BEGINNING THE PROCESS
Whatever your reasons for buying, finding the right home, in the perfect neighborhood, and at a cost that is within your budget, is no small task. We are licensed professionals. There are many benefits you receive from working with an experienced agent.
Organization is the key to finding the home you want while spending the least amount of time and energy. Find out how much house you can afford. Do this before you go house-hunting. I can refer you to a loan officer who can help you determine how much of a down payment you can afford, along with a monthly payment you qualify for. (To help determine how much house you can afford, see section 3 of this guide.)
Make a list of everything you want in a home. Is a master suite important? How many bathrooms? What about closet space? Do you need a yard for the kids and pets to play in? How about a fireplace or a bay window? Do you prefer a rambler or multiple-story house? Are schools or access to transportation important? Separate the essentials from the items you could do without and put them on the “A” list. Prioritize the rest of the items into a second and third list in order of importance. We’ll then go over the list so that I’m very clear on what you want and need in your home.
Keep good notes as we look at homes. After a while, it becomes difficult to remember which features belong to what home. Some buyers make audio tapes as they go along. When selecting a home, look beyond cosmetics. Make sure the home is in good physical condition and that you understand the cost of repairs. For more information on how to assess the home’s condition, refer to“Home inspections” on section 7.
Look at additional homes, even if you love the first one you see. Many times, it takes looking at several homes before you find the one that is really right for you. As your agent, I’ll check with you regularly, even if you haven’t found a house that suits your needs. Keeping in contact with you allows us to establish a good rapport, and helps me to learn how to help you effectively. I’ll continue to be on the lookout for homes that suit your needs.
HOW MUCH HOME CAN I AFFORD?
Before you start looking at homes, it’s a good idea to find a target price range that you can afford.
A mortgage lender will want to make sure you can qualify for the down payment, plus a monthly mortgage payment made up of principal, interest, taxes and insurance (PITI).
Interest rates and your personal finances will influence the amount of house you can afford.
For a quick estimate of a monthly mortgage payment for which you may qualify, or to see how much of a home you might be able to afford, use our mortgage calculator section.
But remember, it’s always good to talk to a lender before you start shopping for a home. we can refer you to lenders suited to your specific financial needs.
PURCHASE AND SALE AGREEMENT
Once you’ve found the home you want to buy, together we’ll complete a purchase and sale agreement.
This is the contract in which you and the seller outline the details of the property transfer. The purchase and sale agreement usually consists of the following pages:
- Earnest money receipt
- Financing addendum
- Inspection addendum
- Conditions/disclosure addendum
- Contingency addendum-when appropriate
- Addendum outlining special conditions
- Lead-based paint notification-when appropriate
In selected areas, the following forms
will also be part of your agreement:
- Agency disclosure
- Property disclosure form
completed by the property seller
THE CHEMISTRY OF ESCROW
Closing Costs, Points, and Title Insurance
WHAT ARE CLOSING COSTS?
Closing costs are charges paid to various entities during the real estate transaction. They can include escrow fees, document preparation fees, the cost of an inspection, and lender fees.
WHAT IS A POINT?
A point is equal to one percent of the loan principal. Some lenders charge points, in addition to interest and fees, at closing.
WHAT IS TITLE INSURANCE?
Title insurance protects against loss from any defects in the legal title, liens against the property or other adverse claims. The lender usually requires title insurance.
When you’re ready to complete a purchase and sale agreement on a home, your offer will generally be contingent on a professional inspection of the entire property-including improvements.
The home inspector looks beyond the cosmetics to make sure that the home’s general systems operate properly. The inspector will also look for large repairs that are needed and report on the condition of the home.
The standard home inspector’s report will review the conditions of the home’s heating and cooling systems; interior plumbing and electrical systems; the roof, attic and visible insulation; walls, ceilings, floors, windows and doors; foundation, basement and visible structure. The inspector will also look for cracks in cement walls, water stains that indicate leakage and any indication of wood rot.
A home inspection also points out the positive aspects of a home, as well as the maintenance that will be necessary to keep it in good shape.
As your agent, I’m familiar with home-inspection services and can provide you with a list of names from which to choose. Another good way to find a home inspector is to ask a friend, or perhaps a business acquaintance, who has had a home inspection and can recommend a home inspector they were satisfied with.
Remember, no home is perfect. If problems are found, I will help you negotiate through the process.
SETTLEMENT–WHO PAYS WHAT
During the negotiation stage of the transaction, a mutually agreed-upon date for closing is determined. “Closing” is when you and the seller sign all the paperwork and pay your share of the settlement fees, and the documents are recorded.
Settlement obligations vary widely due to specific contract language, local laws and customs.
Prior to closing, the closing agent (usually an escrow or title company or attorney) will complete a detailed settlement statement for both buyer and seller.
THE BUYER WILL RECEIVE:
- Earnest money deposit
THE BUYER PAYS:
- One-half of escrow or legal fees paid to the attorney or escrow company for preparing the closing (In California, the party paying escrow fees varies from county to county)
- Document preparation fees
- Recording and notary fees
- Title search and title insurance (paid by either the seller or the buyer)
Local transfer taxes, if any
- Repairs or inspections the buyer has agreed to pay for
- Loan fees
- Appraisal fees
- Credit report fees
- ADJUSTABLE-RATE MORTGAGE (ARM) interest rates on this type of mortgage are periodically adjusted up or down depending on a specified financial index
- AMORTIZATION a method of equalizing the monthly mortgage payments over the life of the loan, even though the proportion of principal to interest changes over time. In the early part of the loan, the principal repayment is very low, while the interest payment is very high. At the end of the loan, the relationship is reversed
- ANNUAL PERCENTAGE RATE the actual finance charge for a loan, including points and fees, in addition to the stated interest rate
- APPRAISAL an expert opinion of the value or worth of a property
- ASSESSED VALUE the value placed on a property by a municipality for purposes of levying taxes. It may differ widely from appraised or market value
BALLOON PAYMENT a large principal payment due all at once at the end of some loan terms
- CAP a limit on how much the interest rate can change in an adjustable-rate mortgage
- CERTIFICATE OF TITLE a document, signed by a title examiner, stating that a seller has an insurable title to the property
- CLOSING the deed to a property is legally transferred from seller to buyer, and documents are recorded
- CLOSING COSTS see “Settlement” or refer to “Settlement–who pays what” in this guide
- COMMISSION a fee (usually a percentage of the total transaction) paid to an agent or broker for services performed
- COMPARATIVE MARKET ANALYSIS (CMA) a survey of the attributes and selling process of comparable homes on the market or recently sold; used to help determine a correct pricing strategy for a seller’s property
- CONTRACT a binding legal agreement between two or more parties that outlines the conditions for the exchange of value (for example: money exchanged for title to property)
- DEED a legal document that formally conveys ownership of a property from seller to buyer
- DOWN PAYMENT a percentage of the purchase price that the buyer must pay in cash and may not borrow from the lender
- EQUITY the value of the property actually owned by the homeowner: purchase price, plus appreciation, plu
- FIXED-RATE MORTGAGE interest rates on this type of mortgage remain the same over the life of the loan. Compare to “adjustable-rate mortgage”
- FIXTURE a recognizable entity (such as a kitchen cabinet, drape or light fixture) that is permanently attached to a property and belongs to the property when it is sold
- HAZARD INSURANCE compensates for property damage from specified hazards such as fire and wind
- INTEREST the cost of borrowing money, usually expressed as a percentage rate
- LIEN a security claim on a property until a debt is satisfied
- LISTING CONTRACT an agreement whereby an owner engages a real estate company for a specified period of time to sell a property, for which, upon the sale, the agent receives a commission
- MARKET PRICE the actual price at which a property sold
- MARKET VALUE the price that is established by present economic conditions, location and general trends
- MORTGAGE security claim by a lender against a property until the debt is paid
- MULTIPLE LISTING SERVICE (MLS) a system that provides to its members detailed information about properties for sale
- ORIGINATION FEE an application fee(s) for processing a proposed mortgage loan
- PITI principal, interest, taxes and insurance, forming the basis for monthly mortgage payments
- POINT one percent of the loan principal. It’s charged in addition to interest and fees
- PREPAYMENT PENALTY a fee paid by a borrower who pays off the loan before it is due
- PRINCIPAL one of the parties to a contract; or the amount of money borrowed, for which interest is charged
- PRORATE divide or assess proportionately
- PURCHASE & SALE AGREEMENT a contract between buyer and seller that outlines the details of the property transfer; or refer to “Purchase and sale agreement” in this guide
- SETTLEMENT all financial transactions required to make the contract final. See “Settlement–who pays what” in this guide.
- TITLE a document that indicates ownership of a specific property
- TITLE SEARCH detailed examination of the entire document history of a property title to make sure there are no legal encumbrances