home buying 101

HomeBuying

101

Home Buying 101

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Working with ZipRealty

Ourguaranteetoyou 2

Whatyoucanexpectfrom yourZipRealtyAgent

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ZipRealtyrebate 4

Home Buying 101

HowmuchcanIafford? 5

Rentingversusbuying 6

Howtofindagoodvalue 6

Buyingadistressedproperty 7

Buyingnewconstruction 10

Homeinspectionsandwarranty 10

Home Loans and Preapproval

Preapprovalprocess 11

Questionstoaskaboutyourloan 12

Closing 101

Closingtimeline 13

Whatyoucanexpect 14

Glossary of real estate terms 16

Table of Contents

Home Buying 101

2 3*See website for full details.

You Get the Best of Both at ZipRealtyWhenyouworkwithZipRealtytobuyorsellyourhome,yougetthebestofbothworlds–awebsitewiththebroadestandmostusefularrayofinformationandtools,andalocal,responsiveagentwhosenumberonepriorityisyou.

We Guarantee Your SatisfactionWe’re100%committedtomakingsureyouhaveagreathomebuyingorsellingexperience–infact,weguaranteeourservice.Ifyou’renotsatisfiedforanyreasonwhenyouclose,we’llpayyou$250*–that’showconfidentwearethatyou’llenjoyworkingwithus.

Rate Your AgentLoveyouragent?We’regladtohearit.ZipRealtyisoneoftheonlycompanieswherewe’lltackonanicebonustoyourZipRealtyAgent’scommissionforprovidingyouwithsuchgreatservice.Afteryourtransactionclosesallyouhavetodoisletusknowthatyouwerecompletelysatisfied,andwe’lltakecareoftherest.


94% of our customers would recommend ZipRealty to their friends

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The Role of Your ZipRealty AgentYouwanttoworkwitharealestateagentwhoisknowledgeable,friendlyandhardworking…andvaluesyourtimeasmuchasyoudo.Thatmeanssomeonewhoreturnsyourcallsquickly,answersyourquestionspromptlyandcompletely,andwhenyou’rereadytomoveforward,they’reready,too.

Atothercompaniesthatcombinationofaccountability,responsivenessandknowledgemightbehardtocomeby,butatZipRealtyweconsiderthatthebasics!

In addition to providing you with “the basics,” your ZipRealty agent will:• Helpyoufindtherighthomeforyou,inyourareaandpricerange• Workwithyoutoprepareanoffertopurchasethehouse

andprofessionallypresentittotheSeller’sAgent• NegotiateonyourbehalfwiththesellerorSeller’sAgent

aftertheofferispresented• Workwiththetitlecompany,thelender,andthesellerorSeller’sAgentto

arrangeallnecessaryinspections• Discussandexplaintheinspectionreporttoyouandnegotiatewiththeseller

orSeller’sAgentforanyrepairstothehome• Serveasyour“pointperson”tomakesuretheclosingprocessgoessmoothly

andensureallcontractsandaddendumsarepreparedandcompleted

What is the difference between a Buyer’s Agent and a Seller’s Agent? Moststateshavewhatiscalled“aBuyer’s Agent,whichisarealestateagenthiredbyyou,thebuyer,tohelpfindtherighthomeatthebestprice.

ASeller’s Agent,or Listing Agent,isarealestateagenthiredbythesellertomarketandselltheirhome.ThemaingoalofaSeller’sAgentistoselltheseller’shomeatthehighestpricepossible.

SomebuyerschoosetoasktheSeller’sAgenttorepresentthem,butbeforeyoudothat,keepinmindthattheSeller’sAgentautomaticallyhasaconflictofinterest–howcantheygetthehighestpossiblepricefortheirsellerclientandatthesametimegetthemostreasonablepriceforyou?


Home Buying 101

4 5*For full details on our rebate, please visit our website: www.ZipRealty.com/rebate

How much will it cost to work with ZipRealty?Asabuyer,youwon’tpayanythingtohaveZipRealtyworkforyou.Inaresidentialrealestatetransaction,thesellerpaystherealestatecommission.AsanaddedbonustoworkingwithZipRealty,wewillgiveyouupto20%*ofthecommissionwereceivefromtheseller!

ZipRealty’s RebateThe ZipRealty rebate is available…

• Tobuyerswhocloseescrow/proceedtofinalsettlementwithZipRealtyactingastheirsoleandexclusiveagentinthepurchaseofrealestate

• Forhomeswithafinalsalespriceof$100,000ormore

The ZipRealty rebate is not available…• Forhomeswithafinalsalespriceof$99,999.99,orless• Whenyourlender(s)ornewhomebuilderdisallowsit–makesuretocheck

withthem!• Whenprohibitedbystatelaw,asinOregon

Pleasebeawarethattheremaybetaxconsequencestotherebate.Youshouldseeklegalortaxadviceregardingtherebatefromtheappropriateprofessional.

Home buyers get up to 20% of our commission back.*

Commission

6%

$18,000

Home Price

$300,000

ZipRealty Share

3%

$9,000

Buyer Rebate

up to 20%

up to $1,800

Home buyers get up to 20% of our commission back.*


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How much can I afford?In general, the amount you can afford to spend on a home is a combination of:

• Yourcashonhand• Yourincome• Youroutstandingdebtanddebtpayments

Accordingtomanyfinancialexperts,yourmonthlyhousingcost(includingmortgagepayment,propertytaxes,homeownersinsuranceandHOAfees,ifapplicable)shouldnotexceed28%ofyourgrossmonthlyincome.

Yourtotalmonthlyloanpayments(includingyourmortgage,carloans,childsupportandalimony,creditcardbills,studentloans,etc.)shouldnotexceed36%ofyourgrossmonthlyincome.

Applyingtheseguidelines,ifyourdebtpayment(asidefromyourmortgage)currentlyexceeds8%ofyourannualincome,you’llneedtoloweryourmortgagepaymentaccordinglytomaintainadebtlevelatorunder36%ofyourgrossincome.Anaccountingprofessionalormortgageloanconsultantcanworkwithyoutohelpyoudeterminehowmuchyoucanaffordbasedonindividualcircumstances.

Additional expenses to factor into your first year of homeownership:• Closingcosts• Movingcosts• Repairandmaintenancecosts

CalculateVisitZipRealty’s“AffordabilityCalculator”toestimatehowmuchyoucanaffordtospendonahome,whatyourclosingcostswillbe,andhowmuchitwillcostyoutomove.

http://www.ZipRealty.com/calculators

Onceyou’veestablishedyourpricerange,sticktoit–spendingmorethanyoucanaffordmaycauseseriousfinancialproblemsforyoudowntheroad.WiththehelpofyourZipRealtyAgent,andbynarrowingyourhomesearchbasedonpricewithouronlinesearchtools,youcaneasilysearchforhomesthatarewithinyourpricerange.

How Much Can I Afford?

Home Buying 101

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Renting versus BuyingAssumingyourfinancesareinorderandyou’reabletogetaloanyou’recomfortablewith,anotherkeyconsiderationinyourdecisiontorentorbuyisyourpersonaltimeframe.

Yourpersonaltimeframecanbedividedintotwosections:financialandemotional.

Your Financial Timeframe:Whenyoubuy,yourmortgagepaymentwilllikelybemorethanyourcurrentrent,soifyou’replanningonmovingtoanewneighborhoodorcityinayearortwo,youmightbebetteroffrentingsinceyourhomeprobablywon’tincreaseinvalueenoughtocoveradditionalcostsofbuyingandselling.

However,ifyou’replanningonstayinginthesamecity/neighborhoodforalongertime,thenitmaybeagoodtimetobuy.Rentswillprobablycontinuetorisewhileyourmortgagepaymentwon’t(ifyouhaveafixedloan),soeventuallyyourmortgagepaymentwillbelowerthanrent.

CalculateTheZipRealtywebsiteoffersacalculatortohelpyoudetermineyour“breakeven”point.Simplyinputtheactualassumptionsformonthlycoststoseeifbuying(versusrenting)istherightthingforyou.

http://www.ZipRealty.com/calculators

Your Emotional Timeframe:Ifyou’renotwildaboutwhereyou’relivingnow,and/ormightmovesoon–sayforanewjob–thenit’sprobablynotagoodideatobuy.Orareyouexperiencinglifechangeslikeamarriage,divorce,birthofachild,orotheremotional,stressfulevent?Thenitmightnotbeagoodtimetobuyahome.

Ifyoulovewhereyouliveanddon’tseeyourselfmoving,thenbyallmeans,itmightbetimetostartlookingforahometobuy!Onceyou’vedeterminedthetimeisright(anditmakesfinancialsenseforyou)yourZipRealtyagentisreadytohelpyoufindyourperfecthome.

TIME

MONTHLYPAYMENTS BUYING

RENTING COST

COST

Renting vs. Buying

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Compare and ContrastVisitseveralsimilarhomesinadditiontotheonesyou’rereallyinterestedin–thatwayyou’llbeabletoformamorecompletepictureofthelocalmarket,andwhetherornotthehomeyou’rethinkingaboutbuyingisagoodvaluefortheprice.

YourZipAgentisalocalexpertintheareaswhereyouaresearching.They’reouttherelookingathomesalmosteveryday,and their inside knowledge is one of your biggest resources! Definitelytakeadvantageofit.

Don’t Overlook the “Ugly Ducklings” Sometimesallahomeneedsisalittleimagination(oralot,dependingonthepreviousowner’staste)toturnitintothehomeofyourdreams.These“uglyduckling”homesoftensellforaloweramountbecausemanypeoplecan’tgetpastthecosmetics.

Itmightbepossibletochangethingslike:• Paint• Flooring• Furniture• Lighting• Landscaping

…Justmakesureyoufactorinthoseexpensesintothetotalcostofthehome.

Does the “Unchangeable” Match What You’re Looking For?Therearesomethingsyoucan’tchangeaboutapropertythatwillaffectitsvalue.Herearethreebigquestionstoaskyourselfasyou’relookingathomes:

Is it in a desirable location? Makesuretheareaisaplaceyouwillbecomfortableliving–thingslikestreetnoise,powerlinesandairtrafficaren’tlikelytochange.

Is the overall “flow” of the floor plan functional? Ifitfeelsdysfunctional,bewary–changingthisisusuallyquiteexpensiveandmaybeimpossible.

Does the property fit your lifestyle? Forexample,ifithasapooloraspabutyou’renotbigonupkeepandyoudon’twanttopayfortheservice,thatsparklingoasiscanturnintoaneyesoreprettyquickly.

And,ofcourse,ifthehomeneedsanymajorrepairs(likefoundationorroofing)you’llneedtofactorthatintotheamountyou’rewillingtopayforthehome.

How to Find a Good Value

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Distressed Properties: Short Sales, Foreclosures and REOsPurchasingadistressedpropertycanbeatime-consumingprocess,butyoucanalsogetagreatdealonahouseyoulove.

• ASHORTSALEoccurswhenahomeownersellstheirhomeforlessthan(shortof)whattheystilloweontheirmortgage,andtheirbankhasagreedtoaccepttheproceedsfromthesaleaspaymentinfulloftheloanbalance.

• AFORECLOSUREoccurswhenahomeownerhasdefaultedonthemortgage,andlenderinitiatesaforeclosureagainsttheproperty.Thepropertywilleventuallybeputupforsaleataforeclosureauction.

• AREALESTATEOWNED(REO)occurswhenthebankhassuccessfullyforeclosedonthepropertyandtheforeclosureauctiondidnotresultinasaletoanoutsidebidder.Thusthelenderendsupasthenew“owner”ofthehome.

Distressedpropertiesoftenhavechallengesnottypicallyfoundwithatraditionalrealestatetransaction.

Work with an Agent who is Short Sale CertifiedGiventhecomplexitiesinvolvedwiththeprocessofpurchasingadistressedproperty,youshouldworkwithaknowledgeable,experiencedZipRealtyAgentwhoisShortSaleCertified,andcanguideyouthrougheverystepoftheway.

Distressed Properties

Visit...

http://www.ZipRealty.com/short-sales formoretipsandinformationaboutbuyingashortsale

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*Thisisforinformationalandmarketingpurposesonly.ZipRealty,Inc.(“ZipRealty”)isaresidentialrealestatebrokerageandcannotgiveyouadviceastoyourlegalrightsortaxconsequencesinassociationwiththepurchaseofahomefacingforeclosureoriscurrentlyownedbythebank.Youareencouragedtoseektheadviceofanattorneyand/ortaxadviceinconnectionwiththepurchaseofanyrealproperty.Ifyourpropertyiscurrentlylistedwithanotherbroker,oryouareboundbyabuyer-brokeragreement,thisisnotasolicitationofthatlistingnorintendedtointerferewithyouragreementwithanotherbroker.ZipRealtyisapubliclyheldcompanytradedontheNASDAQexchangeunderthesymbol“ZIPR”.

What you should know about buying distressed properties*BuyingashortsaleorREOpropertyisacomplexprocess.Theoverviewbelowisintendedtogiveyouanideaofwhatyoumayfaceifyoudecidetopursueapurchaseofadistressedproperty.YoushouldalwaysdiscusstheprocessindetailwithyourZipRealtyAgentbeforemakinganoffer.

Hereisanoverviewofthemostcommondistressedsituationsandhowyoucanworkthroughthem:

Short Sale PropertiesShortSalepropertiesmayoftenbeinbetterconditionthanpropertiesthatareinforeclosure,asthehomeownerisworkingwiththebanktoreleasethemoftheirdebtandistryingtoavoidforeclosure.

Before making an offer on a Short Sale, please keep the following in mind:

• Anyoffermustbeapprovedbyseller’slender.

• Becauseoftherequiredapprovalprocessbythelender,approvalofyouroffer(andthereforetheshortsale)couldtakemonths.

• Alendermaynotagreeto,andthuschange,thetermsoftheagreementmadebetweenthesellerandthebuyer.

Foreclosed Properties (REO)Lenderswilltypicallysellthehomes“as-is,”meaningthatREOpropertieswilloftenneedtoberepaired.

Before making an offer on an REO, please keep the following in mind:

• Thelendermostlikelywillnotagreetomakeanyrepairstothehome

• Thelendermayrequireyoutofinancewiththem.

• WhilemostREOpropertiesarealreadyvacant,thereisapossibilitythelenderisstillintheprocessofhavingtheformerownersevicted.Thiscouldresultinadelayinclosing,andmayalsoincreasetheprice.

• IfyouarenotusingtheREObankasyourlenderitispossiblethatcertainrepairswillberequiredtobemadetothepropertybeforeyourlenderwillagreetoclose.Thiscouldmeanyouwouldberequiredtospendmoneyonrepairsonahomethat’snotyetofficiallyinyourname.

Distressed Properties

Home Buying 101

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New ConstructionLookingtobuyanewlybuilthome?Don’tforgettoletyourZipRealtyAgentknowbeforeyouvisitanewhomecommunity–thatway,ifyoudecidetobuy,you’llbeeligibletoreceivetheZipRealty rebate – up to 20% of our commission*uponclosing.Beforeyouvisitanewcommunity,contactyourZipAgentandtellthemtoregisteryouonyourFIRSTvisittothedevelopment.

Advantages to buying a new home:

• Large Selection–Manyhomebuildershavehundredsofnewlyconstructedhomesreadyformove-in.Thesehomesarereferredtoas“Specs”or“Inventory”homesandinmanycasesarethebestdealsavailableinthemarket.

• Less Maintenance–Newhomesoftenrequirelesstimeandenergytomaintain,simplybecausetheyarecompletelynew.Mostnewlyconstructedhomesarebackedbyabuilderwarrantycoveringsomematerialsandworkmanship.

• Personal Options–Withnewhomes,youoftenhavetheabilitytochooseafloorplanthatfitsyourspecificneeds,pluscustomizableoptionslikecountertops,appliances,storagesystems,flooringandtechnology.

• Energy-efficient Construction–Newhomesareoftenmoreenergy-efficientthanexistinghomes.

Things to know before you make an offer:

• Thecontractwillmostlikelybethebuildersowncontract,writtentoprotecttheirinterests,notyours.

• Yougenerallywon’thavetherighttoaninspectionlikeyouwouldforapreviouslyownedhome.Confirmthatthehomebuilderwilltakecareofallcityinspectionsandthatthehomehaspassedallinspectionsrequiredbythecityorcountyandthatthehomeisbuilttocode.

• SomenewhomebuilderswillnotallowZipRealtytopayyouarebate,somakesuretofindoutbeforeyousubmitanoffertoabuilder.

Your ZipRealty Agent will:

• Register you with new home builders of your choice–WhenyourZipRealtyAgentregistersyouwithaNewHomeBuilder,you’llreceive20%ofourcommissionifyoubuy.

• Find you the best deals–YourZipRealtyAgentwillbeyourpersonaladvisorthroughouttheprocessofsearchingforandpurchasinganewhome.

• Guide You through the purchase process–YourZipRealtyAgentwillhelpyouwithallaspectsofthepurchaseprocess,includingcontractnegotiation,financeoptions,disclosures,publicreports,inspectionprocess,closingcostsandtimeframes.

New Construction

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Home InspectionsAhomeinspectionisavisualinspectionofthestructure,andsomecomponentsofahome.Everyoneshouldconsiderhavingthehomeinspected,evenifitisan“as-is”sale.

It’sagoodideatobetherefortheinspection–notonlyisitagreatwaytolearnaboutyourhome,buttheinspectorcanalsoexplainandansweranyquestionsthatmaycomeup.

A home inspector’s report will typically review the condition of: • Heatingandcentralairconditioningsystem• Interiorplumbingandelectricalsystems• Walls,ceilings,floors,windowsanddoors• Theroof,attic,andvisibleinsulation• Thefoundation,basement,andvisiblestructure

Someitems,likemold,mildew,rodents,termites,etc.,willrequireaseparateinspectionbyaprofessionalinthatarea.Yourgeneralinspectionreportmaycommentonitemsliketermitedamageorwaterstains,onlyaprofessionalinthatspecificareacantellyoutheextentofthedamageandifitissomethingthatshouldbeaddressed.

Home inspections are NOT...• Aprotectionagainstfuturefailures• Anappraisalthatdeterminesthevalueofahome

Acodeinspection,whichverifieslocalbuildingcodecomplianceortheexistenceofpermitsforanyimprovementsontheproperty

Home WarrantiesAhomewarrantyprotectsyouagainstthefailureofsomecomponentsofyourhome.Differentwarrantiescoverdifferentthings,somakesuretoreadthroughthelistcarefullysoyou’reawareofwhatiscovered,whatthedeductibleis,etc.

90 Day Warranty The90daywarrantyfromtheinspectioncompanywillcovercertainitemsforupto90daysaftertheinspectionisperformed.Itisafairlylimitedwarrantythatistypicallydesignedtopartiallycovercertainitemsthatfailshortlyafterahomeinspection.

Annual WarrantyTheannualwarrantyismuchmorecomprehensiveandwhileitdoescovermorethanthe90daywarranty,itdoesn’tcovereverything–besuretoreadwhatisincluded.

Home Inspection and Warranty

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The Importance of PreapprovalGettingpreapprovedwillhelpyouinthreemajorways:

• You will know what you can afford. Settingyourownbudgetbeforetalkingtolendersisthefirststepofthisprocess(readmoreaboutthisonp5),asyoumaynotwanttoborrowthemaximumamountalenderwilllendyou.However,preapprovalwillhelpyouknowwhatthemaximumactuallyis.

• You can effectively comparison shop between lenders and types of loans.Interestratesvarywidelydependingonyoursituation,thelenderandthetypeofloan(FHA,fixedrate,interestonly,etc.).Foraloanaslargeasamortgage,evenonepointdifferenceintheinterestratewillmakeabigdifference.

• You will be taken more seriously by sellers.Thiscanbeabigadvantagewhenyou’remakinganofferonahome:ifyou’repreapproved,thesellersmaychooseyourofferoverothersthataren’tasstrong.

The Preapproval ProcessThelendergatherstheinformationitrequirestoofferyoualoan.Here’sagenerallistofthedocumentsthey’llaskyoufor,thoughsomelendersmayrequiremore–makesuretoaskforthelender’sspecificlistofdocumentssoyoucanbefullyprepared:

• Acopyofyourmostrecentbankstatements• W-2statements(or1099incomestatements)forthelasttwoyears• ProofofassetslikeIRAs,stocks,bondsormutualfunds• Recentpaystub(s)fromyourjob,andproofofanyotherincome(ifapplicable)• Anapplicationfee(thisdependsonthelender)–makesuretoask

Keep in Mind…The result of the pre-approval process is a good faith estimate. Thisisadocumentdescribingthelikelytermsoftheloan,includingtheinterestrate,loantype(fixed-rate,adjustableandsoon)andclosingcosts.However,nothingissetinstone.

Pre-approval does not mean the bank guarantees you the loan.Itjustmeansthatyou’relikelytogetaloanifnothingmajorchangesinyourfinancialpicture.Whenyouroffertobuyahomehasbeenacceptedbytheseller,thelenderthathaspreapprovedyouwillhavetoformallyapproveyourloan,andwillthengiveyouthefinalinterestrates,terms,etc.

Home Preapproval Process

VisitZipRealty’sMortgageCenter.

http://www.ZipRealty.com/mortgage

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Preapproval and LoansThepreapprovalprocessisn’tjustfindingalenderthatwillpre-approveyou,butalsofindingtherightloanforthecurrentmarketandyourfinancialsituation.Thereareawidevarietyofloans–hereisabriefoverviewofsomeofthem.

FHA LoansFHALoansareinsuredbytheFederalHousingAuthorityandrequireasmalldownpayment,typicallyinthe2.5to5percentrange.However,astheyareconsideredahigherrisk,interestratesforFHAloansaretypicallymuchhigherthanthoseforConventionalLoans.

VA Fixed Rate LoansThisloanallowsveteranstopurchasehomeswithoutmakingadownpayment,andareguaranteedbytheDepartmentofVeteransAffairs.Likeotherfixed-rateloans,you“lockin”theinterestrateforthelifetimeoftheloan.

Conventional LoansTheseloansgenerallyrequirehigherdownpaymentsthangovernmentguaranteedones–sometimesupto20%.You’lllikelyneedexcellentcredittoqualifyforalowerinterestrate,andwillneedtohavecash-in-handforthedownpayment.

Fixed rate loan Withafixed-rateloan,you“lockin”theinterestrateforthelifetimeoftheloan.Thisistypicallyagoodideaifinterestratesarelowandyou’renotgoingtomoveorrefinancesoon.

Adjustable rate loanWithanadjustableratemortgage(ARM),theinterestrateonyourloanadjustsupanddown,dependingontheindextherateistiedto.Ifinterestratesgoup,yourmortgagepaymentswillgoup.Conversely,ifinterestratesgodown,yourmortgagepaymentwillgodown.Ifinterestratesarecurrentlyhigh,youmightconsiderstartingoffwithanARMandrefinancingtoafixed-rateloanoncetheydrop.

Fixed-Adjustable loan Someloansarefixedforaperiodoftime,say5or10years,thenadjustlikeanARMbasedonaninterestrateindex.Ifthecurrentinterestrateisfavorableandyouplantomoveorrefinanceduringthefixedrateperiod,thistypeofloanmightbeagoodoptionforyou.

Someconventionalloansrequirethatyoupay“points,”whichisbasicallyprepaidinterestonyourloan.Bypayingsomeinterestupfrontyoucanpayalowerinterestrateontheremainingpartoftheloan.Ifyourloanrequiresyoutopaypoints,youwillhavetopayitatclosing,alongwithyourdownpayment,titleinsurance,taxes(ifapplicable)andotherfees.

Jumbo LoansConventionalloanshavemaximumloanlimitsbasedontheareayou’rebuyingin,upto$729,500forthemostexpensivecities.Ifyouneedtoborrowmorethantheselimits,you’llneedajumboloan.Jumbosgenerallyhavehigherdownpaymentrequirements–sometimeshigherthan20%--sufficientassetsandexcellentcredit.Interestratesonfixedoradjustablejumboloansaregenerallyhigherthanconventionalloanswithcomparableterms.

Key questions to ask about your loan• Willmyinterestchangeduringthelifeoftheloan?Ifso,whenandbyhowmuch?Howmuchwillmy

mortgagepaymentsbe?Iftheloanwilladjust,whatwilltheybeafterthat?• DoesthisloanhavepointsthatIwillhavetopayupfront?• HowmuchmoneywillIneedtobringtoclosing?• Whatarethefeesforthelender,appraiser,etc.?• Willthelendercollectmypropertytaxesandhomeowner’sinsurancepayments(impounds)?

Home Preapproval Process

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The Closing ProcessAfteryourofferhasbeenacceptedbytheseller,therearestillseveralstepsyouand/oryourZipRealtyagentwillneedtocompletetopurchasethehome.Thisiscalledtheclosingprocess.

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What to Expect During Closing

Earnest Money

Title Check

Homeowner’s Insurance

Disclosures, Inspections, and Contingencies

Appraisal of Property

Loan Approval

Request to Payoff Seller’s Existing Mortgage

Cashier’s Check

“Sign-off” and Closing Appointment

Final Steps

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1. Earnest Money—Afteryourofferisaccepted,yourfirststepistowriteacheckforthe“earnestmoneydeposit”(thedepositthatsecuresthebuyer’soffer).

2.Title Check—Dependingonthestatewherethehomeislocated,atitlecompany,closingattorney,orclosingagentwillbeselectedtohandletheclosingprocess.Theirprimarypurposeistogetapreliminarytitlereport,whichconfirmsthattheselleristhelegalownerofrecordofthepropertyandthatthepropertyhasnounsettledliensorotherclaimsagainstit,includingallrealestatetaxesandspecialassessments.Ifyouhaven’tselectedatitlecompany,closingattorney,orclosingagentyet,yourZipRealtyAgentcanassistyouinfindingareputablefirm.

3.Homeowner’s Insurance —It’syourresponsibilitytoobtainhomeowner’sinsurance.Lendersalwaysrequirethebuyertohaveproofofhomeowner’sinsurancesecuredbeforetheyapproveyourloan.Insurancepoliciesvarywidely,soshoparound.ZipRealty’sinsurancepartnerscanprovideyouwithafree,no-obligationquoteifyouchoose.

4.Disclosures, Inspections, and Contingencies—Thesellermustdiscloseanymaterialfactsabouttheproperty.Disclosureofmaterialfactscanincludeanypropertydefectsoranylawsuitsregardingclaimtoownershipontheproperty.Generally,it’stheobligationofthebuyertoarrangeanyinspectionsontheproperty,includinggeneralpropertyandpestinspections–yourZipRealtyAgentwillworkwithyoutoarrangeallofthenecessarysteps.Othercontingenciestobeawareofincludefinancing,additionalinspections,andsaleofthebuyer’scurrenthome.Oncethedisclosuresandinspectionsarecompleteandsatisfactory,yourZipRealtyAgentwillarrangetohaveanycontingenciesremovedfromthesalescontract.

5.Appraisal of Property—Thelenderwillarrangeforthepropertytobeappraised.Theappraiser’sreportwilldescribethephysicalcharacteristicsofthepropertyandcomparablepropertyvalueswillbeusedtodeterminethevalueoftheproperty.Therewillprobablybeathoroughinteriorandexteriorinspection.

6.Loan Approval—Onceallofthenecessarystepsarecompleted,andyourloanhasbeenapproved,yourlenderwillnotifythetitlecompanythatthey’veapprovedyourloanrequest,andwillsendtheloandocumentstothetitlecompanysothatthedocumentscanbesignedattheclosingappointment,whichcanalsobecalledthe“sign-off.”Atthistime,thetitlecompanywillscheduleseparateclosingappointmentwiththebuyerandsellertosignallofthefinalpaperwork,includingyourmortgageandtransferringownershipoftheproperty.

7.Request to Payoff Seller’s Existing Mortgage—Thetitlecompany,closingattorney,orclosingagentwillissueanordertotheseller’sexistinglenderrequestingademandforpaymentinfullandallre-conveyance/releasedocuments.

8.Cashier’s Check—Inpreparationfortheclosingappointment,you’llneedtoobtainacashier’scheckorwiretransferfortheamountofmoneydueuponclosing.Tofindouttheexactamountdue,askyourZipRealtyAgent,whowillworkwiththetitlecompanytoensureyouhavealloftheappropriateinformation.Youcannotpayyourclosingcostswithapersonalcheck.

9.“Sign-off” and Closing Appointment—Theclosingappointmentusuallytakesabout1-2hoursandiswhereyouwillsignallofthenecessarytitleandloanpapers.Dependingonyourstate,thesellerwillhavealreadysignedallthenecessarypaperworkorwillsignthemduringthisappointment.

10.Final Steps—Onceyour“sign-off”iscomplete,thetransactionneedstoberecordedbythecountyandtheformalchangeofpossessionmusttakeplace.YourZipRealtyAgentwillarrangeforthetransferofthepropertykeyswiththeseller’sagent.The“ForSale”signandpropertylockboxwillalsoberemovedbytheseller’sagent.Whilethehomemustbeinsubstantiallythesameconditionaswhenyouinspectedit,sellersarenotrequiredtothoroughlycleanthehouse.Soplantodothesejobsbeforeyoumovein.

What to Expect During Closing

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Annual Percentage Rate (APR) TheAPRforyourhomeloanisanannualcalculationthatincludestheinterestratequotesbyyourmortgagecompanyplusadditionalhomeloancostssuchasoriginationfeesandpoints.Theimportantthingtokeepinmindaboutyourloan’sAPRisthatitwillbehigherthanadvertisedinterestratesbecauseoftheadditionalfactors.

Closing Costs Witheachrealestatetransaction,therearemanyexpensestopayandagenciestocompensate.Thesefees,whichareoftensharedbythebuyerandseller,arereferredtoastheclosingcosts.Whenyoubuyahome,theclosingcostsmightincludeloanoriginationfees,escrowpayments,titleinsurance,attorneyfeesandevendiscountpointspaidtoloweryourloan’sinterestrate.

Contingency Aclauseorphrasethatindicatesatermorconditionwhichmustbemetpriortofurtheraction(s).Acontingencyisa“subjectto…”clause.

Forexample,aninspectioncontingencyinanoffertopurchaseahomemeansifahome’sinspectionshowsdefectsthesellermustfixthemforthesaletoproceed.

Default Failuretomeetthetermsandconditionsofacontract;actofpreventingcompletionofthetermsofanagreement.

DistressedApropertythatisinbadrepairorotherwisenotworthitsnormalvalueduetodecliningneighborhood,pendingforeclosureofproblemsinthearea(airportnoise,etc.).

Equity Theportionofapropertyorassetthatisownedbytheindividual,whetherinrealpropertyorpersonalproperty.OrdinarilythedifferencebetweenthetotalofallexistingdebtonthepropertyanditsmarketValue.

Forexample,ifthehomeisworth$250,000andthemortgagebalanceis$100,000,theownerhas$150,000ofhomeequity.

Earnest Money Anysumorconsiderationusedasa“goodfaith”deposittowardthepurchaseofaproperty,andtoactasabinderforthetransaction.Youtypicallydepositearnestmoneyinanescrowaccountandcouldloseitifyoudon’tproceedwiththesale.

Escrow Duringthehomeloanprocess,aneutralthirdpartyknownasEscrowholddocumentsandmoney(includingearnestmoneydeposits)forsafekeepinguntiltherealestatetransactioniscomplete.AnEscrowaccountisalsousedonceyoucompleteyourhomeloantoholdthepropertytaxandinsurancemoniesthatarecollectedwitheachmortgagepayment.

Glossary of Common Terms

16

Home Buying 101

Lien Alegalclaimonanother’spropertyassecurityforthepaymentofdebt.Oneoftheitemsatitlecompanychecksiswhetheranyonehasalien–orclaim–onthepropertyyouarepurchasing.Yourlenderwillhavealienonyourpropertyuntilyoupayoffthemortgage.

Loan to Value Ratio (LVR) Whenyoubuyahome,thistermreferstotheamountoffinancingyouaregettinginrelationshiptoyournewhome’svalue.

Forexample,an$80,000mortgageona$100,000homehasanLVRof80%.AnLVRofmorethan80%willrequireyoutopurchaseprivatemortgageinsurance(PMI)

Lock-In Homemortgageinterestratesvaryfromday-to-day.Whileyoubuyahomeandsecurefinancing,youmaydecidetolockinaparticularinterestratewithyourlender.Thislock-inguaranteesthatyourhomeloanwillbeprocessedwiththisrate,eveniftheratesrisebeforetheloancloses.

PITI Totaloftheprincipal,interest,taxesandinsuranceonamonthlypaymentbasisinpropertyownershipwherethepropertyissecuredbyamortgage.

Points Therearetwotypesofpointsthatcanbeappliedtoahomemortgage.Discountpointsareusedtoreducetheloan’sinterestrateandoriginationpointsmaybeaddedtocovertheexpensesassociatedwithprocessingaloan.Onepointequalsonepercentoftheloanamount

Forexample,toloweryourinterestratebyonepointona$300,000mortgage,you’llneedtopayanadditional$3,000atclosing.

Private Mortgage Insurance (PMI) Whenyoufinancemorethan80%ofyournewhome’svalue,yourlenderwillrequireyoutopurchasePMI.Thisprotectsthelenderagainstlossifyoudefaultonyourhomeloan.YourmonthlyPMIpaymentisaddedtothecostofyourmortgagepayment.Whenyouhaveaccumulated20%equityinyourhome,checkinaboutcancelingyourPMI.

Title Insurance Ahomemortgagerequirement,titleinsuranceprotectsboththebuyerandtheselleragainstlegaldefectsinahome’stitle.Thispolicyensuresthatapropertyownerhasthelegalrighttotransferahome’stitletotheseller.Ifaproblemoccurs,thetitlecompanypaystheassociatedlegalfeestocorrectthesituation

Glossary of Common Terms

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