homebuying 101
DESCRIPTION
TRANSCRIPT
HomeBuying
101
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Home Buying 101
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Working with ZipRealty
Ourguaranteetoyou 2
Whatyoucanexpectfrom yourZipRealtyAgent
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ZipRealtyrebate 4
Home Buying 101
HowmuchcanIafford? 5
Rentingversusbuying 6
Howtofindagoodvalue 6
Buyingadistressedproperty 7
Buyingnewconstruction 10
Homeinspectionsandwarranty 10
Home Loans and Preapproval
Preapprovalprocess 11
Questionstoaskaboutyourloan 12
Closing 101
Closingtimeline 13
Whatyoucanexpect 14
Glossary of real estate terms 16
Table of Contents
Home Buying 101
2 3*See website for full details.
You Get the Best of Both at ZipRealtyWhenyouworkwithZipRealtytobuyorsellyourhome,yougetthebestofbothworlds–awebsitewiththebroadestandmostusefularrayofinformationandtools,andalocal,responsiveagentwhosenumberonepriorityisyou.
We Guarantee Your SatisfactionWe’re100%committedtomakingsureyouhaveagreathomebuyingorsellingexperience–infact,weguaranteeourservice.Ifyou’renotsatisfiedforanyreasonwhenyouclose,we’llpayyou$250*–that’showconfidentwearethatyou’llenjoyworkingwithus.
Rate Your AgentLoveyouragent?We’regladtohearit.ZipRealtyisoneoftheonlycompanieswherewe’lltackonanicebonustoyourZipRealtyAgent’scommissionforprovidingyouwithsuchgreatservice.Afteryourtransactionclosesallyouhavetodoisletusknowthatyouwerecompletelysatisfied,andwe’lltakecareoftherest.
Working with ZipRealty
94% of our customers would recommend ZipRealty to their friends
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Home Buying 101
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The Role of Your ZipRealty AgentYouwanttoworkwitharealestateagentwhoisknowledgeable,friendlyandhardworking…andvaluesyourtimeasmuchasyoudo.Thatmeanssomeonewhoreturnsyourcallsquickly,answersyourquestionspromptlyandcompletely,andwhenyou’rereadytomoveforward,they’reready,too.
Atothercompaniesthatcombinationofaccountability,responsivenessandknowledgemightbehardtocomeby,butatZipRealtyweconsiderthatthebasics!
In addition to providing you with “the basics,” your ZipRealty agent will:• Helpyoufindtherighthomeforyou,inyourareaandpricerange• Workwithyoutoprepareanoffertopurchasethehouse
andprofessionallypresentittotheSeller’sAgent• NegotiateonyourbehalfwiththesellerorSeller’sAgent
aftertheofferispresented• Workwiththetitlecompany,thelender,andthesellerorSeller’sAgentto
arrangeallnecessaryinspections• Discussandexplaintheinspectionreporttoyouandnegotiatewiththeseller
orSeller’sAgentforanyrepairstothehome• Serveasyour“pointperson”tomakesuretheclosingprocessgoessmoothly
andensureallcontractsandaddendumsarepreparedandcompleted
What is the difference between a Buyer’s Agent and a Seller’s Agent? Moststateshavewhatiscalled“aBuyer’s Agent,whichisarealestateagenthiredbyyou,thebuyer,tohelpfindtherighthomeatthebestprice.
ASeller’s Agent,or Listing Agent,isarealestateagenthiredbythesellertomarketandselltheirhome.ThemaingoalofaSeller’sAgentistoselltheseller’shomeatthehighestpricepossible.
SomebuyerschoosetoasktheSeller’sAgenttorepresentthem,butbeforeyoudothat,keepinmindthattheSeller’sAgentautomaticallyhasaconflictofinterest–howcantheygetthehighestpossiblepricefortheirsellerclientandatthesametimegetthemostreasonablepriceforyou?
Working with ZipRealty
Home Buying 101
4 5*For full details on our rebate, please visit our website: www.ZipRealty.com/rebate
How much will it cost to work with ZipRealty?Asabuyer,youwon’tpayanythingtohaveZipRealtyworkforyou.Inaresidentialrealestatetransaction,thesellerpaystherealestatecommission.AsanaddedbonustoworkingwithZipRealty,wewillgiveyouupto20%*ofthecommissionwereceivefromtheseller!
ZipRealty’s RebateThe ZipRealty rebate is available…
• Tobuyerswhocloseescrow/proceedtofinalsettlementwithZipRealtyactingastheirsoleandexclusiveagentinthepurchaseofrealestate
• Forhomeswithafinalsalespriceof$100,000ormore
The ZipRealty rebate is not available…• Forhomeswithafinalsalespriceof$99,999.99,orless• Whenyourlender(s)ornewhomebuilderdisallowsit–makesuretocheck
withthem!• Whenprohibitedbystatelaw,asinOregon
Pleasebeawarethattheremaybetaxconsequencestotherebate.Youshouldseeklegalortaxadviceregardingtherebatefromtheappropriateprofessional.
Home buyers get up to 20% of our commission back.*
Commission
6%
$18,000
Home Price
$300,000
ZipRealty Share
3%
$9,000
Buyer Rebate
up to 20%
up to $1,800
Home buyers get up to 20% of our commission back.*
Working with ZipRealty
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Home Buying 101
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How much can I afford?In general, the amount you can afford to spend on a home is a combination of:
• Yourcashonhand• Yourincome• Youroutstandingdebtanddebtpayments
Accordingtomanyfinancialexperts,yourmonthlyhousingcost(includingmortgagepayment,propertytaxes,homeownersinsuranceandHOAfees,ifapplicable)shouldnotexceed28%ofyourgrossmonthlyincome.
Yourtotalmonthlyloanpayments(includingyourmortgage,carloans,childsupportandalimony,creditcardbills,studentloans,etc.)shouldnotexceed36%ofyourgrossmonthlyincome.
Applyingtheseguidelines,ifyourdebtpayment(asidefromyourmortgage)currentlyexceeds8%ofyourannualincome,you’llneedtoloweryourmortgagepaymentaccordinglytomaintainadebtlevelatorunder36%ofyourgrossincome.Anaccountingprofessionalormortgageloanconsultantcanworkwithyoutohelpyoudeterminehowmuchyoucanaffordbasedonindividualcircumstances.
Additional expenses to factor into your first year of homeownership:• Closingcosts• Movingcosts• Repairandmaintenancecosts
CalculateVisitZipRealty’s“AffordabilityCalculator”toestimatehowmuchyoucanaffordtospendonahome,whatyourclosingcostswillbe,andhowmuchitwillcostyoutomove.
http://www.ZipRealty.com/calculators
Onceyou’veestablishedyourpricerange,sticktoit–spendingmorethanyoucanaffordmaycauseseriousfinancialproblemsforyoudowntheroad.WiththehelpofyourZipRealtyAgent,andbynarrowingyourhomesearchbasedonpricewithouronlinesearchtools,youcaneasilysearchforhomesthatarewithinyourpricerange.
How Much Can I Afford?
Home Buying 101
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Renting versus BuyingAssumingyourfinancesareinorderandyou’reabletogetaloanyou’recomfortablewith,anotherkeyconsiderationinyourdecisiontorentorbuyisyourpersonaltimeframe.
Yourpersonaltimeframecanbedividedintotwosections:financialandemotional.
Your Financial Timeframe:Whenyoubuy,yourmortgagepaymentwilllikelybemorethanyourcurrentrent,soifyou’replanningonmovingtoanewneighborhoodorcityinayearortwo,youmightbebetteroffrentingsinceyourhomeprobablywon’tincreaseinvalueenoughtocoveradditionalcostsofbuyingandselling.
However,ifyou’replanningonstayinginthesamecity/neighborhoodforalongertime,thenitmaybeagoodtimetobuy.Rentswillprobablycontinuetorisewhileyourmortgagepaymentwon’t(ifyouhaveafixedloan),soeventuallyyourmortgagepaymentwillbelowerthanrent.
CalculateTheZipRealtywebsiteoffersacalculatortohelpyoudetermineyour“breakeven”point.Simplyinputtheactualassumptionsformonthlycoststoseeifbuying(versusrenting)istherightthingforyou.
http://www.ZipRealty.com/calculators
Your Emotional Timeframe:Ifyou’renotwildaboutwhereyou’relivingnow,and/ormightmovesoon–sayforanewjob–thenit’sprobablynotagoodideatobuy.Orareyouexperiencinglifechangeslikeamarriage,divorce,birthofachild,orotheremotional,stressfulevent?Thenitmightnotbeagoodtimetobuyahome.
Ifyoulovewhereyouliveanddon’tseeyourselfmoving,thenbyallmeans,itmightbetimetostartlookingforahometobuy!Onceyou’vedeterminedthetimeisright(anditmakesfinancialsenseforyou)yourZipRealtyagentisreadytohelpyoufindyourperfecthome.
TIME
MONTHLYPAYMENTS BUYING
RENTING COST
COST
Renting vs. Buying
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Home Buying 101
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Compare and ContrastVisitseveralsimilarhomesinadditiontotheonesyou’rereallyinterestedin–thatwayyou’llbeabletoformamorecompletepictureofthelocalmarket,andwhetherornotthehomeyou’rethinkingaboutbuyingisagoodvaluefortheprice.
YourZipAgentisalocalexpertintheareaswhereyouaresearching.They’reouttherelookingathomesalmosteveryday,and their inside knowledge is one of your biggest resources! Definitelytakeadvantageofit.
Don’t Overlook the “Ugly Ducklings” Sometimesallahomeneedsisalittleimagination(oralot,dependingonthepreviousowner’staste)toturnitintothehomeofyourdreams.These“uglyduckling”homesoftensellforaloweramountbecausemanypeoplecan’tgetpastthecosmetics.
Itmightbepossibletochangethingslike:• Paint• Flooring• Furniture• Lighting• Landscaping
…Justmakesureyoufactorinthoseexpensesintothetotalcostofthehome.
Does the “Unchangeable” Match What You’re Looking For?Therearesomethingsyoucan’tchangeaboutapropertythatwillaffectitsvalue.Herearethreebigquestionstoaskyourselfasyou’relookingathomes:
Is it in a desirable location? Makesuretheareaisaplaceyouwillbecomfortableliving–thingslikestreetnoise,powerlinesandairtrafficaren’tlikelytochange.
Is the overall “flow” of the floor plan functional? Ifitfeelsdysfunctional,bewary–changingthisisusuallyquiteexpensiveandmaybeimpossible.
Does the property fit your lifestyle? Forexample,ifithasapooloraspabutyou’renotbigonupkeepandyoudon’twanttopayfortheservice,thatsparklingoasiscanturnintoaneyesoreprettyquickly.
And,ofcourse,ifthehomeneedsanymajorrepairs(likefoundationorroofing)you’llneedtofactorthatintotheamountyou’rewillingtopayforthehome.
How to Find a Good Value
Home Buying 101
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Distressed Properties: Short Sales, Foreclosures and REOsPurchasingadistressedpropertycanbeatime-consumingprocess,butyoucanalsogetagreatdealonahouseyoulove.
• ASHORTSALEoccurswhenahomeownersellstheirhomeforlessthan(shortof)whattheystilloweontheirmortgage,andtheirbankhasagreedtoaccepttheproceedsfromthesaleaspaymentinfulloftheloanbalance.
• AFORECLOSUREoccurswhenahomeownerhasdefaultedonthemortgage,andlenderinitiatesaforeclosureagainsttheproperty.Thepropertywilleventuallybeputupforsaleataforeclosureauction.
• AREALESTATEOWNED(REO)occurswhenthebankhassuccessfullyforeclosedonthepropertyandtheforeclosureauctiondidnotresultinasaletoanoutsidebidder.Thusthelenderendsupasthenew“owner”ofthehome.
Distressedpropertiesoftenhavechallengesnottypicallyfoundwithatraditionalrealestatetransaction.
Work with an Agent who is Short Sale CertifiedGiventhecomplexitiesinvolvedwiththeprocessofpurchasingadistressedproperty,youshouldworkwithaknowledgeable,experiencedZipRealtyAgentwhoisShortSaleCertified,andcanguideyouthrougheverystepoftheway.
Distressed Properties
Visit...
http://www.ZipRealty.com/short-sales formoretipsandinformationaboutbuyingashortsale
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Home Buying 101
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*Thisisforinformationalandmarketingpurposesonly.ZipRealty,Inc.(“ZipRealty”)isaresidentialrealestatebrokerageandcannotgiveyouadviceastoyourlegalrightsortaxconsequencesinassociationwiththepurchaseofahomefacingforeclosureoriscurrentlyownedbythebank.Youareencouragedtoseektheadviceofanattorneyand/ortaxadviceinconnectionwiththepurchaseofanyrealproperty.Ifyourpropertyiscurrentlylistedwithanotherbroker,oryouareboundbyabuyer-brokeragreement,thisisnotasolicitationofthatlistingnorintendedtointerferewithyouragreementwithanotherbroker.ZipRealtyisapubliclyheldcompanytradedontheNASDAQexchangeunderthesymbol“ZIPR”.
What you should know about buying distressed properties*BuyingashortsaleorREOpropertyisacomplexprocess.Theoverviewbelowisintendedtogiveyouanideaofwhatyoumayfaceifyoudecidetopursueapurchaseofadistressedproperty.YoushouldalwaysdiscusstheprocessindetailwithyourZipRealtyAgentbeforemakinganoffer.
Hereisanoverviewofthemostcommondistressedsituationsandhowyoucanworkthroughthem:
Short Sale PropertiesShortSalepropertiesmayoftenbeinbetterconditionthanpropertiesthatareinforeclosure,asthehomeownerisworkingwiththebanktoreleasethemoftheirdebtandistryingtoavoidforeclosure.
Before making an offer on a Short Sale, please keep the following in mind:
• Anyoffermustbeapprovedbyseller’slender.
• Becauseoftherequiredapprovalprocessbythelender,approvalofyouroffer(andthereforetheshortsale)couldtakemonths.
• Alendermaynotagreeto,andthuschange,thetermsoftheagreementmadebetweenthesellerandthebuyer.
Foreclosed Properties (REO)Lenderswilltypicallysellthehomes“as-is,”meaningthatREOpropertieswilloftenneedtoberepaired.
Before making an offer on an REO, please keep the following in mind:
• Thelendermostlikelywillnotagreetomakeanyrepairstothehome
• Thelendermayrequireyoutofinancewiththem.
• WhilemostREOpropertiesarealreadyvacant,thereisapossibilitythelenderisstillintheprocessofhavingtheformerownersevicted.Thiscouldresultinadelayinclosing,andmayalsoincreasetheprice.
• IfyouarenotusingtheREObankasyourlenderitispossiblethatcertainrepairswillberequiredtobemadetothepropertybeforeyourlenderwillagreetoclose.Thiscouldmeanyouwouldberequiredtospendmoneyonrepairsonahomethat’snotyetofficiallyinyourname.
Distressed Properties
Home Buying 101
10 11*Seewebsitefordetails.
New ConstructionLookingtobuyanewlybuilthome?Don’tforgettoletyourZipRealtyAgentknowbeforeyouvisitanewhomecommunity–thatway,ifyoudecidetobuy,you’llbeeligibletoreceivetheZipRealty rebate – up to 20% of our commission*uponclosing.Beforeyouvisitanewcommunity,contactyourZipAgentandtellthemtoregisteryouonyourFIRSTvisittothedevelopment.
Advantages to buying a new home:
• Large Selection–Manyhomebuildershavehundredsofnewlyconstructedhomesreadyformove-in.Thesehomesarereferredtoas“Specs”or“Inventory”homesandinmanycasesarethebestdealsavailableinthemarket.
• Less Maintenance–Newhomesoftenrequirelesstimeandenergytomaintain,simplybecausetheyarecompletelynew.Mostnewlyconstructedhomesarebackedbyabuilderwarrantycoveringsomematerialsandworkmanship.
• Personal Options–Withnewhomes,youoftenhavetheabilitytochooseafloorplanthatfitsyourspecificneeds,pluscustomizableoptionslikecountertops,appliances,storagesystems,flooringandtechnology.
• Energy-efficient Construction–Newhomesareoftenmoreenergy-efficientthanexistinghomes.
Things to know before you make an offer:
• Thecontractwillmostlikelybethebuildersowncontract,writtentoprotecttheirinterests,notyours.
• Yougenerallywon’thavetherighttoaninspectionlikeyouwouldforapreviouslyownedhome.Confirmthatthehomebuilderwilltakecareofallcityinspectionsandthatthehomehaspassedallinspectionsrequiredbythecityorcountyandthatthehomeisbuilttocode.
• SomenewhomebuilderswillnotallowZipRealtytopayyouarebate,somakesuretofindoutbeforeyousubmitanoffertoabuilder.
Your ZipRealty Agent will:
• Register you with new home builders of your choice–WhenyourZipRealtyAgentregistersyouwithaNewHomeBuilder,you’llreceive20%ofourcommissionifyoubuy.
• Find you the best deals–YourZipRealtyAgentwillbeyourpersonaladvisorthroughouttheprocessofsearchingforandpurchasinganewhome.
• Guide You through the purchase process–YourZipRealtyAgentwillhelpyouwithallaspectsofthepurchaseprocess,includingcontractnegotiation,financeoptions,disclosures,publicreports,inspectionprocess,closingcostsandtimeframes.
New Construction
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Home Buying 101
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Home InspectionsAhomeinspectionisavisualinspectionofthestructure,andsomecomponentsofahome.Everyoneshouldconsiderhavingthehomeinspected,evenifitisan“as-is”sale.
It’sagoodideatobetherefortheinspection–notonlyisitagreatwaytolearnaboutyourhome,buttheinspectorcanalsoexplainandansweranyquestionsthatmaycomeup.
A home inspector’s report will typically review the condition of: • Heatingandcentralairconditioningsystem• Interiorplumbingandelectricalsystems• Walls,ceilings,floors,windowsanddoors• Theroof,attic,andvisibleinsulation• Thefoundation,basement,andvisiblestructure
Someitems,likemold,mildew,rodents,termites,etc.,willrequireaseparateinspectionbyaprofessionalinthatarea.Yourgeneralinspectionreportmaycommentonitemsliketermitedamageorwaterstains,onlyaprofessionalinthatspecificareacantellyoutheextentofthedamageandifitissomethingthatshouldbeaddressed.
Home inspections are NOT...• Aprotectionagainstfuturefailures• Anappraisalthatdeterminesthevalueofahome
Acodeinspection,whichverifieslocalbuildingcodecomplianceortheexistenceofpermitsforanyimprovementsontheproperty
Home WarrantiesAhomewarrantyprotectsyouagainstthefailureofsomecomponentsofyourhome.Differentwarrantiescoverdifferentthings,somakesuretoreadthroughthelistcarefullysoyou’reawareofwhatiscovered,whatthedeductibleis,etc.
90 Day Warranty The90daywarrantyfromtheinspectioncompanywillcovercertainitemsforupto90daysaftertheinspectionisperformed.Itisafairlylimitedwarrantythatistypicallydesignedtopartiallycovercertainitemsthatfailshortlyafterahomeinspection.
Annual WarrantyTheannualwarrantyismuchmorecomprehensiveandwhileitdoescovermorethanthe90daywarranty,itdoesn’tcovereverything–besuretoreadwhatisincluded.
Home Inspection and Warranty
Home Buying 101
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The Importance of PreapprovalGettingpreapprovedwillhelpyouinthreemajorways:
• You will know what you can afford. Settingyourownbudgetbeforetalkingtolendersisthefirststepofthisprocess(readmoreaboutthisonp5),asyoumaynotwanttoborrowthemaximumamountalenderwilllendyou.However,preapprovalwillhelpyouknowwhatthemaximumactuallyis.
• You can effectively comparison shop between lenders and types of loans.Interestratesvarywidelydependingonyoursituation,thelenderandthetypeofloan(FHA,fixedrate,interestonly,etc.).Foraloanaslargeasamortgage,evenonepointdifferenceintheinterestratewillmakeabigdifference.
• You will be taken more seriously by sellers.Thiscanbeabigadvantagewhenyou’remakinganofferonahome:ifyou’repreapproved,thesellersmaychooseyourofferoverothersthataren’tasstrong.
The Preapproval ProcessThelendergatherstheinformationitrequirestoofferyoualoan.Here’sagenerallistofthedocumentsthey’llaskyoufor,thoughsomelendersmayrequiremore–makesuretoaskforthelender’sspecificlistofdocumentssoyoucanbefullyprepared:
• Acopyofyourmostrecentbankstatements• W-2statements(or1099incomestatements)forthelasttwoyears• ProofofassetslikeIRAs,stocks,bondsormutualfunds• Recentpaystub(s)fromyourjob,andproofofanyotherincome(ifapplicable)• Anapplicationfee(thisdependsonthelender)–makesuretoask
Keep in Mind…The result of the pre-approval process is a good faith estimate. Thisisadocumentdescribingthelikelytermsoftheloan,includingtheinterestrate,loantype(fixed-rate,adjustableandsoon)andclosingcosts.However,nothingissetinstone.
Pre-approval does not mean the bank guarantees you the loan.Itjustmeansthatyou’relikelytogetaloanifnothingmajorchangesinyourfinancialpicture.Whenyouroffertobuyahomehasbeenacceptedbytheseller,thelenderthathaspreapprovedyouwillhavetoformallyapproveyourloan,andwillthengiveyouthefinalinterestrates,terms,etc.
Home Preapproval Process
VisitZipRealty’sMortgageCenter.
http://www.ZipRealty.com/mortgage
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Home Buying 101
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Preapproval and LoansThepreapprovalprocessisn’tjustfindingalenderthatwillpre-approveyou,butalsofindingtherightloanforthecurrentmarketandyourfinancialsituation.Thereareawidevarietyofloans–hereisabriefoverviewofsomeofthem.
FHA LoansFHALoansareinsuredbytheFederalHousingAuthorityandrequireasmalldownpayment,typicallyinthe2.5to5percentrange.However,astheyareconsideredahigherrisk,interestratesforFHAloansaretypicallymuchhigherthanthoseforConventionalLoans.
VA Fixed Rate LoansThisloanallowsveteranstopurchasehomeswithoutmakingadownpayment,andareguaranteedbytheDepartmentofVeteransAffairs.Likeotherfixed-rateloans,you“lockin”theinterestrateforthelifetimeoftheloan.
Conventional LoansTheseloansgenerallyrequirehigherdownpaymentsthangovernmentguaranteedones–sometimesupto20%.You’lllikelyneedexcellentcredittoqualifyforalowerinterestrate,andwillneedtohavecash-in-handforthedownpayment.
Fixed rate loan Withafixed-rateloan,you“lockin”theinterestrateforthelifetimeoftheloan.Thisistypicallyagoodideaifinterestratesarelowandyou’renotgoingtomoveorrefinancesoon.
Adjustable rate loanWithanadjustableratemortgage(ARM),theinterestrateonyourloanadjustsupanddown,dependingontheindextherateistiedto.Ifinterestratesgoup,yourmortgagepaymentswillgoup.Conversely,ifinterestratesgodown,yourmortgagepaymentwillgodown.Ifinterestratesarecurrentlyhigh,youmightconsiderstartingoffwithanARMandrefinancingtoafixed-rateloanoncetheydrop.
Fixed-Adjustable loan Someloansarefixedforaperiodoftime,say5or10years,thenadjustlikeanARMbasedonaninterestrateindex.Ifthecurrentinterestrateisfavorableandyouplantomoveorrefinanceduringthefixedrateperiod,thistypeofloanmightbeagoodoptionforyou.
Someconventionalloansrequirethatyoupay“points,”whichisbasicallyprepaidinterestonyourloan.Bypayingsomeinterestupfrontyoucanpayalowerinterestrateontheremainingpartoftheloan.Ifyourloanrequiresyoutopaypoints,youwillhavetopayitatclosing,alongwithyourdownpayment,titleinsurance,taxes(ifapplicable)andotherfees.
Jumbo LoansConventionalloanshavemaximumloanlimitsbasedontheareayou’rebuyingin,upto$729,500forthemostexpensivecities.Ifyouneedtoborrowmorethantheselimits,you’llneedajumboloan.Jumbosgenerallyhavehigherdownpaymentrequirements–sometimeshigherthan20%--sufficientassetsandexcellentcredit.Interestratesonfixedoradjustablejumboloansaregenerallyhigherthanconventionalloanswithcomparableterms.
Key questions to ask about your loan• Willmyinterestchangeduringthelifeoftheloan?Ifso,whenandbyhowmuch?Howmuchwillmy
mortgagepaymentsbe?Iftheloanwilladjust,whatwilltheybeafterthat?• DoesthisloanhavepointsthatIwillhavetopayupfront?• HowmuchmoneywillIneedtobringtoclosing?• Whatarethefeesforthelender,appraiser,etc.?• Willthelendercollectmypropertytaxesandhomeowner’sinsurancepayments(impounds)?
Home Preapproval Process
Home Buying 101
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The Closing ProcessAfteryourofferhasbeenacceptedbytheseller,therearestillseveralstepsyouand/oryourZipRealtyagentwillneedtocompletetopurchasethehome.Thisiscalledtheclosingprocess.
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What to Expect During Closing
Earnest Money
Title Check
Homeowner’s Insurance
Disclosures, Inspections, and Contingencies
Appraisal of Property
Loan Approval
Request to Payoff Seller’s Existing Mortgage
Cashier’s Check
“Sign-off” and Closing Appointment
Final Steps
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1. Earnest Money—Afteryourofferisaccepted,yourfirststepistowriteacheckforthe“earnestmoneydeposit”(thedepositthatsecuresthebuyer’soffer).
2.Title Check—Dependingonthestatewherethehomeislocated,atitlecompany,closingattorney,orclosingagentwillbeselectedtohandletheclosingprocess.Theirprimarypurposeistogetapreliminarytitlereport,whichconfirmsthattheselleristhelegalownerofrecordofthepropertyandthatthepropertyhasnounsettledliensorotherclaimsagainstit,includingallrealestatetaxesandspecialassessments.Ifyouhaven’tselectedatitlecompany,closingattorney,orclosingagentyet,yourZipRealtyAgentcanassistyouinfindingareputablefirm.
3.Homeowner’s Insurance —It’syourresponsibilitytoobtainhomeowner’sinsurance.Lendersalwaysrequirethebuyertohaveproofofhomeowner’sinsurancesecuredbeforetheyapproveyourloan.Insurancepoliciesvarywidely,soshoparound.ZipRealty’sinsurancepartnerscanprovideyouwithafree,no-obligationquoteifyouchoose.
4.Disclosures, Inspections, and Contingencies—Thesellermustdiscloseanymaterialfactsabouttheproperty.Disclosureofmaterialfactscanincludeanypropertydefectsoranylawsuitsregardingclaimtoownershipontheproperty.Generally,it’stheobligationofthebuyertoarrangeanyinspectionsontheproperty,includinggeneralpropertyandpestinspections–yourZipRealtyAgentwillworkwithyoutoarrangeallofthenecessarysteps.Othercontingenciestobeawareofincludefinancing,additionalinspections,andsaleofthebuyer’scurrenthome.Oncethedisclosuresandinspectionsarecompleteandsatisfactory,yourZipRealtyAgentwillarrangetohaveanycontingenciesremovedfromthesalescontract.
5.Appraisal of Property—Thelenderwillarrangeforthepropertytobeappraised.Theappraiser’sreportwilldescribethephysicalcharacteristicsofthepropertyandcomparablepropertyvalueswillbeusedtodeterminethevalueoftheproperty.Therewillprobablybeathoroughinteriorandexteriorinspection.
6.Loan Approval—Onceallofthenecessarystepsarecompleted,andyourloanhasbeenapproved,yourlenderwillnotifythetitlecompanythatthey’veapprovedyourloanrequest,andwillsendtheloandocumentstothetitlecompanysothatthedocumentscanbesignedattheclosingappointment,whichcanalsobecalledthe“sign-off.”Atthistime,thetitlecompanywillscheduleseparateclosingappointmentwiththebuyerandsellertosignallofthefinalpaperwork,includingyourmortgageandtransferringownershipoftheproperty.
7.Request to Payoff Seller’s Existing Mortgage—Thetitlecompany,closingattorney,orclosingagentwillissueanordertotheseller’sexistinglenderrequestingademandforpaymentinfullandallre-conveyance/releasedocuments.
8.Cashier’s Check—Inpreparationfortheclosingappointment,you’llneedtoobtainacashier’scheckorwiretransferfortheamountofmoneydueuponclosing.Tofindouttheexactamountdue,askyourZipRealtyAgent,whowillworkwiththetitlecompanytoensureyouhavealloftheappropriateinformation.Youcannotpayyourclosingcostswithapersonalcheck.
9.“Sign-off” and Closing Appointment—Theclosingappointmentusuallytakesabout1-2hoursandiswhereyouwillsignallofthenecessarytitleandloanpapers.Dependingonyourstate,thesellerwillhavealreadysignedallthenecessarypaperworkorwillsignthemduringthisappointment.
10.Final Steps—Onceyour“sign-off”iscomplete,thetransactionneedstoberecordedbythecountyandtheformalchangeofpossessionmusttakeplace.YourZipRealtyAgentwillarrangeforthetransferofthepropertykeyswiththeseller’sagent.The“ForSale”signandpropertylockboxwillalsoberemovedbytheseller’sagent.Whilethehomemustbeinsubstantiallythesameconditionaswhenyouinspectedit,sellersarenotrequiredtothoroughlycleanthehouse.Soplantodothesejobsbeforeyoumovein.
What to Expect During Closing
Home Buying 101
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Annual Percentage Rate (APR) TheAPRforyourhomeloanisanannualcalculationthatincludestheinterestratequotesbyyourmortgagecompanyplusadditionalhomeloancostssuchasoriginationfeesandpoints.Theimportantthingtokeepinmindaboutyourloan’sAPRisthatitwillbehigherthanadvertisedinterestratesbecauseoftheadditionalfactors.
Closing Costs Witheachrealestatetransaction,therearemanyexpensestopayandagenciestocompensate.Thesefees,whichareoftensharedbythebuyerandseller,arereferredtoastheclosingcosts.Whenyoubuyahome,theclosingcostsmightincludeloanoriginationfees,escrowpayments,titleinsurance,attorneyfeesandevendiscountpointspaidtoloweryourloan’sinterestrate.
Contingency Aclauseorphrasethatindicatesatermorconditionwhichmustbemetpriortofurtheraction(s).Acontingencyisa“subjectto…”clause.
Forexample,aninspectioncontingencyinanoffertopurchaseahomemeansifahome’sinspectionshowsdefectsthesellermustfixthemforthesaletoproceed.
Default Failuretomeetthetermsandconditionsofacontract;actofpreventingcompletionofthetermsofanagreement.
DistressedApropertythatisinbadrepairorotherwisenotworthitsnormalvalueduetodecliningneighborhood,pendingforeclosureofproblemsinthearea(airportnoise,etc.).
Equity Theportionofapropertyorassetthatisownedbytheindividual,whetherinrealpropertyorpersonalproperty.OrdinarilythedifferencebetweenthetotalofallexistingdebtonthepropertyanditsmarketValue.
Forexample,ifthehomeisworth$250,000andthemortgagebalanceis$100,000,theownerhas$150,000ofhomeequity.
Earnest Money Anysumorconsiderationusedasa“goodfaith”deposittowardthepurchaseofaproperty,andtoactasabinderforthetransaction.Youtypicallydepositearnestmoneyinanescrowaccountandcouldloseitifyoudon’tproceedwiththesale.
Escrow Duringthehomeloanprocess,aneutralthirdpartyknownasEscrowholddocumentsandmoney(includingearnestmoneydeposits)forsafekeepinguntiltherealestatetransactioniscomplete.AnEscrowaccountisalsousedonceyoucompleteyourhomeloantoholdthepropertytaxandinsurancemoniesthatarecollectedwitheachmortgagepayment.
Glossary of Common Terms
16
Home Buying 101
Lien Alegalclaimonanother’spropertyassecurityforthepaymentofdebt.Oneoftheitemsatitlecompanychecksiswhetheranyonehasalien–orclaim–onthepropertyyouarepurchasing.Yourlenderwillhavealienonyourpropertyuntilyoupayoffthemortgage.
Loan to Value Ratio (LVR) Whenyoubuyahome,thistermreferstotheamountoffinancingyouaregettinginrelationshiptoyournewhome’svalue.
Forexample,an$80,000mortgageona$100,000homehasanLVRof80%.AnLVRofmorethan80%willrequireyoutopurchaseprivatemortgageinsurance(PMI)
Lock-In Homemortgageinterestratesvaryfromday-to-day.Whileyoubuyahomeandsecurefinancing,youmaydecidetolockinaparticularinterestratewithyourlender.Thislock-inguaranteesthatyourhomeloanwillbeprocessedwiththisrate,eveniftheratesrisebeforetheloancloses.
PITI Totaloftheprincipal,interest,taxesandinsuranceonamonthlypaymentbasisinpropertyownershipwherethepropertyissecuredbyamortgage.
Points Therearetwotypesofpointsthatcanbeappliedtoahomemortgage.Discountpointsareusedtoreducetheloan’sinterestrateandoriginationpointsmaybeaddedtocovertheexpensesassociatedwithprocessingaloan.Onepointequalsonepercentoftheloanamount
Forexample,toloweryourinterestratebyonepointona$300,000mortgage,you’llneedtopayanadditional$3,000atclosing.
Private Mortgage Insurance (PMI) Whenyoufinancemorethan80%ofyournewhome’svalue,yourlenderwillrequireyoutopurchasePMI.Thisprotectsthelenderagainstlossifyoudefaultonyourhomeloan.YourmonthlyPMIpaymentisaddedtothecostofyourmortgagepayment.Whenyouhaveaccumulated20%equityinyourhome,checkinaboutcancelingyourPMI.
Title Insurance Ahomemortgagerequirement,titleinsuranceprotectsboththebuyerandtheselleragainstlegaldefectsinahome’stitle.Thispolicyensuresthatapropertyownerhasthelegalrighttotransferahome’stitletotheseller.Ifaproblemoccurs,thetitlecompanypaystheassociatedlegalfeestocorrectthesituation
Glossary of Common Terms
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