Important Guide, Tips and Timelines for Home Buyers

Pre-buying

• Save for your down payment and closing costs. FHA required 3.5% down (and may raise this requirement). Closing costs vary and will be discussed later. Have a rainy day fund. Are you getting a “gift” from a relative?

• Do a budget – What are your monthly debt expenditures now. – Can some debt/expenses be eliminated to make

your credit look better?

Pre- buying (continued)

• Have you checked your credit report:– For errors– Get them fixed– Get free credit report at

www.annualcreditreport.com. Pull all three free reports from Equifax, Experian, TransUnion – they may have different errors.

Meet with your REALTOR® and discuss your plans. Sign any required disclosures/agreements.

Mortgage Pre-Approval

• Research and select a good mortgage professional. Your friends or REALTOR® can help you out here. Sometimes more than one opinion may be valuable. It’s your money!

• Visit your mortgage professional and submit required paperwork. This may include pay stubs, investments, tax returns, and other information.

Mortgage Pre-Approval (continued)

• Your mortgage professional will evaluate all documents and recommend a mortgage that suits your needs.

• Your mortgage professional will provide a preapproval letter that gives you an estimated price range for your home search. While this may be more than you desire, you need to know what price range of homes you can be viewing.

Mortgage Pre-Approval (continued)

• Your preapproval letter may stipulate conditions you must meet to qualify for this mortgage.

• You should not take-on any additional debt, credit, installments, etc., while you are in the home search and closing process. Doing so may result in the Lender not approving your mortgage.

Searching for Homes

• Use your REALTORS® Multiple Listing Service Search Engine to conduct a broad search of homes in your desired price range.

• Know your “wants and needs” when searching for homes – how many bedrooms, baths, home size, location, etc. Do you really need granite countertops right now or can that be added later?

• Ask your REALTOR® questions about any properties that may be of interest.

Searching for Homes (continued)

• Once you and your REALTOR® have narrowed down homes and areas schedule viewings.

• Bring a notepad and camera if desired so you can remember key details.

• View homes – regroup and discuss pros and cons of homes viewed – do we need to reassess our needs?

Searching for Homes (continued)

• View more homes after narrowing focus.• Narrow down top 3 properties and have your

REALTOR® evaluate pros, cons, and comparables.

• Pros may be closing cost assistance, quick close, repairs, move-in ready.

• Cons may be time to close, no closing cost assistance, costly repairs needed, etc.

Preparing the Purchase Offer

• The Contract: this consists of multiple pages. A real estate contract is a contract for the purchase/sale, exchange, or other conveyance of real estate between parties. In the contract, the price will be indicated, financing information, any closing costs assistance, repairs indicated, home warranty, etc.

• Contingency Addendums: Appraisal, Loan, Lead Based Paint, Home Inspection, Well and Septic, and Radon Gas/Asbestos, Condo/Property Owners Assn, just to name a few. Let’s elaborate on most common contingencies:– Appraisal: the home must appraise for the purchase price or the

lender will not approve a mortgage. If not, renogotiation must take place or the buyer bring additional cash for settlement.

– Loan: Your qualification must not change prior to closing. Example, you lose your job – this could disqualify you for a loan.

– Lead Based Paint: Home built prior to 1978 may have lead based paint. You can have an inspection as a contingency to home purchase.

– Home Inspection: In most cases (foreclosure may be different), a home inspection is allowed and a contingency on the purchase. The buyer will pay for the home inspection.

Preparing the Purchase Officer (continued)

• Disclosures: Material Facts are commonly referred to as anything that would affect the buyer's decision to purchase or the price and terms the buyer offers. In other words, if a seller has knowledge about a defect, it should be disclosed. Other common disclosures include aircraft noise/crash zones, property disclosure, and consumer disclosures.

Submitting the Purchase Offer

• Once the contract, contingencies, and disclosures are signed, your REALTOR® will prepare a cover letter and submit/deliver the offer to the listing agent or owner if a for sale by owner property

• An Earnest Money Deposit (EMD) will be required with the contract submission. This amount varies but plan on $500 to $2000 dollars. The EMD is credited towards closing costs or down payment.

The Counter-Offer

• Counter offers are generated by a home seller after a buyer has submitted an offer to purchase. Typically, counter offers will state that the seller has accepted the buyer's offer subject to the following particulars.

• The following particulars such as: – Total consideration (generally a higher price) – Increasing the size of the earnest money deposit – Refusals to pay for certain reports or fees – Changing service providers – Altering closing or possession date – Excluding personal property from the contract – Modifying contingency time frames

Contract Ratification

• Once the counter offers are agreed upon the contract will get ratified (meaning all agree). However, contingencies (home inspection, etc) must be removed before it is really “ratified”.

• The ratified contract will be delivered to your lender and settlement company to start the closing process.

• At this time your REALTOR® will schedule necessary inspections, etc., to get contingencies removed.

Home Inspection

• Every buyer should have a home inspection. If nothing else, it gives you a general report of the “state” of the home.

• You should use an inspection who is a member of the American Society of Home Inspectors.

• You may be present with your REALTOR® for the home inspection and observe. If out of area, your REALTOR® can conduct this item for you.

• Once the inspection is completed and debriefed a copy will be provided the seller’s agent. At this time your REALTOR® will submit the contingency removal agreement with listed repairs, if any subject to caps. The seller will make agreed upon repairs or escrow monies as required.

Termite & Moisture Inspection

• Most lenders will require a professional licensed termite/moisture inspection and “all clear” letter prior to closing.

• Many sellers will have an annual termite contract on their property to protect against any damage.

• Wood destroying infestation damage should be fixed or escrowed prior to closing.

What Are Closing Costs?• After your initial meeting with your mortgage professional you should have

received a GFE or Good Faith Estimate of all costs associated with your loan. Generally, this is provided within a few days of the meeting.

• Closing costs include (but not limited to):– Points or Loan Origination Fee: One point equals one percent of the mortgage

loan.

– Appraisal: You are going to be asked to pay this. Since the property is collateral for the mortgage, the lender wants to know what it is worth. Normally this is done by the appraiser viewing the property and reviewing recent comparables.

– Credit report: Most lenders require a credit review to see your payment history, etc.

– Flood Zone: Are you in a flood zone? Your lender will want to determine this and that will determine additional insurance requirements.

What Are Closing Costs (continued)– Application or document preparation fees: Most lenders have a fee associated with

this.– Administration or Underwriting fee: Usually one or the other will be charged -

cost of doing business.– Homeowner’s Insurance: The first year’s insurance will be charged when you close.– Pre-paid Interest: Closing can happen on any day of the month. The earlier in the

month y ou close the more interest your will pay up front.Veterans Administration Funding Fee: The fee charged by the VA to guarantee your loan. Normally financed in the loan.

– Mortgage Insurance Premium (MIP): Charged on FHA purchases. Normally added to the loan. You will also pay a monthly mortgage insurance fee if you did not put down 20%.There is no MIP with VA.

– Settlement Fee: These are the charges not related to the lender but cost you.

What Are Closing Costs (continued)

– Termite/moisture inspection: Usually paid by seller, but be careful as you might want your own inspector. Required by lender. Termites are common in Virginia Beach, Chesapeake, and Hampton Roads.

– Home Warranty: Optional, but if your budget is tight you might consider the warranty as you only pay a deductible if something needs repair/replacement (HVAC, Water Heater, etc)

- Home or condo fees: Delinquencies? There may be a special assessment pending, but this should be paid by seller.

Settlement

• Closing (or settlement as it is known in some parts of the US) is the final step in executing a real estate transaction

• What happens during closing:– The buyer (or his bank) delivers a check (generally in the US, a

Cashier's check or wire transfer) for the balance owed on the purchase price.

– The seller signs the deed over to the buyer, and delivers the keys.

– A title company, lawyer or civil law notary registers the new deed with the local land registry office.

• The seller receives a check for the proceeds of the sale, less closing costs and mortgage payouts.

Your REALTOR®

Thank you for reading this home buyer guide.Understand that I am committed to finding you the right home at the right price in the location you desire. My goal is to ensure you are completely satisfied with my service and responsiveness to your needs at all times. My satisfied clients are the best references.

Dennis Blackmore