| Copyright © 2005 Reich Realty Website design provided by Laura Donmoyer "Getting Started", "House Hunting", and "Buying" - taken from The Complete Homebuyers Guide © The Gooder Group, Fairfax, Virginia 1989, 1990. All Rights Reserved. Guide compliments of The International Relocation Network |
BUYING
At this point you've narrowed your possible choices to one specific home. You’re ready to make your first offer, negotiate with a
seller, sign a contract, secure the best mortgage loan, and actually buy your home. An agent knows the way, and with that
experienced assistance you can navigate with confidence. Remember you and the seller want the same thing: a smooth and
satisfactory transaction. With that understanding there’s rarely an obstacle too big or too complicated to keep a qualified home
buyer from the ultimate goal - home ownership!
seller, sign a contract, secure the best mortgage loan, and actually buy your home. An agent knows the way, and with that
experienced assistance you can navigate with confidence. Remember you and the seller want the same thing: a smooth and
satisfactory transaction. With that understanding there’s rarely an obstacle too big or too complicated to keep a qualified home
buyer from the ultimate goal - home ownership!
 | What is in a sales contract? | |
Your signed offer to purchase is the document you draft which presents your price and terms to the seller. (The name of the document
varies. Ask an agent what it is called in your area.) This purchase offer must be complete because when the seller signs it, the document
becomes the binding sales contract” which contains the conditions of the sale. If you forget something in the offer, you can’t, usually, add
it to your sales contract later.
Terms and conditions of the contract vary depending on the situation. Following are typical matters you and a seller may negotiate and
agree on:
• What items convey with the home, such as chandeliers, appliances, personal property, swimming pool chemicals, etc.
• The sale price.
• The amount of your deposit (“earnest money”).
• The amount of your down payment and/or the amount of mortgage loan you intend to obtain.
• The date, time and place of settlement, when you take possession of the home. Be sure you and your seller have a clear agreement
about the date of occupancy.
• Any contingencies (agreed upon by you and the seller) which must be met before settlement can take place, such as: improvements
(painting, roofing, etc.); termite inspection; proof of clear title to the home; legal review of the contract by either or both buyer’s and
seller’s lawyer(s); your ability to obtain a specified mortgage loan within a specified time at agreed-upon interest rates and points, and/or
specified seller financing.
• Your signature and that of the seller. (Remember you can always withdraw an offer until the seller has signed it.)
varies. Ask an agent what it is called in your area.) This purchase offer must be complete because when the seller signs it, the document
becomes the binding sales contract” which contains the conditions of the sale. If you forget something in the offer, you can’t, usually, add
it to your sales contract later.
Terms and conditions of the contract vary depending on the situation. Following are typical matters you and a seller may negotiate and
agree on:
• What items convey with the home, such as chandeliers, appliances, personal property, swimming pool chemicals, etc.
• The sale price.
• The amount of your deposit (“earnest money”).
• The amount of your down payment and/or the amount of mortgage loan you intend to obtain.
• The date, time and place of settlement, when you take possession of the home. Be sure you and your seller have a clear agreement
about the date of occupancy.
• Any contingencies (agreed upon by you and the seller) which must be met before settlement can take place, such as: improvements
(painting, roofing, etc.); termite inspection; proof of clear title to the home; legal review of the contract by either or both buyer’s and
seller’s lawyer(s); your ability to obtain a specified mortgage loan within a specified time at agreed-upon interest rates and points, and/or
specified seller financing.
• Your signature and that of the seller. (Remember you can always withdraw an offer until the seller has signed it.)
| How do I make an offer on a home and negotiate with the seller? | |
You, as potential buyer, start the process by putting an offer with price and terms in writing and presenting it to the seller through an agent.
Buying a home is probably the biggest financial investment you will make. Only you can decide which home you want, and the price is
up to you and the seller.
Understand the seller has three basic options: to accept your offer, counter offer on specific details, or reject your offer. If there is any
negotiation, it usually takes place trading counter offers, if the seller doesn't immediately accept or reject the offer. Keep up the dialogue
until you arrive at the price you can pay and the price and terms the seller can accept.
This is where an agent’s help is invaluable. The agent keeps the negotiation process running smoothly. With a knowledge of both your
situation and the seller’s, plus a complete understanding of financing options, an agent can suggest strategies that bring about a
satisfactory transaction.
Buying a home is probably the biggest financial investment you will make. Only you can decide which home you want, and the price is
up to you and the seller.
Understand the seller has three basic options: to accept your offer, counter offer on specific details, or reject your offer. If there is any
negotiation, it usually takes place trading counter offers, if the seller doesn't immediately accept or reject the offer. Keep up the dialogue
until you arrive at the price you can pay and the price and terms the seller can accept.
This is where an agent’s help is invaluable. The agent keeps the negotiation process running smoothly. With a knowledge of both your
situation and the seller’s, plus a complete understanding of financing options, an agent can suggest strategies that bring about a
satisfactory transaction.
| How do I shop for a mortgage? | |
An agent can help you compare interest rates and terms to find out which mortgage plan is best for you. However, each buyer’s
circumstances are unique, and once you ye narrowed the field, you will want to discuss your case in detail with the lender. You’ll
determine, for instance:
• What kinds of loans the lender offers (both fixed-rate and adjustable rate).
• What terms are offered on adjustable-rate loans: rate adjustment frequency, maximum limit on each rate change, frequency of monthly
payment adjustment, ceiling on payment adjustments, possible extension of the length of time on the loan pay-off, life-of-the-loan
interest rate cap, conversion privilege, positive or negative amortization, etc.
• What amount of investment is required for a down payment.
• What is the term (length of time) to repay a loan, and whether there is a prepayment penalty if you pay off your loan before its due date.
In some areas pay-off penalties are illegal, while in other areas common. Ask your agent.
• What fees are involved (credit report, appraisal, survey, legal costs, “points,” title insurance, etc.).
• Whether the lender can furnish you a second mortgage, if needed, at a pre-determined interest rate.
• How long it will take to process your application.
• What inspections the lender will require.
• What kinds of insurance and how much coverage you will be required to carry.
circumstances are unique, and once you ye narrowed the field, you will want to discuss your case in detail with the lender. You’ll
determine, for instance:
• What kinds of loans the lender offers (both fixed-rate and adjustable rate).
• What terms are offered on adjustable-rate loans: rate adjustment frequency, maximum limit on each rate change, frequency of monthly
payment adjustment, ceiling on payment adjustments, possible extension of the length of time on the loan pay-off, life-of-the-loan
interest rate cap, conversion privilege, positive or negative amortization, etc.
• What amount of investment is required for a down payment.
• What is the term (length of time) to repay a loan, and whether there is a prepayment penalty if you pay off your loan before its due date.
In some areas pay-off penalties are illegal, while in other areas common. Ask your agent.
• What fees are involved (credit report, appraisal, survey, legal costs, “points,” title insurance, etc.).
• Whether the lender can furnish you a second mortgage, if needed, at a pre-determined interest rate.
• How long it will take to process your application.
• What inspections the lender will require.
• What kinds of insurance and how much coverage you will be required to carry.
| What information specifically will the lender ask for when I apply for my loan? | |
Lenders’ loan application questions vary, but, in general, they will include:
• the kind and amount of mortgage loan you wish to obtain.
• the verifiable source of your down payment money (bank account statement, gift, etc.).
• the length of time you wish to borrow the money for.
• your current address and the length of time you've lived there and at your previous address.
• your employment history, your current employment and income, plus your employer’s name and address.
• your social security number
• your assets, including your gross monthly income, your bank balance(s), your possessions (car, furnishings, jewelry, etc.).
• your debts and account numbers (including car payments, credit cards, etc.).
• a copy of your sales contract.
• the kind and amount of mortgage loan you wish to obtain.
• the verifiable source of your down payment money (bank account statement, gift, etc.).
• the length of time you wish to borrow the money for.
• your current address and the length of time you've lived there and at your previous address.
• your employment history, your current employment and income, plus your employer’s name and address.
• your social security number
• your assets, including your gross monthly income, your bank balance(s), your possessions (car, furnishings, jewelry, etc.).
• your debts and account numbers (including car payments, credit cards, etc.).
• a copy of your sales contract.
| How long does it take to get a mortgage approved, and can I do anything to speed up the process? | |
How long it may take before your loan is approved depends on what kind of loan you apply for, the efficiency of your lender the lender’s
workload, and your own diligence in supplying required information.
Here again is where an agent’s knowledge of what your lender needs and where the information comes from can help prod the process
along - even to carrying papers from one place to another.
From experience we know the process works best when you rely on an agent, and lenders appreciate the agent as a single source to turn to
for answers. An agent will keep tabs on the different sources of information and needed action: Has your bank supplied your account
information? Have your credit card companies produced reports? Will your insurance policy be guaranteed to be in effect by settlement
day? Have your parents, relatives or friends provided the gift letter” that must accompany the cash donations? Has your employer verified
your income? Etc.
workload, and your own diligence in supplying required information.
Here again is where an agent’s knowledge of what your lender needs and where the information comes from can help prod the process
along - even to carrying papers from one place to another.
From experience we know the process works best when you rely on an agent, and lenders appreciate the agent as a single source to turn to
for answers. An agent will keep tabs on the different sources of information and needed action: Has your bank supplied your account
information? Have your credit card companies produced reports? Will your insurance policy be guaranteed to be in effect by settlement
day? Have your parents, relatives or friends provided the gift letter” that must accompany the cash donations? Has your employer verified
your income? Etc.
| What kind of homeowner’s insurance should I carry? | |
Your lender requires you to carry a homeowner’s insurance policy (also hazard insurance”), protecting your home (and the lender’s money)
against such hazards as fire, smoke, wind, hail, explosion, riot, theft, glass break-age (if the glass is part of the home), and damage caused
by aircraft, vehicles or vandalism. A basic policy also protects you against injury to a visitor on your property.
An “all-risk” policy reimburses you for the major hazards plus damage due to lesser catastrophes such as burst water pipes. But, to insure all
your equity and personal property, you may still need additional coverage.
against such hazards as fire, smoke, wind, hail, explosion, riot, theft, glass break-age (if the glass is part of the home), and damage caused
by aircraft, vehicles or vandalism. A basic policy also protects you against injury to a visitor on your property.
An “all-risk” policy reimburses you for the major hazards plus damage due to lesser catastrophes such as burst water pipes. But, to insure all
your equity and personal property, you may still need additional coverage.
| What happens at settlement? | |
In some areas, you and the agent meet with the sellers, their agent, and a settlement officer (either a lawyer or title company
representative) and often attorneys representing the seller and/or you, to settle the transfer of the property and close the transaction. In
other areas, an escrow officer does all the preparations for closing, and contacts the buyer and seller to come in individually and sign their
respective documents.
In either case you will need to provide:
• Your homeowner’s insurance policy, and paid receipt for one year’s coverage, sometimes paid at closing.
• A certified or cashier’s check (payable to yourself and ready to be endorsed to the seller, attorney or escrow company) for the balance of
your down payment and your closing costs.
• Your regular check book so that you can pay any incidental costs. Typically all closing costs are calculated in advance and your
certified check is usually sufficient.
You go over a list of adjustments presented on government-standard “Settlement Statements,” to settle what you and the seller owe one
another in cash, taxes, etc. You sign the mortgage and a mortgage note (denoting your monthly principal and interest payments). After
recording all signed documents, you then pay the seller, and the seller gives you the title (or deed).
Finally, you pick up your keys - the home is yours!
representative) and often attorneys representing the seller and/or you, to settle the transfer of the property and close the transaction. In
other areas, an escrow officer does all the preparations for closing, and contacts the buyer and seller to come in individually and sign their
respective documents.
In either case you will need to provide:
• Your homeowner’s insurance policy, and paid receipt for one year’s coverage, sometimes paid at closing.
• A certified or cashier’s check (payable to yourself and ready to be endorsed to the seller, attorney or escrow company) for the balance of
your down payment and your closing costs.
• Your regular check book so that you can pay any incidental costs. Typically all closing costs are calculated in advance and your
certified check is usually sufficient.
You go over a list of adjustments presented on government-standard “Settlement Statements,” to settle what you and the seller owe one
another in cash, taxes, etc. You sign the mortgage and a mortgage note (denoting your monthly principal and interest payments). After
recording all signed documents, you then pay the seller, and the seller gives you the title (or deed).
Finally, you pick up your keys - the home is yours!
| Congratulations! | |
Thank you for letting us share with you our experience and knowledge in the home-buying process. After reading these
pages we encourage you to contact an agent and get even more answers to any specific questions you may have.
Now is an excellent time to buy. We’re looking forward to helping you with what may be the most important investment of
your life. Your call is welcome!
If you know someone who is planning to move soon, please send them our website address or phone number. We
would be glad to share with them our experience as much as we've enjoyed informing you. Again, thank you!
pages we encourage you to contact an agent and get even more answers to any specific questions you may have.
Now is an excellent time to buy. We’re looking forward to helping you with what may be the most important investment of
your life. Your call is welcome!
If you know someone who is planning to move soon, please send them our website address or phone number. We
would be glad to share with them our experience as much as we've enjoyed informing you. Again, thank you!
| Richard A. Reich, REALTOR |
| 827 Willow Street, Lebanon, PA 17042 (717) 273-8861 ~ dick@reichrealty.com |
| What does the lender do to approve my loan? | |
Typically the lender will give or send you an application package” with instructions and necessary forms. You complete these in detail,
including the financial data and account numbers, and present them to your loan officer when ready. A loan application fee will be
required by most lenders to cover credit report and appraisal.
A lender takes several steps in processing your application, and different procedures exist in different areas. Primarily, your lender is busy:
• Getting an appraisal of the home you want to buy, to determine if it’s worth the price you are paying.
• Getting reports on your employment, income and debt-paying ability, to determine if you are a good credit risk.
• Verifying bank deposits to satisfy down payment and closing cost needs.
• Ordering inspections, such as:
a) Housing or building code compliance.
b) Completion of repairs the seller agreed to make.
c) Termites or other wood-boring insects.
• Ordering the title search (sometimes by the lender’s lawyer, your lawyer or a title insurance company), to deter-mine if the seller can
convey clear title to you.
• Verifying hazard insurance coverage, to make sure the home is protected against major losses.
Once all the documents are assembled, a review of your application by the lender’s loan committee will determine whether or not your
loan is approved. When your application is approved, your lender will send you a loan confirmation letter to put the loan amount, interest
rate and monthly payment in writing.
including the financial data and account numbers, and present them to your loan officer when ready. A loan application fee will be
required by most lenders to cover credit report and appraisal.
A lender takes several steps in processing your application, and different procedures exist in different areas. Primarily, your lender is busy:
• Getting an appraisal of the home you want to buy, to determine if it’s worth the price you are paying.
• Getting reports on your employment, income and debt-paying ability, to determine if you are a good credit risk.
• Verifying bank deposits to satisfy down payment and closing cost needs.
• Ordering inspections, such as:
a) Housing or building code compliance.
b) Completion of repairs the seller agreed to make.
c) Termites or other wood-boring insects.
• Ordering the title search (sometimes by the lender’s lawyer, your lawyer or a title insurance company), to deter-mine if the seller can
convey clear title to you.
• Verifying hazard insurance coverage, to make sure the home is protected against major losses.
Once all the documents are assembled, a review of your application by the lender’s loan committee will determine whether or not your
loan is approved. When your application is approved, your lender will send you a loan confirmation letter to put the loan amount, interest
rate and monthly payment in writing.
| What are “closing costs,” and how much should I expect to pay? | |
Depending on your area, the price of your home, your lender’s terms and other factors, your closing costs will vary. An agent can provide a
rule-of-thumb figure for your situation. Also, your lender will give you a pre-settlement “good faith” estimate of specific costs. This estimate
is sometimes low. Take extra funds just in case.
Closing costs typically include:
• Loan origination fee, usually 1~/o of your mortgage amount.
• Discount point (or points); each point is 10/o of your mortgage amount.
• Assumption fee if you assume the seller’s loan.
• Cost of a title search.
• Lender’s title insurance fee.
• Owner’s title insurance fee (optional but advisable).
• Survey fee (if applicable).
• Transfer tax (state and/or local tax and tax stamps in some areas; sometimes split with seller).
• Lender’s appraisal fee.
• Recording fees for settlement documents.
• Prepaid interest on your mortgage, covering the time between settlement and your first monthly payment.
• Prepaid mortgage insurance premium.
• Homeowner’s hazard insurance premium.
• Property tax escrows.
• Lawyer’s or escrow company’s fee.
rule-of-thumb figure for your situation. Also, your lender will give you a pre-settlement “good faith” estimate of specific costs. This estimate
is sometimes low. Take extra funds just in case.
Closing costs typically include:
• Loan origination fee, usually 1~/o of your mortgage amount.
• Discount point (or points); each point is 10/o of your mortgage amount.
• Assumption fee if you assume the seller’s loan.
• Cost of a title search.
• Lender’s title insurance fee.
• Owner’s title insurance fee (optional but advisable).
• Survey fee (if applicable).
• Transfer tax (state and/or local tax and tax stamps in some areas; sometimes split with seller).
• Lender’s appraisal fee.
• Recording fees for settlement documents.
• Prepaid interest on your mortgage, covering the time between settlement and your first monthly payment.
• Prepaid mortgage insurance premium.
• Homeowner’s hazard insurance premium.
• Property tax escrows.
• Lawyer’s or escrow company’s fee.