlement fees are the loan origination fee, mortgage insurance premium, attorney fees, owner and lender title insurance, recording fees, tax stamps, and the survey fee. In addition the lender will require an appraisal fee and a credit report fee in advance of the closing.
A few other items, not required to be listed under the law, may also have to be paid at a closing. These include advance deposits held in trust for real estate property taxes and insurance. The lender collects a portion of these every month and then pays the insurance and taxes when they are due.
Because specific closing costs vary from area to area, and transaction to transaction, we encourage you to consult with a HomeLife Higher Standards Sales Representative to determine your exact charges.
Signing the Dotted Line
With the seller, the attorney explains the settlement sheets and gets the home seller’s signature on them and the deed. The seller then pays appropriate closing costs. If the seller’s taxes or insurance have been paid in advance, the seller will receive any money accumulated in the account for bills not yet due. The seller will receive these refunds at or after closing, depending on the area. Taxes and homeowner’s dues or condominium fees will be prorated on a daily basis. Seller, buyer and brokers are supplied a copy of closing statements for their records.
The house keys are passed.
You are now the proud owner!
Words to the Wise
Agent. A person acting on behalf of another, called the principal.
Agreement of Sale. Known by various names, such as "contract of purchase", "purchase agreement", "sales agreement", or "binder", according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.
Appraisal. An expert judgment or estimate of the quality or value of Real Estate as of a given date.
Assessed Value. The valuation placed upon property by a public tax assessor as the basis for taxes.
Bill of Sale. An instrument which transfers title to personal property (chattels); a ‘Deed’ transfers real property.
Certificate of Title. A document signed by a title examiner or attorney, stating that the seller has good marketable and insurable title.
Chattel. Tangible, movable property which may be included, the sale of real property.
Closing Statement. The computation of financial adjustments between buyer and seller as of the day of closing a sale to determine the net amount of money which buyer must pay to seller to complete purchase of the Real Estate, and seller’s net proceeds.
Commission. Payment of money or other valuable consideration to a Real Estate broker for services performed.
Convey. To deed or transfer title of property from one person to another.
Deed. A formal written instrument by which title to real property is transferred from one owner to another.
Deposit Money. The money given to the seller by the potential buyer upon the signing of the agreement of sale to show that buyer is serious about buying the property/house.
Equity. The interest or value which owner has in Real Estate over and above the debts against it. (Sale Price – Mortgage Balance = Equity)
Escrow. Funds, property, or other things of value left in trust to a third party. The Escrow may be released upon the fulfillment of certain conditions or by agreement of the parties.
Fixture. What was formerly personal property which is now permanently attached to real property and goes with the property when it is sold.
Hazard Insurance. Protects against damages caused to property by fire, windstorms, and other common hazards.
Land Contract. Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a land contract the parties involved are only the seller and buyer. Seller receives land contract payments and continues to pay existing mortgage payments, if they exist .
Listing Contract. Between a home owner (as principal) and a licensed Real Estate broker (as agent) by which the broker is employed to sell the Real Estate within a given time for which service the owner agrees to pay a commission. Also, “listing agreement".
Market Value. The highest price which a buyer, ready, willing and able but not compelled to b u y, would pay, and the lowest price a seller, ready, willing and able but not compelled to sell, would accept. Basis for "listing price" or "asking price".
Market Price. The actual amount for which a piece of property is sold. Also, "sales price", "purchase price".
Mortgage. A lien or claim against real property given by the buyer to the lender as security for money borrowed.
Mortgage Note. A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness, and states the manner in which it shall be paid. Also, "deed of trust note".
P.IT.I. Principal, interest, taxes and insurance. Most residential mortgage payments include the above and are therefore referred to as PITI. Also, "carrying charges".
Prepayment Penalty. Penalty for the payment of a mortgage note or deed of trust note before it actually becomes due.
Principal. This word has several meanings: (A) to denote the most important; (B) a capital sum lent on interest; (C) one who appoints an agent to act for and in behalf of the “principal”; (D) either party to a contract.
Property Management. The operation of real property, including the leasing of space, collection of rents, selection of tenants, and the repair and renovation of the buildings and grounds.
Prorate. To allocate between seller and buyer their proportionate share of an obligation paid or due. For example, a prorate of real property taxes, fire insurance, or condominium fee.
Sales Representative. A person with a real estate license and associated with a specific real estate broker.
Survey. A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure a building is actually sited on the land according to its legal description.
Title. As generally used, a document that indicates rights of ownership and possession of particular property. A summary of the public records relating to the title to a particular piece of land.
Title Abstract. A summary of the public records relating to the title to a particular piece of land.
Title Insurance. Protects lenders and property homeowners against loss of their interest in property due to legal defects in title.
Title Search or Examination. A check of the title records, to make sure the buyer is purchasing property and there are no liens, overdue special assessments, or other claims.
Transfer Tax. Local tax (where applicable) and tax stamps (in some areas) required by law when title passes from one owner to another.