HUECU REAP Home Buyer's Guide

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dvocacy • Mortgage Financing • Real Estate Services • Perso nsurance Products • Rebates • Moving Services • Advoca Mortgage Financing • Personal Insurance Products • Real Es ces• Simplify Your Next Move with Real Estate Advantage • Mo

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Table of Contents • Welcome.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 • HUECU Real Estate Advantage Program.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 • Your Real Estate Advantage Sales Associate as Your Buyer’s Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 • Agency Representation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 • Home Ownership – An Overview of the Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Financing • Financing Your Purchase .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 • Getting Pre-Approved for a Mortgage Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 • What Type of Loan Is Right for You?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 • Borrower/Buyer Costs for Processing the Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 • How Much Can You Afford?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Finding the Right Home • Defining Your Real Estate Needs and Desires. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 • Researching and Touring Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 • Helpful Websites and Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

When You Find the Right Home—Next Steps • The Offer to Purchase and Negotiating The Sale.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 • Important Information About Purchasing a Condominium. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 • The Home Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Completing the Purchase • Loan Application, Title Company, Appraisal and Closing Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 • Closing Preparation/Closing The Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Additional Resources • Glossary of Common Real Estate Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Welcome to the Real Estate Advantage

Home Buyer’s Guide

Congratulations on your decision to purchase a new home!

Advantage Home Buyer’s Guide is one of the many

We at Real Estate Advantage have the experience and

journey of finding, financing, and closing on a new home.

resources to help make your home search and purchase

Here you will find helpful tips, worksheets, and charts

exciting and enjoyable. With many years of experience,

that will prepare you for this exciting adventure. You can

our mission is to provide exceptional real estate services

sit back and relax knowing that Real Estate Advantage is

from honest, knowledgeable professionals who are

here for you every step of the way!

resources we provide buyers to help them navigate the

dedicated to customer satisfaction. The Real Estate

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800-396-0960 RealEstate-Advantage@NEMoves.com https://www.huecu.org/reap

Real Estate Advantage Program

With the HUECU Real Estate Advantage Program, you will receive outstanding service and the support that you need throughout the buying, selling, and moving process.

Mortgage Benefits

Individual Guidance

Your Real Estate Advantage Specialist will provide you with all the information you need:

• • • • •

Real estate market conditions Community profiles Financing Moving and storage Choosing the home that best fits your needs

Moving Services

Real Estate Advantage can provide you with additional benefits when you are moving your household goods. Our carriers are committed to customer service, performance, and dependability.

Insurance Services

Through the Real Estate Advantage program, you have access to quality personal insurance products and services at highly competitive rates, issued only by top-rated carriers.

At Harvard University Employees Credit Union (HUECU), we pride ourselves on making the mortgage process as straightforward and hassle-free as possible. Whether you’re purchasing a new house or refinancing an existing loan, our loan experts will help find the solution that’s right for you.

Additional HUECU First-Time Home Buyer Benefits: • FREE Pre-Approval • .125% rate discount • $300 credit towards closing costs • Discounted attorney fees • Home Buyer Workshops • 90 day rate lock huecu_mortgage@harvard.edu Phone: 617-495-4460

Receive a Cash Rebate When You Buy or Sell Your Home In most states, you can receive a rebate on the sale or purchase of your home, and a combined rebate if you do both. The amount you receive is based on the sale or purchase price of the home.

Purchase/ Sales Price

Massachusetts Mortgage Lender and Broker MC2668. This is not a commitment to lend.

Restrictions apply. Additional HUECU First-Time Home Buyer Benefits subject to change without prior notice. Equal Housing Lender.

Your Cash Bonus*

$50,000 – 99,999

$330

How to Obtain Your Benefits

$100,000 – 199,999

$440

$200,000 – 299,999

$687

$300,000 – 399,999

$962

$400,000 – 499,999

$1,237

To receive your cash rebate after your real estate closing, you must follow these guidelines: • R egister with a HUECU Real Estate Advantage Specialist at 1-800-396-0960 before you contact any real estate agent.

• V iew the home you want to purchase only with the agent referred to you by the program Specialist.

• C lose on the property with the agent referred to you by your program Specialist.

• I f selling, list your home only with the agent referred to you by your program Specialist.

$500,000 – 599,999

$1,512

$600,000 – 699,999

$1,787

$700,000 – 799,999

$2,062

$800,000 – 899,999

$2,337

$900,000 – 999,999

$2,612

$1,000,000 – 1,099,999

$2,887

$1,000,000 andand up up $1,000,000 $1,000,000 – Bonus increases by $275 for each and$100,000. up additional

* Restrictions apply in some states.

Important: Do not contact a real estate agent before registering for this program or you may not be eligible to receive the benefits. Your cash rebate will be mailed to you within three weeks after you close on the property.

RealEstate-Advantage@NEMoves.com 800-396-0960 https://www.huecu.org/reap

ColdwellBankerHomes.com

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When you work with Real Estate Advantage to select a sales associate to represent you as a buyer’s agent, you can be confident that they are well-trained, know the laws and technical aspects of real estate practice, and will work diligently to meet your needs and protect your interests. Our sales associates undergo extensive training and are supported by an experienced management team and knowledgeable support staff.

As your buyer’s agent, your Real Estate Advantage sales associate will use their market knowledge, skills and experience to assist you in securing the best price and terms for your desired property. Today’s real estate transaction has become more complex with new and revised regulations; your buyer’s agent will

Your Real Estate Advantage Sales Associate as Your Buyer’s Agent

advocate for you and advise you through each step of the transaction, ensuring a smooth transition to your new home.

Your Real Estate Advantage Sales Associate will…

1• Listen to your needs and answer your questions.

1• Assist in defining your real estate needs and desires.

Your Real Estate Advantage Sales Associate will use their market knowledge, skills, and experience to assist you in securing the best price and terms for your desired property.

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1• Inform you regarding the current market conditions.

1• Describe the home buying process and familiarize you with the standard contracts in use.

1• Help you research and tour appropriate properties.

1• Professionally value properties of interest using a comparable market analysis.

1• Prepare an offer to purchase and negotiate the best price and terms for you.

1• Keep you informed throughout the process and provide professional advice at each step.

Types of Agency Representation BUYER’S AGENT A buyer can engage the services of a real estate agent to purchase property and the real estate agent is then the agent for the buyer who becomes the agent’s client.

This means that the real estate agent represents the buyer. The agent owes the buyer undivided loyalty, reasonable care, disclosure, obedience to lawful instruction, confidentiality and accountability, provided, however, that the agent must disclose known material defects in the real estate. The agent must put the buyer’s interests first and negotiate for the best price and terms for their client, the buyer.

SELLER’S AGENT A seller can engage the services of a real estate agent to sell his property (called the listing agent) and the real estate agent is then the agent for the seller who

Buyer Representation

becomes the agent’s client. This means that the real estate agent represents the seller. The agent owes the seller undivided loyalty, reasonable care, disclosure, obedience to lawful instruction, confidentiality and accountability, provided, however, that the agent must disclose known material defects in the real estate. The agent must put the seller’s interests first and negotiate for the best price and terms for their client, the seller.

(The seller may authorize sub-agents to represent him/ her in marketing its property to buyers, however the seller should be aware that wrongful action by the real estate agent or sub-agents may subject the seller to legal liability for those wrongful actions).

What is Agency?

The following two pages provide legal explanation on the possible relationship in the state of Massachusetts between a buyer and a real estate agent.

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Types of Agency Representation DUAL AGENT A real estate agent may act as a dual agent representing both the seller and buyer in a transaction but only with the express and informed consent of both the seller and buyer. Written consent to dual agency must be obtained by the real estate agent prior to the execution of an offer to purchase a specific property. A dual agent shall be neutral with regard to any conflicting interest of the seller and buyer.

Consequently a dual agent cannot satisfy fully the duties of loyalty, full disclosure, and obedience to lawful instructions which is required of an exclusive seller or buyer agent. A dual agent does, however, still owe a duty of confidentiality of material information

Understanding Your Responsibility as a Consumer

and accounting for funds. The written consent for dual agency must contain the information provided for in the regulations of the Massachusetts Board of Registration of Real Estate Brokers and Salespeople (Board). A sample dual agency consent is available at the Board’s website at www.mass.gov/dpl/re.

As a buyer or seller you can choose

(NON-AGENT) FACILITATOR

to have the advice, assistance and

When a real estate agent works as a facilitator that

representation of your own agent

ment but does not represent either the seller or buyer

who works for you (unless dual

agent assists the seller and buyer in reaching an agreein the transaction. The facilitator and the broker with whom the facilitator is affiliated owe the seller and

agency arises). Do not assume that

buyer a duty to present each property honestly and ac-

a real estate agent works solely for

property and owe a duty to account for funds. Unless

you unless you have an agreement for that relationship.

curately by disclosing known material defects about the otherwise agreed, the facilitator has no duty to keep information received from a seller or buyer confidential.

The role of facilitator applies only to the seller and buyer in the particular property transaction involving the seller and buyer. Should the seller and buyer expressly agree a facilitator relationship can be changed to become an exclusive agency relationship with either the seller or the buyer.

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Home Ownership—An Overview of the Transaction 11 Selection of a Real Estate Advantage Program sales

19 Submit a mortgage application.

associate to act as your buyer’s agent.

Promptly after signing the Purchase and Sale Agreement

12 Pre-approve for a mortgage loan.

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1–3 days

14–21 days from application

13 Define your real estate needs and desires with your

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sales associate.

1–3 days

Closing preparation by the closing attorney or title company including a title search and document preparation.

14 Review properties online and tour homes.

7–14 days prior to closing

Typically 1–12 weeks 15 Identify a property in which you are interested. Once a

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responsibility).

comparative market analysis to provide an estimate of

7–14 days prior to closing

the value of the property.

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16 If you decide to proceed with an offer, your agent

Obtain final utility bills, smoke and carbon monoxide detector certificate and prepare the deed (seller

desired property is identified, your agent can prepare a

Notify utility companies of closing date to disconnect seller/connect for buyers (natural gas, electric,

will work on your behalf to negotiate terms that are

telephone, cable, and Internet).

acceptable to you.

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Loan processing/appraisal/commitment from Lender.

7–14 days prior to closing

Hire a professional home inspector and conduct a

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home inspection.

Review Final Closing Disclosure 3 day prior to closing

2-10 days after signing the Purchase and

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Sale Agreement.

Conduct final property visit.

1 day prior to closing

18 Finalize and sign the Purchase Offer.

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3–10 days after accepted offer

Close the transaction - it’s your home!

45-60 days from accepted offer

Home Search and Acquisition Timeline SEARCH | | | BEGINS

1

|

|

VARIABLE TIME FRAME |

2

|

|

|

3

Select a sales Pre-approve Define your associate/ for a real estate buyers agent mortgage needs 1–3 DAYS

|

|

|

4 Visit and review properties

1-3 DAYS 1-12 WEEKS TYPICALLY

|

|

5

|

OFFER | ACCEPTED

6

10 DAYS

20 DAYS

30 DAYS

9

11

40 DAYS

50 DAYS

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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Negotiate Prepare and Conduct the sale submit an a home offer inspection

8

10

12

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Sign the Submit a Obtain Closing Obtain final Notify utility review Purchase mortgage mortgage preparation utility bills, companies final closing and Sale application commitment prepare the Dislcosure Agreement from lender deed

2-10 DAYS 3-10 DAYS PROMPTLY 14-21 DAYS 7-14 DAYS 7-14 DAYS 7-14 DAYS AFTER SIGNING PURCHASE OFFER

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AFTER ACCEPTED OFFER

AFTER SIGNING P&S

3 DAYS

CLOSING

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16

Conduct final property visit.

Close the transaction It’s your home!

1 DAY

45-60 DAYS

FROM PRIOR PRIOR PRIOR PRIOR PRIOR APPLICATION TO CLOSING TO CLOSING TO CLOSING TO CLOSING TO CLOSING

FROM ACCEPTED OFFER

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Notes: ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________

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___________________________________________________________________________________________________________________

Financing

• Financing Your Purchase • Getting Pre-Approved for a Mortgage Loan • What Type of Loan is Right for You? • Borrower/Buyer Costs for Processing the Loan • How Much Can You Afford?

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The majority of home buyers, typically 85-90% annually, finance a portion of their home purchase using a mortgage. The mortgaging process involves two primary documents given from the buyer (mortgagor) to the lender (mortgagee) at closing, including the promissory note and the mortgage. The promissory note describes the terms of the loan including the loan amount, interest rate, and the time period of repayment. The mortgage pledges the property as security for the note.

Financing Your Purchase

HUECU offers very competitive interest rates and reduced closing costs.

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A mortgage pre-approval is a process in which a lender reviews your financial status and issues a letter indicating the maximum loan amount they will provide you and the basic terms of the loan.

Lender’s guidelines vary as to the amount they will lend to any particular borrower based on income, credit score, long-term debt, and the amount of cash paid toward the purchase price at closing, known as the down payment. There is typically no cost to the buyer for the pre-approval process. A loan pre-approval letter is typically valid for 90 days.

The benefits of obtaining a pre-approval: 1. Determining the highest loan amount you are qualified to borrow.

2. Reducing the time needed to process a loan after a desirable property is located.

3. Providing written assurance to the seller of your ability to finance the purchase, improving the

Pre-Approving for a Mortgage Loan

acceptability of your offer.

You should be prepared to submit: 1. Personal information.

2. Credit authorization.

3. Federal tax returns for the previous two years.

4. IRS W2 forms for the previous two years.

5. Bank statements for the prior two months.

6. Income paycheck details for the previous 30 days.

7. Details on any outstanding long-term debt such as credit cards, auto loans, student loans, etc.

Interested in receiving a loan consultation and a no-cost mortgage pre-approval? Contact a Real Estate Advantage representative today for more information at 800-396-0960 or email RealEstate-Advantage@NEMoves.com.

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There are many different types of mortgage loans to meet the varying needs of borrowers. The most commonly used include: • 30-, 20-, 15- OR 10-YEAR FIXED RATE LOANS These feature a fixed interest rate and a fixed monthly payment for the term of the loan. Jumbo loan options available. • ADJUSTABLE RATE MORTGAGES (ARM) with 5-, 7-, 10-Year adjustment periods These loans begin with a relatively low interest rate and adjust to a market interest rate at each period

What Type of Loan is Right For You?

interval, changing the monthly payment with each adjustment.

Contact Real Estate Advantage to be connected to a mortgage representative for more information on home loan programs. A representative is ready to assist you at 800-396-0960 or email

The right loan to meet your needs is a phone call away. Consult with an HUECU home loan representative for expert guidance on determining the loan type that fits with your financing goals.

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RealEstate-Advantage@NEMoves.com.

There are several costs involved when obtaining a mortgage loan which are charged to the borrower at closing. Below is an estimate of those costs: Note: HUECU doesn’t charge a separate credit report fee

SERVICE FEE Origination Charge $300 Points 1% of the loan amount

for each

(generally not required) Appraisal Fee – per appraisal $350 - $600 Flood Determination $10 Tax Service Fee $93 Settlement Agent $750 Lender’s Title Insurance of Mortgage Loan $2.75 per $1000 Other Title and Closing Fees $155 Survey $150 Recording Fee $402 Owner Title Insurance Recommended but not required Prepaid Homeowner’s Insurance $600 - $1500 (1 year) Tax Escrows 3-6 months of property taxes For First Time Home Buyers, HUECU offers .125 off the rate and reduced closing costs. HUECU also offers a No Points No Closing Cost option.

In addition, lenders often require that you have a minimum of two monthly housing payments in your asset account at closing.

Additional costs may include flood insurance and private mortgage insurance. Flood insurance is required

Borrower/Buyer Costs for Processing the Loan Lenders are required to provide you with a complete statement of estimated costs of the loan, known as a “Loan Estimate.”

if the property lies in a federally designated flood zone and the cost is typically $700-1000 annually. Private Mortgage Insurance (PMI) is required if the amount borrowed is more than 80% of the appraised value. The cost of PMI varies based on the down payment and your FICO score. PMI is normally paid monthly over the life of the loan, or for a predetermined length of time set by the lender.

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One of the most important steps in determining the amount to borrow is to assess the impact of the monthly payment on your financial position, circumstances and lifestyle. Your ability to qualify for a certain loan amount does not necessarily mean that the resulting monthly housing payment will be comfortable for you.

As per the residential mortgage industry standards, the maximum monthly debt to gross monthly income ratio is 43.0%, which includes monthly payments for ‘other’ expenses including car loans or leases, student loans, credit cards, etc. A good budgetary plan is to ensure your proposed housing expenses and other obligation ratio does not exceed 36.0% - but this can be a difficult task for first time home buyers in expensive housing areas. Once you subtract other payments from your

How Much Can You Afford?

expense budget, the remaining funds can be used toward the proposed housing expense. In addition to the principle and interest payment, an all-inclusive housing expense includes real estate tax, home insurance and/or a condo fee. If your down payment is less than 20% of the purchase price, you may also be

30-year Term Mortgage INTEREST RATE

2.00% 2.25% 2.50% 2.75% 3.00% 3.25% 3.50% 3.75% 4.00% 4.25% 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 14

COST/$1,000 OF LOAN

$3.70 $3.82 $3.95 $4.08 $4.22 $4.35 $4.49 $4.63 $4.77 $4.92 $5.07 $5.22 $5.37 $5.52 $5.68 $5.84 $6.00

required to pay Private Mortgage Insurance monthly.

These are general guidelines only. Your licensed mortgage professional will help you determine what loan amount and loan program(s) you will qualify for based on your income, proposed debt to income ratio, down payment, credit history, other obligations, postclosing savings, etc.

To more precisely determine your housing affordability and discuss pre-approval application steps, speak with a Real Estate Advantage representative at 800-3960960 or email RealEstate-Advantage@NEMoves.com.

Finding the Right Home • Defining Your Real Estate Needs and Desires • Researching and Touring Properties • Helpful Websites and Resources

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Defining Your Real Estate Needs and Desires What’s important to you in your new home? Answering

the home features that are most important to you will

this question provides a great start to defining your real

help minimize the time and effort required to find the

estate needs and desires. As you consider your needs you

best home for your needs. Completing the worksheet

will quickly realize that there are many variables involved

below will help with this process. Review each feature

in the home-buying decision. Choosing and prioritizing

and variable noting the importance to you.

FEATURE/VARIABLE COMMENTS: LIKES/DISLIKES

IMPORTANCE 1-5

5 =VERY IMPORTANT

PRIORITY RANKING 1-15

minimum/maximum

Price range Monthly payment

maximum

Towns/cities Distance to employment

shopping, police/fire, daycare, schools, transportation

Location/distance/other Public schools Neighborhood Property type House style

ranking, performance

single family/condo/multi-family

Colonial, Ranch, Split Entry, Contemporary, Garden, Townhome new construction, historic

Property age Total living area (sq. ft.)

Yard size/land Bedrooms Bathrooms

number, size number required, number

Garage Living room Dining room Family room Kitchen Other property features

features, location, size waterfront, view, pool, central air

Other important features or considerations: _____________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 16

There are several real estate websites that provide complete information on all available homes such as the Coldwell Banker Residential Brokerage website NewEnglandMoves.com. Our online property listings include multiple photos, video, mapping, and property information. In addition, there is information about the community such as schools, demographics, income, and crime statistics. Please register for the Real Estate Advantage program before registering on the NewEnglandMoves.com website and any other real estate websites, or before contacting a real estate agent to ensure program eligibility.

Viewing Homes Properties are viewed either by appointment scheduled through your Real Estate Advantage sales associate or by attending an open house. At the beginning of your search you will likely want to tour several potential homes and your sales associate will prepare an efficient tour, typically including four to six properties, based on

Researching and Touring Properties

geography and time available. A typical home viewing takes approximately thirty minutes and appointments are usually scheduled in succession, with an allowance for travel time.

Generally, the seller is not home during the showing and the property will be accessed by your sales associate through the use of a secure key lock box attached to the door. With some properties, the listing broker will also attend the showing and will tour you and your agent through the property. As you tour each

NewEnglandMoves.com property listings include multiple photos, video, mapping, and property information.

property make note of the features included relative to your list of priorities.

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Helpful Websites and Resources The Coldwell Banker Online Relocation Guide offers a comprehensive look at communities throughout all regions of the state of Massachusetts.

This is a great way to begin your initial research for target communities for your home search, done from the comfort of your home or office. In addition to the community profiles, on the website you will find information on demographics, education, community services, entertainment, culture, sports, healthcare, shopping, and attractions.

For your added convenience, the guide provides links

Community Overviews

to government, state and education websites.

Visit the website at: www.sunraydirect.com/Massachusetts3/CBRBBethDuncan/

Coldwell Banker Residential Brokerage’s Online Relocation Guide‌ community profiles, demographics and more.

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When You Find the Right Home– Next Steps • The Offer to Purchase and Negotiating the Sale • Important Information About Purchasing a Condominium • The Home Inspection

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The Offer to Purchase You have found the right home and would like to purchase it. Your Real Estate Advantage sales associate will assist you by providing a professional opinion of value and will prepare a standard offer to purchase form. The forms used vary by market area but most contain the following basic terms of the offer:

The Offer to Purchase and Negotiating the Sale

Most offer forms include the language “time is of the essence� which means all dates and times included in the offer are inflexible and it is necessary to strictly adhere to the dates and times indicated.

1. The purchase price offered.

2. The amount of an initial deposit delivered with the offer, usually $500-$1,000.

3. The amount and timing of a second deposit which is usually delivered with the signed Purchase and Sale Agreement in the amount of five percent of the total purchase price less the initial deposit.

4. The time at which the offer expires and is no longer valid.

5. In some states, a provision for signing a more detailed Purchase and Sale Agreement by a particular time which is normally 5 to 14 days after acceptance of the offer.

Legal representation is advised.

6. The date and time for closing the sale which is typically 45 to 60 days from date of accepted offer.

7. An escrow clause authorizing a third party to hold the deposits as escrow broker. These are usually held by the listing firm.

8. A financing contingency which provides time, normally 25 to 35 days from offer acceptance, for the buyer to obtain a commitment for financing from a lender.

9. A home inspection contingency allowing a time period to conduct inspections, usually ten days, and provision for remedy if the buyer is not satisfied with the results of the inspections.

After preparing your offer with you, your sales associate will submit your offer, with pre-approval letter and initial deposit, to the listing broker and/or seller.

Negotiating the Sale Negotiations between the buyer and seller are conducted through the broker or brokers. Upon receipt of the offer, the seller has the option to accept the offer, reject the offer, or propose a counter offer.

Negotiations will continue until mutually acceptable 20

terms are agreed upon or until the parties choose to discontinue negotiations.

Important Information about Purchasing a Condominium When purchasing a condo it is important to do the necessary research to ensure a successful closing.

Keep in mind that you are purchasing the interior of the condo and a proportionate share of the exterior of the condo (roof, decks, landscaping, hallways etc.)

Have your home inspector evaluate the condition of the interior and exterior, including all common areas.

Additionally, remember to ask for the amount of the condo fee and what the fee pays for.

Ask Your lawyer to…

• Ask for a budget from the condo association to make sure the association is saving sufficient funds for future necessary repairs or improvements to the building structure and common areas; maintaining or enhancing the general condition of the building. It is required that

Buying a Condo…

What You Should Know

the condo association save 10% of the gross condo fee receipts each month for this purpose.

• Request a balance sheet from the condo association.

It is necessary to check their level of reserves to be assured there are enough funds for the building repairs and enhancements.

• Check the number and amount of condo fee delinquencies.

When buying a condo you purchase the interior and a share of the exterior

• Ask for the list of capital improvements completed in the last year.

• Ask for the history of special assessments, if any.

• Ask for the percentage of owner occupants and percentage of renters. Your financing institution will want to know.

• Request a copy of the condo association documents that will tell you any special requirements and conditions of the condo building.

• Ask if there are any legal claims against the condo association.

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The Home Inspection Most property sales are contingent on the results of a home inspection, and other inspections, paid for by the buyer. The cost of a typical home inspection ranges in price from $300 – $800 and will take two to four hours to perform. The home inspection usually occurs within five to seven business days of the seller’s acceptance of the buyer’s offer.

The inspector will review the exterior of the premises including the roof, siding, trim, and windows and the interior including bathroom and kitchen fixtures and appliances. They will also review the major systems of the home including heating, cooling, plumbing, and electrical. Buyers should attend the home inspection to further their knowledge of the property and to observe any defects discovered. Additional inspections

The Home Inspection

often performed include pest and termite inspections, radon gas, lead paint, pool, and septic. If unforeseen defects are discovered during the home inspection the buyer’s may exercise the remedy described in the offer to purchase or, if both buyer and seller are willing, these items may be addressed through additional negotiations.

Ask your Real Estate Advantage representative about home warranty programs.

Lead Paint Properties built prior to 1978 may contain lead paint.

Lead paint can potentially cause serious illness if ingested, particularly by children. There are both Federal and State laws regarding disclosure and the treatment of lead paint. For more information please visit your state government website.

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Completing the Purchase • Loan Application, Title Company, Appraisal and Closing Disclosure • Closing Preparation/Closing the Sale

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Applying for the Mortgage Many home buyers wait until after placing a property under agreement to secure financing. A pre-approved home buyer is better prepared for the home buying process and can often place a more competitive offer on a property. HUECU can facilitate the pre-approval process, making the loan application itself simple and easy.

The Appraisal Upon receipt of your completed application and required documentation, HUECU will order an appraisal of the property. The appraisal is a valuation of the property. It is required by HUECU as the property is the security for the note. It is performed by a licensed

Loan Application, Title Company, Appraisal and Closing Disclosure

appraiser who will provide a written report and opinion of the value for the property.

After the successful processing of your loan, HUECU will issue a commitment letter to you indicating their intention to fund your loan. HUECU will then choose an attorney and/or title company to perform a title search.

When all Underwriting Conditions have been met,

Your HUECU loan representative

your file moved to the closing department. At least

will work with you to obtain the

“Closing Disclosure� which details the terms of your

best interest rates and terms available at the time of your purchase.

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3 days prior to closing HUECU will provide you with a mortgage, your down payment, final closing cost and escrows. This ensures that you have time to review the figures and the total funds required to close on your new home.

Establish Utility Accounts As the buyer it is important to establish accounts with utility and other service providers for the property seven to fourteen days prior to closing including natural gas (if applicable) and electric service and additionally, if desired, Internet service, cable, and telephone.

Final Property Visit and Review Once the seller has vacated and prior to closing, it is recommended that the buyer has a final property visit and review. This usually occurs the day before the closing. It provides an opportunity for the buyer to verify that the property is in a similar condition as at the time of purchase and that all possessions of the sellers have been removed. If deficiencies are discovered in this process they can be addressed before closing.

The Closing of the Sale

Closing Preparation/ Closing the Sale

You, as the buyer, will be notified by the closing attorney of the place and time of the closing and the amount and form of funds needed from you to close.

Your buyer’s agent will attend the closing with you to ensure that all goes smoothly. Congratulations!

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Additional Resources Glossary of Common Real Estate Terms ADJUSTABLE RATE MORTGAGE (ARM): A mortgage with an interest rate that changes over time in line with movements in the index. ARMs are also referred to as AMLs (adjustable mortgage loans) or VRMs (variable rate mortgages).

ADJUSTMENT PERIOD: The length of time between interest rate changes on the ARM. For example, a loan with an adjustable period of one year is called a one year ARM, which means that the interest rate can change once a year.

AMORTIZATION: Repayment of a loan in installments of principal and interest, rather than interest-only payments.

ANNUAL PERCENTAGE RATES (APR): The total finance charge (interest, loan fees, points) expressed as a percentage of the loan amount.

APPRAISAL: An estimate of the property’s value.

ASSUMPTION OF MORTGAGE: A buyer’s agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approve the buyer in order to release the original borrower (usually the seller) from liability.

BALLOON PAYMENT: A lump sum principal payment due at the end of some mortgages or other long-term loans.

BINDER: Sometimes known as an offer to purchase or an earnest money receipt. A binder is the acknowledgement of a deposit along with a brief written agreement to enter into a contract for the sale of real estate.

BUYDOWN: Permanent–prepaid interest that brings the note rate on the loan down to a lower, permanent rate. Temporary - on the loan, allowing the buyer to more readily qualify and to increase payments as income grows.

CAP: The limit on how much an interest rate or monthly payment can change, either at each adjustable or over the life of the mortgage.

CASH RESERVES: The amount of the buyer’s liquid cash remaining after making the down payment and paying all closing costs.

CC&Rs: Covenants, conditions and restrictions. A document that controls the use, requirements and restrictions of a property.

CERTIFICATE OF COMMITMENT: The lender’s approval of a VA loan, which is usually good for up to six months.

CERTIFICATE OF REASONABLE VALUE (CRV): A document that establishes the maximum value and loan amount for a VA guaranteed mortgage.

CHATTEL: Personal property.

CLOSING STATEMENT: The financial disclosure statement that accounts for all of the funds received and expected at the closing, including deposits for taxes, hazard insurance, and mortgage insurance.

COMMITMENT PERIOD: The period during which a loan approval is valid.

CONDOMINIUM: A form of real estate ownership where the owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surface (walls, floors and ceilings) serves as boundaries.

CONTINGENCY: A condition that must be satisfied before a contract is binding. For instance, a sales agreement may be contingent upon the buyer obtaining financing.

CONVERSION CLAUSE: A provision in some ARMs that enables homebuyer’s to change an ARM to a fixed rate loan, usually after the first adjustment period. The new fixed rate is generally set at the prevailing interest rate for fixed rate mortgages. This conversation feature may cost extra.

COOPERATIVE: A form of multiple ownership in which a corporation or business trust entity holds a title to a property and grants occupancy rights to shareholders by means of proprietary leases or similar arrangements.

CRB: Certified Residential Broker.

CRS: Certified Residential Specialist.

DEBT RATIOS: The comparison of a buyer’s housing costs to his or her gross or net effective income, and the comparison of a buyer’s total long-term debt to his or her gross or net effective income. The first ratio is housing ratio; the second ratio is total debt ratio.

DUE-ON-SALE CLAUSE: A clause that requires a full payment of a mortgage or deed of trust when the secured property changes ownership.

EARNEST MONEY: The portion of the down payment delivered to the seller or escrow agent by the purchaser with a written offer as evidence of good faith.

ESCROW: A procedure in which a third party acts as a stakeholder for both the buyer and the seller, carrying out both parties’ instructions and assuming responsibility for handling all the paperwork and distribution funds.

EQUITY: The difference between what is owed and what the property could be sold for.

FHA LOAN: A loan insured by the Federal Housing Administration (of the Department of Housing and Urban Development).

FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC): Called “Freddie Mac”; a part of the secondary market, particularly used to purchase loans from savings and loan lenders within the Federal Home Loan Bank Board.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): Popularly known as “Fannie Mae”; a privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by the VA, as well as conventional home mortgages.

FEE SIMPLE: An estate in which the owner has unrestricted power to dispose of the property as he wishes, including leaving by will or inheritance. It is the greatest interest a person can have in real estate.

FINANCE CHARGE: The total cost a borrower must pay, directly or indirectly, to obtain credit according to Regulation Z.

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FIXED RATE MORTGAGE: A conventional loan with a single interest rate for the life of the loan.

FULLY INDEXED RATE: The maximum interest rate on an ARM that can be reached at the first adjustment.

GIFT LETTER: A letter from a relative stating that an amount will be gifted to the buyer, and that said amount is not to be repaid.

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA): Called “Ginnie Mae”; a governmental part of the secondary market that deals primarily in recycling VA and FHA mortgages, particularly those that are highly leveraged.

GRADUATED PAYMENT MORTGAGE: A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate.

GRI: Graduate REALTORS® Institute: A professional designation granted to a member of the National Association of Realtors who has successfully completed courses covering Law, Finance and Principals of Real Estate.

HOME INSPECTION REPORT: A qualified inspector’s report on a property’s overall condition. The report usually includes an evaluation of both the structure and mechanical systems.

HOME WARRANTY PLAN: Protection against failure of mechanical systems within the property. Usually includes plumbing, electrical, heating systems and installed appliances.

INDEX: A measure of interest rate changes used to determine changes in an ARM’s interest rate over the term of the loan.

INITIAL INTEREST RATE: The introductory interest rate on a loan; signals that there may be rate adjustments later in the loan.

MORTGAGE LIFE INSURANCE: A type of term life insurance often bought by homebuyer’s. The coverage decreases as the mortgage balance declines. If the borrower dies while the policy is in force, the mortgage debt is automatically covered by insurance proceeds.

NEGATIVE AMORTIZATION: Occurs when monthly payments fail to cover the interest cost. The interest that isn’t covered is added to the unpaid principal balance, which means that even after several payments the borrowers could owe more than they did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments that aren’t high enough to cover the interest.

ORIGINATION FEE: A fee or charge for work involved in evaluating, preparing, and submitting a proposed mortgage loan. The fee is limited to one percent for FHA and VA loans.

PAYMENT CAP: The maximum amount the payment can adjust in any given time frame.

PITI: Principal, Interest, Taxes and Insurance.

PLANNED UNIT DEVELOPMENT (PUD): A zoning designation for property development at the same or slightly greater overall density than a conventional development, sometimes with improvements clustered between open common areas.

Use may be residential, commercial or industrial.

POINT: An amount equal to one percent of the principal amount of the investment or note. Lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments.

PREPAYMENT PENALTY: A fee charged to a borrower who pays a loan before it is due. Not allowed for FHA or VA loans.

JOINT TENANCY: An equal undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedent’s interest in the property.

PRIVATE MORTGAGE INSURANCE (PMI): Insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage.

JUMBO LOANS: Mortgage loans that exceed the loan amounts acceptable for sale in the secondary market; these jumbos must be packaged and sold differently to investors and, therefore, have separate underwriting guidelines.

PURCHASE AGREEMENT: A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions. Also called a sales contract, earnest money contract, or agreement for sale.

LIEN: A legal hold or claim on property as security for a debt or charge.

LOAN COMMITMENT: A written promise to make a loan for a specified amount on specified terms.

RATE GAP: The difference between where the rate is now and where it could adjust to on an ARM. Also used to compare the difference between a current conventional rate and that of an ARM.

LOAN-TO-VALUE RATIO: The relationship between the amount of the mortgage and the appraised value of the property, expressed as a percentage of the appraised value.

REALTOR: A real estate broker or associate active in a local real estate board affiliated with the National Association of Realtors.

LOCK-IN: The fixing of an interest rate or points at a certain level, usually during the loan application process. It is usually done for a certain period of time, such as 60 days, and may require a fee or premium in the form of a higher interest rate.

REGULATION Z: The set of rules governing consumer lending issued by the Federal Reserve Board of Governors in accordance with the Consumer Protection Act.

MARGIN: The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.

MORTGAGE INSURANCE PREMIUM (MIP): The mortgage insurance required on FHA loans for the life of said loans; MIP can either be paid in cash at closing or financed in its entirety in the loan. The premium varies depending on the method of payment.

TENANCY IN COMMON: A type of joint ownership of property by two or more persons with no right of survivorship.

TITLE INSURANCE POLICY: A policy that protects the purchaser, mortgagee or other party against losses.

VA LOANS: A loan, made by a private lender, which is partially guaranteed by the Veterans Administration.

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800-396-0960 RealEstate-Advantage@NEMoves.com https://www.huecu.org/reap Real estate agents affiliated with Coldwell Banker Residential Brokerage are independent contractor sales associates and are not employees of Coldwell Banker Residential Brokerage. © 2017 Coldwell Banker Residential Brokerage. All Rights Reserved. Coldwell Banker Residential Brokerage fully supports the principles of the Fair Housing Act and the Equal Opportunity Act. Operated by a subsidiary of NRT LLC. Coldwell Banker® and the Coldwell Banker logo are registered service marks owned by Coldwell Banker Real Estate LLC. 95840 4/2017