Page 1

HOWTOBUY AHOME


Table of Contents

GERRYANGEL

914.263.7168


Factors to Consider When Looking For A Home

GERRYANGEL

914.263.7168


How We Can Help You

GERRYANGEL

914.263.7168


Understanding Representation

GERRYANGEL

914.263.7168


Home Financing

In today’s real estate market, more and more homebuyers are obtaining preapproval for mortgages prior to purchasing a home. Mortgage consultants are readily available to assist you in the easy process of obtaining pre-approval from a lending institution.

Advantages of Loan Pre-Approval • You gain a better sense of the purchase price you can afford. • Enables you to make an offer when you have selected a property you wish to purchase. • Expedites the closing process, as only a fully executed contract of sale and a home appraisal will be required. • Informs the sellers that you are creditworthy and financially able to purchase their home.

Requirements for Pre-Approval Required documents you will need when speaking with a mortgage broker or representative: • W-2 forms and tax returns from the past 2 years. • Three most recent pay stubs. • Financial asset statements. • Fees • Application Fee (approximately $275) • Credit Check Fee (approximately $55) • Appraisal Fee (approximately $275-350) GERRYANGEL

914.263.7168


Home Financing

Financial Information Reviewed in the Pre-Approval Process • Cash for Closing – to ensure that you can finance the closing and incidental closing fees. • Credit – to evaluate your credit standing based on the size of the loan. • Income – to certify that you can afford mortgage payments according to your income. Three Types of Loan Pre-Approval Pre-Qualification:  Written pre – qualification for a specified loan amount based on information regarding your salary, assets and credit history. A credit check (requiring a fee) usually not performed. Not all real state agents and sellers will accept prequalification as evidence of your financial credibility. Loan Approval  Written approval for a specified loan amount. This involves a credit check and a calculation of you debt but does not incorporate income and/or assets in the evaluation. Realtors and sellers are more willing to accept this type of pre -approval since a credit check is involved. Loan Commitment  A written promise from a lender to provide a loan up to a specified amount. This type of pre-approval involves a credit check and verification fo assets and income. Then, only an appraisal and inspection will be required to finalize the loan.  Should you have any questions regarding the pre-approval process or if you would like to obtain a pre-approved loan, your Realtor can provide you with names of highly qualified and experienced mortgage consultants. GERRYANGEL

914.263.7168


Credit Scores Credit Scores

What is a Credit Score?  A credit score is a number derived from your personal credit history and profile. With this number a lender can determine whether you will qualify for credit cards, loans and/or services. Credit scores range from 300-850 and project the likelihood a person will make payments on time. Why are Credit Scores important?  Credit scores are important because it gives the lender an idea of how much risk you represent. The higher your score, the less of a risk you represent and generally this translates into the amount of credit you can receive. Why should you check your Credit Scores?  It’s important to check your credit scores periodically to make sure that the information contained on your profile is accurate. If you are aware of what is on your credit profile you’ll be able to protect yourself against identity theft but also be able to challenge any errors before you run into a problem when it’s time for a loan. Where do I go for a copy of my Credit Score?  Every 12 months the law allows you to order one free copy from each of the nationwide consumer reporting companies.  Equifax: 1.800.685.1111 (Equifax.com)  Experian: 1.888.397.3742 (Experian.com)  TransUnion: 1.800.916.8800 (transunion.com) What makes up a credit score? 35% How past payments were made 30% The amount of debt to total available credit: Balances vs. credit limits 15% Length of credit history 10% Types of credit used (installment, revolving, consumer finance) 10% Recent search for credit and/or amount of credit obtained recently www.wikipedia.com

GERRYANGEL

914.263.7168


Home Buying Worksheet

Example*

Yours

$48,000

$_____________

$4,000

$_____________

$1,520

$_____________

$400

$_____________

$1,120

$_____________

$896

$_____________

$122,070

$_____________

$152,600

$_____________

This material is intended for example purposes only and is not a commitment for financing. This worksheet is intended for use on primary residences. Your rate and affordable price will vary, depending on the size of your down payment, specific terms of our loan, other monthly obligations and the amount of assessment fees, if applicable.

GERRYANGEL

914.263.7168


Home Purchase Negotiation

GERRYANGEL

914.263.7168


Home Purchase Negotiation

GERRYANGEL

914.263.7168


Making An Offer

Once you have found a home you wish to purchase, the next step is to present an offer to the seller. I will assist you in making the offer, which will be delivered to the seller’s agent who in turn will present it to the seller. Negotiations will continue until an agreed upon price has been determined by the seller and you, the buyer. TERMS OF AN OFFER  Down Payment – The amount of cash you are prepared to invest in the purchase.  Contingencies – The two primary types of contingencies are stipulations regarding the mortgage and the home inspections. The mortgage commitment contingency will be satisfied if not, you will now go through the mortgage application process and await a decision. Other contingencies include the completion of satisfactory home inspections (engineering, termite, water, etc.).  Personal Property – that which is or is not included in the purchase (e.g., appliances and light fixtures).  The Closing Date – The date upon which you would like to take title to the property. This is often an “on or about” date, mutually agreed to by the buyer and seller. FACTORS TO CONSIDER WHEN MAKING AN OFFER Are home prices in the surrounding area increasing or decreasing? Has the price of the home been reduced since it went on the market? Are you concerned that other bids have been made?

GERRYANGEL

914.263.7168


Making An Offer

HOW TO STRENGTHEN YOUR OFFER Give the seller as much information as possible about your ability to follow through with the offer. Obtain pre-approval for a loan before making the offer. Perform inspections and sign contract in a timely manner. Verify important information such as the property taxes, square footage, appraisal and maintenance prior to signing contracts. Your Realtor can refer you to the proper sources for this information. AN ACCEPTABLE OFFER An acceptable offer is not binding to either party until the contracts have been signed by both parties and delivered back to the buyer’s attorney. Also, an acceptable offer does not preclude other potential buyers from making another offer on the house. The possibility still exists that another buyer will make a higher offer and/or offer better terms. Since all offers must be presented to the seller regardless of the stage of the selling process, buyers are urged to conduct all desired property inspections as quickly as possible and to enter into a contract. Then, and only then, are buyers and seller legally bound to one another.

GERRYANGEL

914.263.7168


Negotiation From Offer to Contract The Home Inspection It is crucial to conduct a thorough inspection of your prospective home as a contingency of your offer to purchase. It is important to conduct inspections as soon as possible once your offer has been accepted. If you are purchasing a home that requires significant renovations, multiple inspections may be needed to assess the condition of the property and to outline the renovations you plan to undertake. Schedule the inspections when you can be present. This will allow you to become familiar with your prospective new home, evaluate its present condition and decide what repairs will be needed. Be sure to retain the services of licensed professionals to perform the inspections. Engineering This inspection will assess the major structural elements of the home, outbuildings and pool as well as the heating, air conditioning, plumbing and electrical systems. Pest and Termite An inspection will be performed for the presence of all forms of wood-destructive insects in the home and outbuildings. The report should contain a certificate of non-infestation and/or a report of any damage and recommended treatment. Water A laboratory analysis will test the quality of the water. This is especially important for homes that have well water; another test may be performed to determine the capacity of the well. Septic Often, a visual inspection of the septic system area will be performed. If a problem is suspected, a dye test will be performed. Since septic systems require routine maintenance, be sure to find out when the system was last pumped out and its condition at that time. Radon This invisible, odorless and slightly radioactive gas can seep into a house from surrounding soil. Prolonged exposure to high levels of radon can pose a health hazard. In most cases, if radon is detected, steps can be taken to remedy the problem. GERRYANGEL

914.263.7168


Negotiation From Offer to Contract The Home Inspection Carbon Monoxide This odorless, colorless and tasteless gas can be fatal if inhaled at sufficient levels. Carbon monoxide in the home is produced from fuel-burning sources such as gas or oil fired heating systems. Each home is required by law to have at least one operable carbon monoxide detector on the bedroom level. Compliance will be affirmed at the closing. Asbestos This mineral fiber was once used for insulation and fire protection. Asbestos in good condition, such as that in ceiling tiles, may not need to be removed, but instead covered and sealed. Any work performed on asbestos must be done by a properly trained and licensed contractor. Oil Tank Oil tanks of 1,000 gallons or more must be tested for leakage. Be sure to ask if the seller has purchased tank insurance. Lead Paint Paint chips or dust from deteriorating lead paint are toxic and can cause lead poisoning when inhaled or ingested. If the home was built before 1978, the seller must complete a lead paint disclosure form, which will be signed by the buyer acknowledging receipt of the disclosure. A lead disclosure booklet endorsed by the EPA will also be provided to both parties.

GERRYANGEL

914.263.7168


Contract of Sale

After the seller has accepted your offer, the contractual negotiations begin. If you have not already done so, now is the time to hire an attorney to represent you. At this time, the inspections should be complete or coming to a close shortly. A STEP-BY-STEP PROCESS 1. The Listing broker will send a memorandum of the accepted offer to the seller, the seller’s attorney and to you and your attorney. 2. The seller’s attorney will prepare the contract of sale and send it to your attorney. This is done once all property inspections have been completed, unless it has been agreed that inspections will take place after the contract has been signed. 3. Your attorney will review the contract with you and then discuss modifications, if any, with the seller’s attorney. 4. Once the contract is finalized, you will sign it and provide the down payment specified Then, the signed contract and down payment check will be sent to the seller’s attorney. 5. The seller will sign the contract and return a fully executed copy to your attorney. 6. You will now satisfy any contingencies that remain in the contract, such as finalizing your financing or performing any further inspections.

GERRYANGEL

914.263.7168


Contract of Sale

INCLUDED IN THE CONTRACT OF SALE • A legal description of the property including boundaries, property size and address. • The selling price of the property, the amount of the down payment and the balance due on closing. • The specific terms of the financing by personal assets and/or by loans. • A provision voiding the agreement if the mortgage contingency is not met. • The closing date and the date by which the property can be occupied. • Provisions regarding inspections if they have not yet been complete. • A finalized description of personal property that will and will not be included in the sale. • A clause specifying that the house will be sold in its current condition, unless otherwise noted. • A stipulation that the sale is conditional upon the seller providing the title and certificate of occupancy. Please note that this is not a complete list, but only a partial one outlining major details included in the contract of sale. Each contract of sale will vary based on circumstances of the purchase. Your attorney can assist you with any questions you may have regarding the contract.

GERRYANGEL

914.263.7168


Home Financing

Documents Needed to Apply For a Mortgage

GERRYANGEL

914.263.7168


Financing Process

GERRYANGEL

914.263.7168


Mortgage Financing

Once you have a fully executed signed contract, it is time to secure a mortgage from a lending institution. Ask your mortgage broker about the various financing options that are available to ensure obtaining a mortgage within your budget. THREE TYPES OF MORTGAGES 1. Adjustable-Rate Mortgage (ARM) The interest rate for this type of loan can adjust up or down in accord to the interest rate index at set adjustment periods. The adjustment period can be set anywhere between 6 months & 10 years, although the terms typically span one year, 2 years, or 5 years. Initial monthly payments will be lower with an ARM than with a fixed-rate mortgage and payments will fluctuate according to index performance. Advantages:  An option for homeowners who plan on their income rising in the next few years or for those who do not plan to own the home for a long period of time.  Monthly payments can be reduced when interest rates decrease. Disadvantages:  The adjustment cap (ceiling) may be high, causing monthly payments to greater.  The index may increase each time your loan.

GERRYANGEL

914.263.7168


Mortgage Financing 2. Fixed-Rate Mortgage The interest rate on this type of loan and therefore the monthly payments, will remain the same over the life of the mortgage. The fixed interest rate is determined at the time the loan is secured according to present economic conditions. Fixed-rate mortgages are typically offered with either 15 year & 30 year terms.

Advantages:  A fixed rate maintains monthly payments from increasing when interest rates rise.  A 15 year mortgage offers lower total interest payments.  A 30 year mortgage offers lower monthly payments.  A 30 year mortgage enables you to afford a more expensive home.

Disadvantages:

 Monthly payments will not be reduced when interest rates decrease.  A 15 year mortgage will have higher monthly payments.  A 30 year mortgage will have higher total interest payments.

3. Balloon Mortgage The monthly payments for this type of mortgage are equivalent to those of a 30 year loan but the term of the loan is between 5-7 years with a large payment due at the end of the term. Please note that not all banks offer balloon mortgages as a financing option.

Advantages:  Monthly payments are the same a a 30 year mortgage.

Disadvantages:  A large payment is due at the end of the term. FINDING THE BEST LOAN  Compare loan APRs to find the lowest rate.  Compare down payments or cash needed up-front.  Compare up-front points and other accompanying fees.

GERRYANGEL

914.263.7168


Mortgage Financing

TYPES OF LENDERS 1. Lender An institution providing funds to the buyer at closing in return for the buyer’s acceptance of debt & commitment to pay, placing a lien on the property in the event the buyer defaults. 2. Mortgage Broker A company or individual who can offer the loan services of any number of lenders. The broker can offer financing advice & process your loan application but cannot approve you for a loan with out first conferring with the lender. 3. Mortgage Banker A lender who can offer a variety of mortgage services & represent mortgage banks. These individuals can process your loan application & approve you for a loan.

THE LOAN PROCESS  You will complete the loan application & provide documentation of income, financial assets, etc.  The lending institution will have the property appraised.  The loan manager will make a decision on the loan request based on the appraisal & your financial information.  When the loan is approved, you will receive a commitment letter stating the terms of the loan.  Be sure to have your attorney review the commitment letter before you sign it.  Once the letter is signed & returned, the lender’s attorney will prepare any final documents which will be signed at closing.

GERRYANGEL

914.263.7168


Mortgage Financing

LOAN APPLICATION CHECKLIST  Photo Identification.  Proof of social security number.  Residence address(es) for the past 2 years.  W-2 forms & federal income tax returns for the last 3 years.  Three most recent pay stubs.  Name & address of each employer for the past 2 years.  Bank name & address for all checking & savings accounts plus 2 months bank statements showing all account numbers & current balances.  Loan information & address(es) of real estate currently owned.  Estimated value of personal property.  Deposit for credit report & appraisal.

GERRYANGEL

914.263.7168


Mortgage Financing

GERRYANGEL

914.263.7168


Frequently Asked Questions

GERRYANGEL

914.263.7168


Frequently Asked Questions

GERRYANGEL

914.263.7168


The Closing

GERRYANGEL

914.263.7168


The Closing

THE CLOSING  Parties Present: You and your attorney, the seller and seller’s attorney, the lender’s attorney, the title closer, and the Realtors involved will be present at the closing.  Calculation of the Adjustments: The three attorneys and the title closer will review all documents and agree on the calculation of adjustments.  Responsibilities of the Title Closer: The title closer will assure your attorney and the lender’s attorney of the following: i.  Clear title to the property ii.  Any mortgages, liens, and judgments presently on the property have been satisfied. iii.  All taxes have been paid to date. iv.  There are no violations on the property v.  A certificate of occupancy has been issued.  Adjustments: All documents are then signed and any adjustments are made before the seller receives full payment for the home.  Documents to the County Clerk’s Office: The deed and other required documents are given to the title closer to file at the county clerk’s office.  Keys to the property: You will receive the keys to the property.  Final Closing Statement: Once the closing is complete, your attorney will send you a final closing statement for your records. GERRYANGEL

914.263.7168


Buyer’s Closing Costs

GERRYANGEL

914.263.7168


Buyer’s Closing Costs

TAXES PAID AT CLOSING Mansion Tax  All home sales of $1,000,000 and over are subject to this New York state tax of 1% of the entire purchase price. Reimbursement to Seller for Prepaid Taxes  Since the seller has paid taxes on the property, the buyer will owe the seller a portion of these pre-paid taxes. Tax Escrow  The lender may require the buyer to deposit funds into an escrow account to be used by the bank to pay the next year’s taxes and insurance. INSPECTION COSTS Engineers  A fee for structural inspection of the house including foundation, plumbing and electrical systems, etc. Estimate: $275 to 1% of home purchase price. Flood Certification  A fee to assess flood maps and determine if the home s within federal flood zones. Estimate: $75 Radon  A fee to test levels of radon in the home and around the property. Estimate: $100-$150 Termite and Pests  A fee to inspect for termites and other wood-destructive insects. Estimate: $65-$100 Water Analysis and Septic Test  A fee to test the portability of the water and the adequacy of the septic system. Estimate: $150-$250

GERRYANGEL

914.263.7168


Buyer’s Closing Costs

INSURANCE COSTS  Departmental Searches A fee for the search of municipal records for property violations. Estimate: $175  Endorsements A fee for added insurance coverage to the basic title requirement. Estimate: $50  Fee Title Insurance A premium paid to ensure the purchaser’s clear title to the property. Estimate varies according to purchase price of house and New York State Department of Insurance.  Homeowner’s Insurance Policy The buyer is required to bring to the closing a paid receipt for an insurance policy listing the lender as the loss payee. Estimate: varies according to type of coverage and insurance company.  Recording of Deed A fee paid to the county clerk to record the deed and mortgage. Estimate: $150  Survey (if required) A fee to survey any major changes to the property. A bank will usually require a new survey if the existing one is more than 10 years old. Estimate: $1,000 and up (according to property size)  Survey Inspection A fee for the title company to inspect the existing survey and property. Estimate: $75

GERRYANGEL

914.263.7168


Buyer’s Closing Costs

ADDITIONAL COSTS  Attorney’s Fee Your attorney’s fee will vary depending on the attorney, & may be billed on an hourly basis or as a pre-set amount.  Adjustments or Apportionments These are fees that are pro-rated to determine the buyer’s costs. They can include adjustments on taxes & on fuel remaining in the tank.

CONDOMINIUM CHARGES  Common charges & Maintenance Fees The condominium board of managers will usually require 1 month of common charges to be paid in advance.  Contribution to Capital Usually associated only with new construction, this fee is put towards the condominium board’s general budget for operating expenses. The fee is generally equal to 2 months of common charges.  Recording of Power of Attorney Condominium boards may require all buyers to give the board power of attorney to make decisions on behalf of the entire condominium. The fee for this is estimated at $25.

GERRYANGEL

914.263.7168


Glossary of Terms

GERRYANGEL

914.263.7168


Glossary of Terms

GERRYANGEL

914.263.7168


Fair Housing

GERRYANGEL

914.263.7168


Property Evaluation Worksheet

GERRYANGEL

914.263.7168


Inspection Checklist

GERRYANGEL

914.263.7168


Closing Costs Worksheet

GERRYANGEL

914.263.7168


Closing Costs Worksheet

GERRYANGEL

914.263.7168

Buyer Presentation  

The Angel Team Buyer Presentation

Read more
Read more
Similar to
Popular now
Just for you