There are several ways to gauge how much
you can afford to spend on a house. But, before you go house-hunting,
get pre-qualified for a mortgage so you'll know in what price
range you can shop.
It is not unusual for first-time buyers to
be somewhat baffled about how to estimate what mortgage payment
they will be able to handle each month, plus how much money
they'll need for a down payment and closing costs.
That's why it is a good idea to get pre-qualified
through a lender before you even start to look for a home.
Pre-qualification lets a buyer know exactly how much a lender
is willing to loan them. Obviously, with pre-qualification
in hand, the buyer can save a lot of time and frustration.
Pre-qualification does not obligate buyers to take a loan
from the lender, nor should it involve any fees (until later,
when they actually apply for the loan).
At the same time, you must understand that
pre-qualification is not pre-approval for a loan either which
is a much more involved formalized process that results in
an actual letter of credit from a lending institution for
a specific loan. Depending on your unique circumstances, you
may wish to consider pre-approval as an option, but it is
not necessary. Consult with your real estate professional
to decide what's right for you.
The less formal process of pre-qualifying
on the other hand is a tremendous tool for buyers to have
when making an offer. Usually, pre-qualified buyers have an
edge when making a purchase offer because the seller knows
that the buyer is pre-qualified, and that there is at least
one lender ready to make it happen.
In addition, it allows you the flexibility
to choose the mortgage that is best for you at the time of
actual purchase - which is sometimes months down the road.
That can be important given the volatility of interest rates.
When a lender pre-qualifies, they are more
concerned about the buyer's paying ability than the price
of the property. For this reason, lenders are interested in
more than just a buyer's income. They also want to know how
much existing debt a buyer has, what their on-going financial
obligations happen to be, and what the buyer's monthly budget
looks like.
Lenders use an established debt-to-income
ratio, usually between .28 to 1 and .38 to 1, to calculate
the amount of the loan they are willing to give to a buyer.
For instance, a lender who uses a .3 to 1 debt-to-income ratio
has determined that payments toward debt reduction, including
existing debt plus new debt associated with buying a home,
cannot be more than 30% of they buyer's gross monthly income.
An important factor that may influence a
lender to authorize a loan with a higher debt-to-income ratio
(where debt payments take a higher percentage of a buyer's
income) is a larger down payment. Buyers who put a larger
percentage of the purchase price down (5%, 10%, 15%, 20%,
etc.) are considered better "risks," because the
theory is that the more a person has actually invested in
the purchase, the less likely they are to default on the loan.
Buyers usually discover that the pre-qualification
process will produce a home purchase price that is roughly
2 1/2 to 3 times their gross annual income. The 2 1/2 -to-3
guideline is only a general rule of thumb, however, and it
doesn't take a buyer's full financial situation into consideration.
Since the lender's calculations will also consider a buyer's
actual debts and ongoing expenses, the loan pre-qualification
amount may be higher or lower.
Regardless of the price bracket a buyer targets,
they should keep pre-qualification in mind.
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the topics
How much should I budget to
own my own home?
Aside from the down payment, the three largest
expenditures involved with the purchase of a home are usually
your monthly mortgage payment, insurance and taxes. Obviously,
the amount of your mortgage payment depends upon your down
payment, rate of interest and the price of the property.
Take, for example, a home that has a $100,000
mortgage. An 8% fixed mortgage for 30 years, will run approximately
$734 per month. What about taxes? The rate will oftentimes
vary from city-to-city, but generally you might expect your
yearly tax bill to total around 2% of the purchase price.That
means, for a home with a market value of $100,000, yearly
taxes might run around $2,000. A local real estate agent can
help prospective homeowners refine these figures.
In addition, it is important to keep in mind
that there are many additional expenses incurred with home
ownership, some of the most obvious are utilities and trash
collection. Smart homeowners should also budget for one other
item--maintenance and upkeep of the home. If possible, a small
amount should be set aside each month to pay for those "rainy
day" repairs such as painting, plumbing (hot water heaters,
garbage disposals), adding storm windows (to improve energy
usage), insulation (in attics), etc. And, if you live in a
home long enough there are inevitable repairs - e.g., the
cost of roof replacement.
But home ownership is not just a one way
street. That is, aside from spending money on repairs and
maintenance, homeowners can profit from their property. The
most significant benefit is the tax deduction. It is no secret
that among the last real income tax deductions available to
consumers today are the interest paid on the home loan and
the property taxes. This can amount to thousands of dollars
in deductions each year.
And, of course, the primary benefit of home
ownership is appreciation (equity that builds every month).
A home, aside from being a place that provides shelter, can
be a profitable investment, and the rising value of the property
oftentimes provides another "savings" account.
So, when it comes to buying a new home, remember
one thing...the purchase of a property requires budgeting
and planning, but it can also provide the buyer with a long-term
investment and a return that is hard to beat.
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the topics
How do I go about finding a
mortgage?
The commotion of house hunting is finally
over. You found just the right house, and your offer has been
accepted. It was a great buy. Now, just one more hurdle -
getting a loan - and you're home free.
Often, buyers are so eager to get this "final
detail" behind them, they rush through this portion of
the transaction, and end up with less-than-ideal terms. Borrowers,
however, have something lenders want...their business. This
positions them to negotiate the best possible price (cost
of loan), terms and service.
Let's look at price, or the cost of the loan.
The first thing to do is find out what the current rates are,
information readily available in your newspaper or from your
real estate agent. When comparing rates, figure the annual
percentage rate (APR), which includes interest, extra fees
and costs amortized over the life of the loan. Also determine
the number of points, if any, that the lender will charge
to make the loan. (A point is equal to one percent of the
loan amount.)
Next, consider what loan options the lender
offers. There are six or seven basic types of loans, which
vary in their duration. Check how rates are calculated (fixed
versus variable), and whether charges are fully amortized
over the life of the loan, or whether you'll have to pay points
up front and/or balloon payments at the end. Is there a prepayment
penalty clause?
Which terms are best for you depends on such
factors as what changes you expect in your income, how long
you plan to own the home, and what you predict will happen
with loan rates in the years ahead. For example, if you only
plan to reside in the home for a year or two, starting with
a lower Adjustable Rate Mortgage (ARM) might be the best choice.
If you have no plans to move, and feel that inflation will
rise rapidly, a fixed rate would obviously be better.
Finally, and perhaps most importantly, consider
speed and service. Buyers shouldn't have to wait days for
approval and weeks for closing just because the lender is
slow.
Remember, qualified buyers are great prospects
for lenders, so give your business to the lender who demonstrates
they not only want it, they deserve it.
For help with your mortgage questions, please
contact Cencal Mortgage at 805-238-LOAN (5626) or visit CenCal's
web site at www.cencalmortgage.com.
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the topics
Can I qualify for a mortgage
if I have past credit problems?
Credit problems can make it harder to qualify,
but it's quite possible for buyers with poor credit to obtain
a home loan.
Anyone who has had a financial problem, whether
it was a matter of late credit payment, delinquent taxes,
or even a judgment that was filed, should expect this data
to be a factor when applying for a mortgage.
How critical a factor? Minor lapses will
probably have little or no effect. However, buyers with serious
problems may still qualify for a loan, but they may have to
pay a higher rate of interest or provide a larger down payment.
There are three steps that a person with
past credit problems should take before applying for a loan.
First, request a credit profile from one of three major credit
reporting agencies. In fact, it's best to request a report
from all three, since not all creditors report information
to the same agencies. TRW will furnish a complimentary copy
once a year on request, at (800) 392-1122. Equifax (800/685-1111)
and Trans Union (800/408-1050) will also furnish reports for
a nominal charge.
Second, the buyer should optimize his or
her credit profile by citing prompt payment of rent, utilities,
and other bills not reported on the credit profiles.
Finally, the buyer should be prepared to
provide comprehensive and candid explanations for any late
payments to the loan officer. This is important because problems
not reported by the buyer but discovered by the lender will
reflect unfavorable.
Many lenders are understanding about one-time
problems such as the loss of a job, a medical emergency, etc.
Buyers with patterns of delinquent payments might want to
consider adding six months or a year of flawless credit to
their track record before pursuing their home-buying plans.
Discuss this with your real estate agent. They can offer excellent
suggestions.
So remember...if you are thinking about purchasing
a home, but are worried about your past financial record,
don't give up. There are solutions, lenders and agents who
are in business to help.
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the topics
What are five common mistakes
made by first-time buyers?
A good home-buying decision is one that fits
your lifestyle and your budget. Sounds simple? Not always.
Here are five common mistakes frequently made by first-time
buyers and how to avoid these pitfalls.
(1) Looking outside your price range. To
avoid disappointment, contact a real estate agent who can
help you pre-qualify before you start looking for a home.
The agent can also provide valuable insight on taxes and other
expenses associated with a home (utility bills, etc.) (2)
Buying on impulse. Buyers, especially first-timers, may be
impressed by the first two or three homes they view. Look
at a good selection. List the positives and negatives. Narrow
the prospects to three or four, and then return for a closer
look. Evaluate more than just the property. Look at the surrounding
area and community amenities. Is this what you-and your family-want
and need? (3) Not planning ahead. Think seriously about any
personal changes you are planning in the next five to seven
years. For instance, if you are planning on having children,
consider how the home will meet both your current and future
needs. If a double-income is necessary to qualify for financing
and make your payments, do your plans foresee an income sufficient
to continue making payments? (4) Failure to focus on location.
Don't just focus on the house, examine the neighborhood. Is
the area safe, well-maintained, moderately quiet and close
to work, stores, and schools? Find out about zoning and what
new construction is planned on any vacant land in the immediate
neighborhood. Will the property be easy to market when you
are prepared to sell it? (5) Failure to understand the home
buying process. Once you select a home, get involved. Find
a real estate agent willing to spend time with you. Don't
hesitate to ask questions. Have them explain the negotiation,
financing and escrow processes and other elements involved
in the transaction. Home-buying involves knowing the price,
and what's inside and around the property. Consider all your
options carefully. This may be the most important financial
transaction of your life.
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the topics
What's the real difference between
a new home & an old one?
While each offers its own style and charm,
the difference usually boils down to two things: (1) how the
home fits into the buyer's lifestyle; and, (2) the condition
of the property.
Homes that are 10 years old or less are generally
better insulated. They have dual-glazed windows or thermal
panes, which translate into lower heating and cooling bills.
And, in today's rising energy cost environment, these considerations
are significant. Although there are some exceptions, homes
that have been built with all-electric systems, generally
have higher utility bills.
Homes that range between 15 and 20 years
old may be in need of new water pipes, especially if the old
ones were galvanized and if a water softener was used. Water
softeners and galvanized pipe can be deadly and, after 15-20
years, re-plumbing is usually required. Have a plumber or
general contractor inspect the pipes. Needless to say, it
can be expensive to re-plumb an entire system.
Check the built-in fixtures and appliances
for any signs of damage. Flush toilets, test all the water
taps and the electrical sockets, open and shut the windows,
and try all the lights. A window that will not open may be
a sign of a more significant problem-for example, a wall may
have shifted, or worse yet, it could indicate a problem with
the foundation itself.
It is also a good idea to ask the seller
for copies of past utility bills. Examine them for some insight
into what you can expect monthly gas and electric costs to
be.
Although newer homes may be free of significant
physical or structural problems, there are other things to
consider in making your decision. Generally, room size and
yard size tend to be smaller in some newer homes. While, on
the other hand, they usually offer the benefit of the latest
building and design technology. Many new homes also have more
windows and natural light incorporated into their design plan,
allowing for a more spacious feel and efficient energy usage.
Return to
the topics
Should I get a professional
inspection before buying a home?
Definitely. Hiring a professional home inspector
can save a great deal of grief for buyers. The one exception
would be when the home is new and carries a written warranty
by the builder.
Many buyers mistakenly believe that the only
reason to have a home inspection is to make sure that the
house they're buying doesn't have defects serious enough to
warrant backing out of the transaction. But there's more to
it than that.
Certainly, an inspection will usually reveal
major problems that may even surprise the seller. The obvious
ones are corroded plumbing, antiquated and unsafe electrical
systems, or structural and foundation problems. And, the discovery
of such problems may cause the buyer to re-think his or her
offer.
Although a competent inspector can uncover
deal-crushing defects, these problems are usually not commonplace.
Typically, the seller will already have told the buyer about
anything major. More often, inspections reveal less serious
problems; problems that may not be serious but can be aggravating.
For instance, there could be a minor electrical
defect, or inferior ventilation of a heating system or fireplace.
If so, the buyer is usually in the position of having the
purchase price reduced, or the defect corrected. More important,
it also prevents the minor problem from developing into a
major disaster a year or two down the road.
There is, of course, the possibility that
the home inspection will produce another outcome: everything
is fine. In this case, they buyer gains piece of mind, confident
about the major investment he or she is about to make. That,
too, is an enormous benefit for the cost of the inspection.
Now, how does a buyer find a home inspection?
By asking their real estate agent, friends, or lender. Inspectors
are also listed in the Yellow Pages under "Home Inspection
Services." But, a word of advice-don't hire a contractor.
Contractors earn their living doing repair and renovation
work, so their recommendations aren't likely to be as objective
as those of a professional inspector.
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the topics
Is real estate a wise investment?
In the long run, there are fewer investments
that have shown a better return.
However, the key to investing wisely in real
estate is understanding how the industry differs from others.
For example, when the defense industry dips, it usually shows
a national decline and the stock prices of defense-oriented
firms drop across the board. The same is true of most industries.
They are impacted nationally.
That is not the case with real estate, which
is actually an industry and investment driven by local conditions.
One community may suddenly lose a manufacturing facility,
and almost overnight the market is flooded with properties
for sale. An excellent example is Southern California. Several
years ago, when defense cutbacks began an excess of homes
went up for sale, increasing the supply and lowering demand.
Therefore, it became a buyer's market. At the same time, Bakersfield,
a community less than 150 miles from Los Angeles continued
to experience high demand for real estate. With a short supply
of homes, it was a seller's market.
Obviously, the key to successful real estate
investing, like stocks and bonds, is to buy low and sell high.
But, how do you know when the "low" has been reached?
Or, for that matter, how can you judge when your property
may be peaking in value?
Some investors rely partially on the media.
They read the daily newspaper, watch television and follow
the trends. Although the media provides a good deal of information,
remember that by the time things are printed or broadcast,
the news may be old. For instance, you will find statistics
frequently quoted in the media that have been supplied by
the National Association of Realtors (NAR). But, NAR statistics,
like most, tell you where things have been, not where they
are going.
So what can you do? First, check local economic
indicators. If, for example, a community depends on defense
spending, and there is a government cutback, you can be assured
that your area will be impacted. Even if the community does
not have a major defense contractor, it may have subcontractors.
The local chamber of commerce can frequently
help. They usually have information on which companies are
moving in and out of an area. Logically, the relocation of
a firm into a community generally indicates that demand for
real estate in that marketplace will increase-while if firms
are moving out of the area, housing demand will often shrink.
Aside from economic indicators, check real
estate trends and cycles. Talk to a real estate agent. They
can provide statistics on how quickly homes have sold, how
prices have fluctuated in the past six to 12 months, and projections
of future home sales. They can show you how today's market
compares to last year's. Are sales headed up? Down? The same?
The answers will not only help you determine
what the market is like in your area, but they will also be
critically important in helping you determine when and where
to make your real estate investment.
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the topics
Does a home warranty protect
a buyer in the event something goes wrong after they have
purchased a property?
Sometimes.
That's because home warranties are oftentimes
misunderstood, and not every warranty provides the same protection.
All warranty companies are not equal, either.
Warranties, of course, were designed to protect
buyers from problems that emerged after they moved into a
dwelling. For example, if a major appliance breaks or the
roof leaks, the ideal warranty kicks in and pays for the repairs.
On the surface, this sounds simple and straight
forward. But, most of the time it is not.
First, all warranties differ. Aside form
the obvious differences (the amount of deductible required),
they may also vary insofar as what is covered and what is
not. For instance, with some warranties, if the hot water
heater works on the day of closing, but suddenly does not
work six months later, then it may be covered. And, with other
policies if the water heater was not in good working condition
when the home was purchased, and it breaks a week or two later,
there is no coverage.
Complex? Confusing? It can be. Even though
the language in the warranty must spell out exactly what's
covered, it isn't always the easiest document to understand.
Thus, step one in evaluating any warranty should be to take
it to your attorney to help you decipher the legalese. It
may be well worth the hour or so that it will cost you in
legal fees.
Next, is the warranty company financially
sound? In many states, warranty companies can be doing business,
despite the fact they do not have the funds to back up their
policies. Thus, step two when evaluating a warranty is to
take the policy to your accountant or a local CPA. Have them
check out the warranty company's financials. Can they pay
the claims?
Warranties can be critically important when
it comes to new construction, too. Obviously, the reputation
of the builder is an important consideration. However, problems
with new homes can be enormously expensive if they are not
covered by a warranty.
There are two types of defects when it comes
to new homes: patent or latent. Patent are those problems
which can be seen. Cracked plaster, a fence that is off-kilter,
etc. Latent problems develop later, and may not show up for
five or six months...ground shifting, for example. Latent
problems are usually more expensive than patent problems.
Thus, the warranty for a new home can be one of the most important
documents executed during the buying process.
Whether you are purchasing a new home or
a resale, remember that warranties definitely have a place
when it comes to protection and peace of mind in the real
estate transaction, but make sure that you check them out
carefully.
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the topics
Is a pre-closing inspection
-- that is, an inspection of the property by the buyer before
they move in -- really important?
Yes, it is. The intent of a pre-closing inspection
is to give the buyer one last opportunity to verify that they
are getting all that was promised in the sales contract. Although
buyers still have legal recourse if they discover, even after
closing, that the condition of the home is not as it should
be. The best time to identify problems is before closing,
when the seller will be motivated to correct any deficiencies
in order to close the transaction.
Typically, a buyer takes possession of a
property one to three months after signing the sales agreement.
But, a lot can happen before the actual move-in. Appliances
and fixtures can break down, and walls, carpets and doors
can be damaged during the seller's move-out. Sometimes the
seller will simply have forgotten that he or she had agreed
to leave the refrigerator or window coverings with the house.
Whatever the reason, problems identified before closing have
the best chance of being remedied.
If possible, schedule the inspection right
before the closing, such as the day before. Ask your real
estate agent to attend the inspection with you.
What should you be inspecting? Using a copy
of the sales contract as a checklist, first make sure that
all items that should be in place: appliances, built-in furniture,
window coverings, fixtures, etc. are there. Test each appliance
to make sure they work properly. Bring along an electrical
clock or radio to test each electrical outlet. Test all electrical
switches and the garage door opener, if there is one. Run
the garbage disposal and turn on every water faucet, checking
under the sinks for leaks. Flush the toilets. Inspect the
floors, carpets, walls and doors for recent damage.
If you discover that something is damaged
or missing, make a note of it and inform your agent immediately.
In most cases, the seller is usually able to take care of
small problems immediately, either by making a needed repair
or offering compensation to handle it. And, if there are major
problems, the seller can even sign a statement acknowledging
the deficiency and agreeing to correct it. Although pre-closing
inspections take time and may be inconvenient, they are important
and well worth the buyer's time.
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What are 'contingencies' and
why are they important?
A `contingency,' is an escape-clause that
is added, in-writing, to a contract which allows a buyer to
back out of the transaction if certain conditions aren't met.
Some contingencies, often called `riders',-like
attorney approval of the contract, or the passing of a home
inspection-are obviously designed to protect buyers from a
poorly written contract or a defective home.
Other purchase contingencies may hinge on
the buyer's current living situation, or his or her cash-flow.
For example, when it comes to contingencies
many first-time buyers can be better prospects for a seller's
home than move-up buyers. Why? Because offers from homeowners
usually are contingent upon the sale of their present home.
And, even if a move-up buyer has an offer for their home in-hand,
their buyer's offer may be contingent on another contingency
(or sale), and so on down the line. If one transaction in
the chain falls through, they all might.
Cash offers can also be more attractive to
sellers. Why? After all, the seller will get their money at
closing whether or not the buyer has cash or takes out a loan.
True, but cash offers don't require lender approval, loan
approval is never a certainty and may delay or prevent closing.
(Incidentally, for this reason, buyers who get pre-qualified
for a loan have an edge over other buyers. A pre-qualified
buyer is the same as a cash buyer.)
Buyers offering a larger-than-customary amount
of "earnest money", a deposit that accompanies an
offer, can be more appealing too. More money deposited along
with the signed contract often demonstrates greater sincerity
and motivation to close the transaction.
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the topics
Do I have enough homeowner's
insurance?
Unfortunately most homeowners are inadequately
insured. In fact, many not only lack financial protection
for the equity in their home, but for their personal property
as well.
Why?
It usually happens because lenders only require
home buyers to carry enough insurance to cover the value of
the mortgage. Then, in the event of damage or destruction
to the property (fire, flood, etc.), the lender's investment
is covered. Unfortunately, this required insurance is only
for the lender's money. It does not cover the homeowner's
personal property, or their equity.
When deciding on insurance, homeowners should
carry enough to cover the replacement value of the home and
all of its contents. The key word is replacement. As the homes
appreciates, so will its replacement cost. Thus, the policy
should be reviewed every year or two, adjusting the amount
of coverage if appropriate.
A word of caution, however. Do not insure
for more than the value of your real and personal property,
because an insurance company will not reimburse more than
the replacement value of the property. Consult with a reliable
agent to ensure that you have the correct amount of insurance.
The most common homeowner policies cover
the home and its contents without requiring an itemization
of all furniture and personal effects. Items over a specified
value, such as jewelry and artworks, are generally listed
separately and usually require an additional premium.
Remember, few homeowners think about the
value of their home or the replacement costs-until a disaster
hits. The key is to be pro-active. Get the coverage you need,
before you need it.
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the topics
What is "escrow" and
what does it mean to buyers and sellers?
Escrow is a process that begins when the
purchase offer papers are signed by both parties, and ends
when the loan is approved and all the necessary requirements
have been fulfilled by both the buyer and the seller.
The escrow holder is an intermediary, and
an agent of both the buyer and seller. The escrow holder is
given the buyer's deposit, and holds onto all funds until
the agreement is finalized. They notify the seller when the
deposit has been received and if the check has cleared the
bank. The escrow holder also draws up a set of instructions,
itemizing things that have to be done to the property before
it is sold and the title is transferred.
For example, if the seller is required to
supply a termite inspection, the escrow holder would track
this obligation and make sure it is fulfilled before any funds
are transferred to the seller. Findings in the termite inspection
report must be corrected on or before the close of escrow.
If the report calls for a plumber, roofer or other contractor,
the agent would advise the seller and get authorization for
work to be done.
The escrow company also interacts with the
title company. The escrow holder receives a complete ownership
history of the property and any liens on record in the preliminary
title report. Anything that is out of the ordinary, such as
condo liens, judgments, etc. against the buyer and the seller
must be clarified prior to the sale of escrow.
The escrow process can be any number of days
depending on what is agreed upon between the buyer and seller.
To assure a timely closing, the buyer should do things like,
inform the escrow holder of the name and phone number of their
insurance agent as soon as possible. The homeowner insurance
policy needs to be ordered early, so verification can be made
with the lender. The lender will not fund a new loan without
a homeowner policy. If there is a delay, the escrow process
may be held up.
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What does my Realtor® mean
when referring to a "closing"?
A closing is the meeting where title and
money are exchanged between the seller and the buyer, and
the sale of a home is finalized.
At the closing all the progressive steps
in buying a home-from the acceptance of the offer, title search,
home inspection, buyer's loan application to approval, etc.-come
together in a final transaction. The documents are ready to
sign, the buyer is ready to hand over the purchase price,
and the seller is ready to transfer title (and the keys!)
Usually held at the offices of a title company,
the closing takes less than an hour and sometimes less than
30 minutes. The meeting is always attended by the buyer, usually
the seller (although his or her signature can often be obtained
in advance), the brokers and/or attorneys, and of course,
the title company representative-who acts as the intermediary
for the seller and buyer in the transaction.
What goes on during the closing? First the
buyer reviews all the loan documents, which describe the loan
amount, payments and itemization of closing costs, including
impounds for tax and insurance, etc. If everything is as it
should be, the buyer signs the loan papers.
Next, the buyer reviews and signs the title
documents, making sure the deed is recorded as desired (joint
tenancy, tenants in common, community property, etc.) By the
time the closing is held, the title company has already conducted
a title search and verifies that the title is held by the
seller, and that no liens are held against the property. If
there are any obstacles or other conditions that could potentially
undermine the sale of the property, the title company will
tell the seller about them (in writing) at the closing.
Assuming, however, that the funds are in
order, the deed is correct and the title is clear, the final
step is the disbursement of funds to the seller for the purchase
price of the home, and the presentation of the keys to the
buyer. The buyer may also receive a refund for overpayment
of closing costs, which were paid out of his or her deposit
check.
What should a buyer be prepared to bring
to closing? That's easy: everything. The buyer should bring
all of the documentation relating to the transaction, including
a canceled check for the deposit paid with the offer, just
in case the title company or lender asks for it unexpectedly.
The title company should already have the loan funds in its
possession, but the buyer needs to bring a cashier's or certified
check for the purchase amount minus the loan amount (that
is, the downpayment).
Ideally, the closing will go through "without
a hitch." Some delays, such as receiving loan funds from
the lender or an error in the loan documents, are unpredictable
and therefore, uncontrollable. Other delays, however, can
be avoided if they are anticipated and, if possible resolved
ahead of time.
Return to
the topics
What are closing costs and who
generally pays them - the buyer or the seller?
First, the responsibility of who pays for
closing costs is always negotiable. Local custom may dictate
which fees the buyer will pay and those the seller pays.
Typically, the buyer pays for home inspection
services and escrow, deed preparation and recording fees.
He or she may also pay for title insurance, since this is
required by the lender. The buyer is also responsible for
any fees or costs associated with obtaining the purchase loan.
The seller customarily pays the real estate
agent's commission, as well as costs associated with transferring
an unencumbered title, such as a title search, reconveyance
deed and documentary transfer tax. Often, a seller will sweeten
the deal by offering a one-year home warranty.
Who will pay for what closing costs should
always be clearly spelled out in the purchase offer. A creative
sales associate will consider the cash, income and tax situation
of the home seller and the buyer when constructing an offer.
For instance, if the buyer is short of cash, the agent may
ask the seller to pay the buyer's loan points up front in
exchange for some other concessions from the buyer. In this
scenario, the buyer and seller benefit-and both get what they
want.
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