from tenant to home owner

8/8/2019 From Tenant to Home Owner

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A publication ofNgansop, Properties Investment LLC; INEPOSCollection; 2008

The Home Buyers Guide/Washington Metropolitan

Photo INEPOS Collection

By Charles NgansopRealtor,Real Estate Consultant; Public Notary.

[email protected]


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The Home Buyers Guide

______________________________________________________________________________________A publication ofNgansop, Properties Investment LLC; INEPOS Collection; 2008

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Table of Contents

page

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A Should one remain aTenant or Buy a Home? ------------------- 4A1 Renting: Advantages and Disadvantages.A1.1 Advantages of renting:A1.2 The disadvantages of rentingA2 Buying: Advantages and disadvantages.A.2.1 The advantages of being ahome owner

A.2.2 The disadvantages of being ahome owner: ------4B. If I decide to buy, how do I go about it-------------------------5B.1 Be ready-B.2 Choose yourReal Estate Agent (Realtor)

B.2.1 Can I carry out the transaction myself without a Realtor? ----------------- 5

B.2.2 What will be therefore, the role of the Realtor? ------------------- 6B.2.3 How do I choose my Realtor?B.3 Choose your Loan Officer. (L.O)

B.4 pre-qualification: What do we understand by that? ----------------- 6B.4.1 What documents do Ihave to tender in for my pre-qualification? --------------7B.4.2 These are my personal informations.Will they be secured? -B.4.3 Once pre-qualified, what are the documents I have to receive from the Agent?B.4.4 You talk of estimates: at what time do I know the definite figures?

B.4.5 Can ifhappen that the definite figures differ from the estimates figures? --------------7B.4.6 If Im qualified what other information do I have to know? --------------- 8B.5 As concern the Credit Score.

B.6 Choose the type ofhouse you wan to buy. ----------------8B.7 House Hunting time: ------------------9B.8 Purchase offer----------10B.9 InspectionB.9.1 ContingenceB.9.2 As-it is condition.B.1.1 InsuranceB.1.2 Loan Approved

B.1.3 The walkthrough-----------------10B.1.4 closing the transaction. -------------11C. Before you move to your newhouse.D. After you moved to your newhouse

E. As Concern

E.1 Down Payment. (DP)-----------11E.2 Deposit (or Earnest money Deposit) ---------12E.3.1 Closing CostF.Closing Statement

References: ----------------------------------------------------- 12


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Warning.

The information contained in this brochure has been collected from

sources of faith. It is solely prepared in this case to inform and educate

the consumer on the general plan. This document should not be considered a judicial reference. The reader is therefore advised to seek the help of

lawyer specialized in real estate for more details.

All rights reserved. The text of this publication, or any part thereof, may

not be reproduced in any manner whatsoever except as permitted under Section

107 or 108 of the 1976 United State Copyright Act, without written permission

from the author.

Copyright 2008 by Charles Ngansop

This publication was translated from the French original version


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A - Should one remain a Tenant or buy a home?

The answer to this question can differ from according to the various cases

A1 Renting: Advantages and Disadvantages.

A1.1 Advantages of renting:o Affordable prices;o No maintenance fees;o Cheaper for a short term lodging.

A1.2 The disadvantages of renting1. Obligations and exigencies of the landlord (For example, you cant effect any modification inyour apartment without his permission);2. Youre exposed to the worries and humburgs of the neighbors.3. Limited space;4. Limited time. Length of time as Tenant limited by the landlord;5. You are limited by the humours of the landlord who can increase the rent anytime;6. No tax benefit;7. Costly at the long run.

A2 Buying: Advantages and disadvantages.

A.2.1 The advantages of being a home owner.1. The prestige of proprietorship;2. Tax benefit;3. You enjoy more space and freedom. You can modify your house to your taste;4. More privacy in your life;5. Saving: in the course of time, your house will become valuable as such as constituting a

real capital saving.6. You have the possibility of having access to new credit lines;7. It proves your stability in the eyes of the local collectivity.

A.2.2 The disadvantages of being a home owner:1 The need for big capital2. The cost of maintenance is high


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B. If I decide to buy, how do I go about it

B.1 Be ready

These are some ideas to help you to better prepare yourself.1. Put in place a family budget. Its importance cannot be over emphasized. This helps you

to better control your expenses.Reduce your dept.Investors are very particular about your depts which, in a general way,

should not exceed 36% of your monthly income?Warning! Reducing your dept does not mean closing out your credit cards account whichyou already have.2. Increase your income; look for a part time job. This will increase your chance of being

qualified for a loan;

3. Save some money: Buying a house without having some money in saving account is areal adventure. Indeed, investors insist on seeing your economies which must be, at least,equal to three monthly payments of your future mortgage.

4. Do not quit your job.But if youre forced to do so, be sure that you remain in the sameprofessional field.

5. Establish a detailed line of credit. Get some credit cards if you do not have any yet.Afterusing them, make sure you pay back on time.

6. If youre in an apartment, respect the payments due dates of your rents.Do the same forothers bills such as telephone, car insurance, car payments etc.

7. Get a detail account of your score credit; you can obtain it freely from one of the officesindicated in paragraph B.5

B.2 Choose your Real Estate Agent (Realtor)His job is to represent you all through the buying process. This procedure is very complex.Without being a jurist, he defends your interest throughout the transaction. Youre related byan agreement of faithfulness and loyalty towards each other. This agreement will be served toyou for signature at the first meeting or before visiting the houses. Its advisable to tell himthe truth on your finances, in order for him to better preserve your interests.The Realtor is rewarded by the seller, through is company once the transaction isaccomplished.But in certain cases, he can insist on having money for transport to moveabout showing the houses.

B.2.1 Can I carry out the transaction myself without a Realtor?Sure. You can carry out the transaction without the assistance of a Realtor, if you have thenecessessary competence. You do not need a license to carry out your own transaction.


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B.2.2 What will be therefore, the role of the Realtor?Like in all professions, the real estate industry has its own peculiarities which are not always

evident to the outsider.A real estate transaction needs a lot of patience and endurance, theenemy of time.Many documents to consult and sign, add to the complexity of a transaction.The presence of an expert beside you will be more than beneficial. Sure, your houseconstitutes, without doubt, one of the greatest investment of your life. Why take the risk toventure in a domain as complex as this without the help of a guide? And , best of all, this is afree service for you

B.2.3 How do I choose my Realtor?The following qualities to govern your choice of Realtor:

o Availability: A good Realtor has to be available. Generally, those who work part-time will give you appointments they will hardly honor because they are occupied by

their first jobo Experience: If he is in the job for less than a year, there are high chances of him not

mastering all the rules of the transaction.He risk abandoning you, wasting your timeand money when the transaction becomes complicated.

o Fame, Honesty,Aggressiveness in work etc.A good Realtor makes himself knownin his community by the quality of his work. Inform yourself from those who havehad his service in the past.Avoid the trap on the internet where you risk falling in thehands of unscrupulous agents.

B.3 Choose your Loan Officer. (L.O)It is generally advisable for you to seek the opinion of your Realtor who can help you in

finding one. The Loan Officer controls all the financial aspect of the transaction starting withyour pre-qualification.

B.4 pre-qualification: What do we understand by that?You are pre-qualified in the process of purchasing a house when you fulfill certainpreliminary conditions, established by Lenders.Among these criteria, one can quote:

o Your Credit score;o Your annual income;o Your debts;o Your activities (at least two years in the same line of work);o Your place of residence (at least two years in the same residence);

o Your asset (at least the equivalent of three months of your monthly payment of yourfuture house).


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B.4.1 What documents do I have to tender in for my pre-qualification?

The documents to be tender vary depending on the Lenders.But following a general rule,you have to produce:

1. Your social security card2. The prove of your status in the USA (If youre illegal alien, you cannot be qualified

for such loan .But somebody can be a guarantor for)3. The prove of your incomes: the W-2 form for the last 2 years if youre an employee

or the Profit and Lost Statement plus the last 2 years tax return, if your are a Selfemployee

4. Two resents pay slips for the employee;5. The last three months bank statement;6. The prove of your residence during the past two years;

This list is far from being exhausted.

B.4.2 These are my personal informations.Will they be secured?In general, there is no guarantee that your informations shall be in security.But the Agentsare supposed to respect the confidential of all the personal information that you give them.

B.4.3 Once pre-qualified, what are the documents I have to receive from theAgent?He has to give you at least two documents: your letter of pre-qualification and the transcriptof estimates of your expenses that you will have to engage in the transaction. It is calledGood Faith Estimate (GFE).If you dont understand anything in this sheet, you have to at

least retain three things: your interest rate, your monthly payment and the closing fees for thetransaction, commonly known as closing cost. It is duty on the part of the loan officer togive you these documents

B.4.4 you talk of estimates: at what time do I know the definite figures?Just before the closing of the transaction, generally 24 hours before the closure. These figuresare contain in a form callHUD-1, given to you by the Title company in charge to close thetransaction

B.4.5 Can if happen that the definite figures differ from the estimates figures?Yes.More or less, from a hundred to a thousand dollars at the most. It is for that reason you

should always have you check booklet with you on the day of the settlement, to round upthe angles


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B.4.6 If Im qualified what other information do I have to know?These are some questions you will ask your LOWhat are the different types of popular real estate loan that you offer?

1. What type of loan will be convenient for me and why?2. Your interest rates, closing cost and miscellaneous are they negotiable?3. Is mortgage insurance, commonly called PMI obligatory? If Yes, what will be the

amount?4. Do not mistake it with hazard insurance with is obligatory. The Premium Mortgage

Insurance is generally insisted upon by investors if the borrowers personalcontributions less than 20% of the total of amount of the loan.

5. But as soon as your house accumulates a certain value, this insurance can be

cancelled at the discretion of the investor.6. For how long will you lock up my interest rates.7. How many points will you charge me? How much time do you need to close this

transaction?8. Will there be an escrow account along with my mortgage? An Escrow account is an

account in which part of your monthly payment is deposited for the benefit of taxesand hazard insurance.

9. Does my loan has a pre-payment penalty provision?

B.5 As concern the Credit Score. (C.S)The Credit Score is a numerical evaluation, a detail account of your credit history. It is used

by investors to measure the degree of risk of every borrower. This variable is calculated bycomplex mathematical formula which take into account, among others:, your debt, yourpayment history, the length of your credit history etc.The Credit score varies generally between 300 and 850.The more it is high, the more it isgood. Generally, any score less than 400 is said to be bad. Every score more than 700 is saidto be good. There exist in the USA many credit bureaux.The best known are:Equifax (www.equifax.com) Po Box 740341, Atlanta, GA 30074Experian (www.experian.com) Po Box 2002,Allen ,TX, 75013Transunion (www.transunion.com) Po Box 1000, Chester, PA 19022.

B.6 Choose the type of house you want to buy.

Discuss this issue with your Realtor Prices vary according to the model, size and location.Single Family.(SFH),Town House (TH) and Condominium (CD) are the most common inthe Washington Metropolitan area.


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B.7 House Hunting time :

Select your dream home, get a road map ready and write on it:1 The characteristics of your future house. For example the style of the house, the number ofrooms and toilets, the necessity of a garage and a basement, the material of the floor, etc.2 The location. Generally, many factors govern these criteria: the nearness to the place ofwork, childrens school or place of worship, the existence of public transportation and manyother factors.Select your house with yourAgent. Examine it in and out.Be sure that this house answers toat least 70% of your expectation.Avoid being guided in your choice by emotions.Berational. Compare the positive and negative points of each house before you decide. If you donot find it easy to choose, ask the opinion of yourAgent .A house might be pleasing to youwithout being that which is convenient to you. Let a friend accompany you.His opinion can

influence your choice.A good or bad choice can make you loose or save money in yourtransaction.

B.8 Purchase offerYourAgent will prepare an offer which you are going to sign. The Agent will be in chargeand transmit it to the other party. The contract must absolutely have an engagement (EarnestMoneyDeposit) in the form of a money order or check filled in the name of a neutralparty.(The Title company)The dollar amount of the Deposit is not determined by the law.In case you desist or a break up of the contract this amount is not refundable.

B.9 Inspection

B.9.1 ContingenceIf your offer is accepted, the law obliges you to make the house be inspected within sevendays following the acceptance of your offer. With the help of yourAgent, recruit a CertifiedResidential Home Inspector.His role is to establish a medical report of the house youwant to buy.He will insist on points such as: plumbing, A/C and heating and the electricalsystems, the roof, the foundation, the door, the windows, the kitchen appliances, etcAll the faults observed shall be contained in the inspection report. The seller has theobligation to repair all the vital defects like the plumbing, electrical, AC and Heatingsystems, the roof and the foundation.Minor defects can be repaired or constitute a point ofnegociations.If no compromise is arrived at, you can breach the contract and insist on the

reimbursement of your deposit.


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B.9.2 As-it is condition.

If the house is sold as it is, the seller is under no obligation to repair any defects as noted bythe inspection.All vital installations, however, should be in a good functioning conditionThe law recommends the seller to give to the buyer a document that summarizes to hisknowledge the state of the house. YourAgent has to play a very important role in theanalysis of this document which can contain very unpleasant surprises.The inspection fees vary from one Home Inspector to another, from one house to another.Beprepared to pay at least $400 for SFH, $350 for a TH and $300 for a CD.A certified Real estate Appraisal will equally be recruited by the Lender at your expenses todetermine the market value of the house you which you to buy.(It will cost you no less than$450 for this service).If the report of the evaluation indicates a price inferior to the priceoffered , the seller has to conform to it so that the lender can accept to finance it. If the report

indicates a higher price than that offered, it is to the advantage of the buyer.

B.1.1 InsuranceYou will need to purchase hazard insurance. It is mandatory. The loan can be rejected if thisinsurance is not bought.

B.1.2 Loan ApprovedYou will be informed by yourAgent who during all the transaction works in collaborationwith the loan officer

B.1.3 The walkthrough

Once your loan has been approved, with yourAgent, make a short tour of the property,preferably one or two days before the close of the transaction. Take down notes for anyinadequate remark.Here your Realtor has to show proof of his professionalism.He has tohave on his hands a document to verify point after point and room after room. Everything tobe corrected must immediately be reported to the seller through his agent. If no action istaken to remedy, the imperfection observed, the report should be envisaged on the day of theclosing.


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B.1.4 closing the transaction.

The D-day is the great day.Around the table will be:The Seller and his AgentThe buyer and his AgentA Real Estate Attorney. This attorney is chosen by the Buyer, according to law. Seek the

advice of your Realtor in getting a reliable and an experienced one.The Attorney will explain to you the pros and con the documents to be signed, the relatedfees, from the beginning to the end of the transaction.You will sign a lot of documents. So, be prepared for lot of paperwork signatures.After all these, youre done. Get the keys, give hook or shake hands with the other party.Bravo! Youre now Proprietor. Welcome to the club! Do not forget to organize a HOUSEWARMING PARTY. Ill be there. See you.

C. Before you move to your new house.Your Realtor will direct you how to transfer your utilities subscriptions.Recruit a pest control company to disinfect your house and keep away best such ascockroaches, rats etc.Seek advice from your Realtor for the choice of who offers competitiveprices.

D. After you moved to your new houseSurely, you will receive letters from many marketing and advertising companies.Dontworry about them.But pay attention to your first bills which will start coming after about 45days. Your Realtor, if he is competent has to assist you from time to time for a follow up.

Do not hesitate to call him if you have a question or concern.

E. As Concern

E.1 Down Payment. (DP)Literally, DP is a personal endeavor in the process of asking loan. It is generally expressed interm of percentage in relation to the purchase of house. The rate varies from zero to twenty(or more) percent as the case may be. If the house youre buying is your first home and notdesigned for investment, and your Credit Score conforms to their standard, many Lenderswill not ask you for any personal endeavor. It is the famous Zero down heard over radiosand TVs in the advert pages.

On the contrary, if youre buying a house for investment, or if your Credit Score is notconformed to the standard stipulated by the Lenders or lastly if you belong to the Diplomaticcorps then your personal endeavor will be asked.


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E.2 Deposit (or Earnest money Deposit)

Its a caution fee.A proof of good faith. It assures the Seller of your real intention to buy hishouse (see paragraph b.8).The amount of the money is not defined by law.But in practice itvaries depending on the price of the sale of the house. It has to be in the form of check ormoney order, filled under the name of a third party.(the title company or your Realtorscompany) This money will go towards the closing cost to the benefit of the Buyer in case thetransaction is totally performed.But if the Buyer unilaterally provokes a breach in thecontract, he looses this money.

E.3.1 Closing CostIt is fees inducted by the transaction. These fees are made up among things of: Loanapplication, title insurance, Hazard insurance, Lawyer, taxes, recordation, courier etc. In

general these fees are estimated at about 4 to 6% of the price of the house. These fees areimputed on the buyer, but the Seller can assist the Buyer if he desires in the form ofsubsidies, in the payment of this amount. It all depends on the talent of your Realtor to be agood negotiator.

F.Closing RemarkIf you have questions regarding this Guide or if you want to have a personal consultation asto what concerns the buying and selling a house, contact the professional Charles Ngansop:Fairfax Realty Inc.11333Woodglen Dr., Suite 150, Rockville ,MD 20850Phone: 301-881-9800 Ext 543.Fax: 301-881-2270; Cell 301-437-0163E-mail:[email protected].

References:

1/ Thomas A.Morgan: The Loan Officers Practical Guide to Residential Finance: 2007,19th Printing; Quick Star Pub.2/ The Federal Reserve Board:A Consumers Guide to mortgage financing; April 20073/ Long and Foster companies: The Buyers Guide: 20054/ Universal settlements: The guide to home buying5/ US Department of housing and Development: Buying your home: Settlement cost and

helpful information, June 19976/ Realtor magazine online:www.realtor.org/realtormag.

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