a home-buying guide
DESCRIPTION
Mehmet "Matt" Halici's Guide for New Home BuyersTRANSCRIPT
A Home-Buying Guide
MehMet “Matt” haliciAssociate Brokertop 1% Nationwidelicensed in Va, MD & Dccell: 202.431.1991Office: 301.656.2500Fax: 301.907.8572www.mhalici.come-mail: [email protected]
“ K N O W L E D G E I S P O W E R ”
Matt halici l 202.431.1991 – 2 – www.mhrealtyplus.com
About Mehmet “Matt” HaliciAs certified Buyer Agents,I offer these advantages:
l Access to thousand of homes for sale Icansaveyoutimebylocatingtheonesthatsuitsyourneeds
l Correctly written contracts Iamskilledtechnicalwriterofrealestatecontracts.Apoorlywrittencontractwastes timeandisnotenforceable.
l Skilled negotiations on your behalf Iamtrainedandskillednegotiatorandwillapplymyexperienceonyourbehalftogetthe bestpossibletransactionbasedonyourneeds.
l Advice and counseling to protect your interests Price Deposits Financingterms,loancontingencies Personalproperty Conditionofpropertyinspections Titleinsurance Draftingcounteroffers
l Explain the seller’s counter offers Disclosureforagency,RESPA,FIRPTA Timeforacceptanceandmethodforacceptance Specialrequirements As-isclaims Possession Damages Surveys Homewarranties
l From sale to settlement Selectingthehomeinspector Theinspectionprocess Selectingtheattorney Selectingthelender Makingapplicationandfollowingup Alltheotherdetailsastheyarise Negotiatinganyproblems Goingtothesettlement!!! p
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Matt halici l 202.431.1991 – 3 – www.mhrealtyplus.com
A Warm Welcome from Jim Weichert
Formostpeoplethepurchaseofahomerepresentsmuchmorethanagoodfinancialinvestment.Buyingahomeistherealizationofadream-adreamtiedtoavisionofthefuturethatisfilledwithoptimismandjoy.
Fromthedayourfirstofficeopenedin1969,wehavebuiltourservicesaroundhelpingpeopleachievetheirvisionsofthefuturesmoothlyandwithaslittlestressaspossible.YouwillseethatreflectedinthemanygenuinelyhelpfulserviceswehavedevelopedandintheveryattentivewayWeichertSalesAssociateswillworkwithyou.Keepinmind,too,thatWeichert,Realtorsisatrue“fullservice”realestatecompany.ThatmeansyourWeichertSalesAssociatewillbetheretoguideyouthroughtheentireprocess,frommortgagepre-approvaltothedetailsofmovingin.
Sowelcometoweichert.com.It’syourconvenientportaltoourlistings,ourservices,andourpeople.Iwishyoueverysuccessinyourhomesearch--andajoyousfulfillmentofyourdreamsforthefuture.
Jim WeichertFounder and president
Matt halici l 202.431.1991 – 4 – www.mhrealtyplus.com
Since 1969, Weichert, Realtors has been perfecting a smarter approach to real estate focused on the needs, concerns, hopes and
dreams of our customers.
Weicherthasgrownfromasingleofficeintothenation’sleadingproviderofhomeownershipservices*byputtingcustomersfirst.Today,wecontinuetorefineourapproachinresponsetothechangingneedsandconcernsofpeoplelikeyou.
Tobeginwith,we’veturnedWeichertsalesofficesintotrue“one-stop”destinationsforthefullrangeofrealestateproductsandservices.Now,there’salwaysanexpertonhandtooffersolutionsandadviceonmortgages,insurance,andallthedetailsofmoving.Insteadofcallingan800number,youcanmeetfacetofacewithoneoftheseWeichertGoldServicesManagers.Inotherwords,wegobeyond“fullservice.”NoonecanmatchtheWeichertOpenHouseprogramorourpromiseofimmediateliveanswerstowebsiterequests.But,intheend,it’stheneighborhoodknowledgeandpersonalattentionfromourfriendlySalesAssociatesthatensureyourproblemswillberesolvedandyourdreamsrealized.
Weichert has more than 16,800 sales associates in over 360 company-owned and franchised sales offices in key markets throughout the U.S. A family of full-service real estate and financial services companies, Weichert helps customers buy and sell both residential and commercial real estate, and streamlines the delivery of mortgages and home and title insurance.
*Source:RealTrends2004surveyofleadingbrokers;includestotal2003volumeforrealestatesales,mortgage,insurance,andtitle.
Matt halici l 202.431.1991 – 5 – www.mhrealtyplus.com
The Home Buying Processl Home Buyer
l Select Agent
l Determine Purchasing Power: UnderstandBuyingProcess SelectAreas DetermineNeeds&Desires
l Preview Homes
l Make Offer
l Contingencies: HomeInspection Financing Othercontingencies
l Contract Acceptance
l Mortgage Application Credit&Appraisal
l Home Inspection
l Call Settlement Company
l Mortgage Approval
l Buyer Arranges Termite Inspection
l Contact Utility Companies
l Final Walk-through
l Settlement
l MOVE
Matt halici l 202.431.1991 – 6 – www.mhrealtyplus.com
What you should know about
Agency ?
Matt halici l 202.431.1991 – 7 – www.mhrealtyplus.com
Who Represents Whom?
OneofthemostcommonmisconceptionsthataresharedbyalargenumberofhomebuyersisthatwhenworkingwithaRealEstateAgent,heorshewill“automatically”representyouasabuyer.Aswewilldiscuss,unlessthisisspecificallydisclosedin
writing,inallprobabilitytheAgentwillberepresentingtheseller.
ThetraditionalrelationshiphasbeenthataRealEstateAgent’sprimaryloyaltywastotheselleroftheproperty.ThisrelationshipwasineffectwhethertheAgentwasthelistingagentorworkingwithabuyer.Thissituationcausedmanyhomebuyerstobeconfused:theyassumedthattheAgentthathadbeendrivingthemaroundshowingthemhousesforthelast3weekswasrepresentingthem.Inreality,theAgentwasrepresentingtheownersofthehousestheysaw,andwasboundtorevealtothoseownersanyinformationheorsheknewaboutthebuyers.
Buyer’sAgency,whichisalmostuniversallyavailablenow,changedallthat.Thebuyernowhasachoiceinrepresentation:theAgentwithwhomtheyareworkingcancontinuetorepresentthesellerinthetransaction,ortheAgentcouldrepresentthemasbuyers.Thebuyerisnowabletocompeteonamorelevelplayingfield.
Althoughtherearestatetostatevariations(pleaseverifythesituationinyourparticularlocality),thefollowingisabasicsummaryofthetypesofAgency,andwhotheAgentrepresents.
SELLER AGENCY: The“default”situation.Unlessdisclosedtothecontrary,allAgentsinvolvedinaRealEstatetransaction(andtheirBrokers--withwhomalistingagreementisactuallywith)represent,andowetheirallegiance,totheseller.
BUYER AGENCY: WhenanAgentrepresentsthebuyer,thatAgent“rejects”theimplicitselleragencyandthusowesloyaltytothebuyer.
DUAL AGENCY: Thisoccurswhen2Agents--orthesameAgent--workingforthesameBrokereachrepresentabuyerandasellerinatransaction.Thissituationmustbedisclosedtoboththebuyerandtheseller.Privilegedinformation(e.g.thepricethatabuyerwillpayorasellerwillsellat)cannotbedisclosedtotheotherpartywithouttheexpresspermissionofthatparty.
Matt halici l 202.431.1991 – 8 – www.mhrealtyplus.com
What it means to you…
Ifyouleavetheagencyquestion“as-is”,yourAgentwillautomaticallyrepresentthesellerinthetransaction(althoughitisverylikelythattheywillsuggestBuyerAgency.)IftheAgentdoesnotrepresenttheseller,thenyoucanoptforBuyerAgency.Ifthehouseinwhich
youareinterestedislistedbythesameBrokerasyourAgent,thenyouhaveanautomaticDualAgencysituation.Tosumitup,ifyouwantfullrepresentation,insistonBuyerAgency.
Real estate is the most important investment. Don’t trust just anyone.
When you work with me you get:
l A much wider choice of properties--every home that is listed with any Real Estate Agency in MRIS.com which is only for realtors
l I have over twenty years of experience in real estate and real estate negotiations.
l Access to thousand of homes for sale
l Advice and counseling to protect your interests
l Skilled negotiations on your behalf
l Correctly written contracts
l Explain the seller’s counter offers
l From sale to settlement
Matt halici l 202.431.1991 – 9 – www.mhrealtyplus.com
Why should you have a Buyer’s Agent?
IfyouarecurrentlyworkingwithaRealEstateAgentwhohasnotexplainedtoyouhowBuyersAgencyworks,askyourself“whynot?”ABuyer’sAgentisrequired,bylaw,tohelpyoupurchaseahouseatapricethatisrightforyouandthenrepresentyourinterestsin
everystepofthehomebuyingprocess.ASeller’sAgentisrequired,bylaw,togetsomeonetobuythehouseforasmuchmoneyaspossibleasquicklyaspossibleandthenensurethesellers’interestsarerepresentedthroughouttheprocess.IfyouragenthasnotenteredintoaBuyersAgencyagreementwithyou,she/heisnotonlyallowed,butOBLIGATEDtoworkfortheSeller!
YourBuyer’sAgentisaprofessionalRealEstateAgent.AsRealEstateAgents,theyaretrainedandlicensedinrealestatelaw.Theyhavetrainingandexperienceinbuyingandsellingrealestategainedfromthecompanytheyworkwith.Theyknowthetricks-of-the-trade,marketingtechniquesandcommonsalesmethods.Inshort,Buyer’sAgentsareconsideredexpertsintheirfield.TheSellershaveexpertsworkingforthemandpaythemhandsomelytodoso.GoingtobuyahousewithouthavingaBuyer’sAgentonyoursideislikebeingincourtwithoutalawyerandrepresentingyourselfwhilethepersonsuingyouhasanentirelawfirmworkingforthem!Youareatadisadvantage.
Matt halici l 202.431.1991 – 10 – www.mhrealtyplus.com
Why use a Real Estate Agent?
Youcouldfixyourcaronyourown.Surelymanypeopleknowhowtochangetheoil.Buthowmanypeopleknowhowtofixatransmissiontimingbeltorreplaceacarburetor?Andevenifyoudidknowhowtodothosethings,doyouhavethetoolstodothejob?
Andmostimportantly,doyouhavethetime?Theanswertothesequestionsisusuallyno.Thevastmajorityofuswouldprefertopayanexperttodothejob,doesitright,andinamuchshorteramountoftimethanifwedidthejobourselves.
Intermsofbuyingorsellingahome,manypeopleattempttogoitalone.Thethoughtisthattheywillsavemoneybynotpayinganagent.
InregardstoBuyer’sAgents,wealreadydiscussedthathavingaBuyer’sAgentcoststhebuyernothing.IfthereisnoBuyer’sAgent,theSeller’sAgentandhis/hercompanygettokeeptheentirecommission.YourBuyer’sAgentisatrained,licensed,experiencedRealEstateAgentwhoknowsthetricks-of-the-trade,thecommonsalesmethods,andthenot-so-commonmarket-ingtechniquesusedbySeller’sAgentstosellhouses.Havingaprofessionallikethatwhois,bydefinition,legallyobligatedtorepresentyouandyourbestinterestsisinvaluable.Anditcostsyounothing.
Seller’showever,havetomakethesamedecisionasinthecarexampleabove.Mostpeoplewhotrytoselltheirhomeontheirownas“ForSalebyOwner”,a.k.a.FSBO(commonlypronounced“fiz-boe”),findthattheysimplydon’thavethetimenormoneytoadvertise,tostayhomeontheweekendstoholdopenhouses,orgethomeearlierintheeveningeverysinglenighttoanswerthephoneandshowthehousetoanyonewhowantstoseeitwhenevertheywanttoseeit.
ThevastmajorityofFSBO’s,about72%,accordingtotheNationalAssociationofRealtors,enduplistingtheirhousewithaSeller’sAgent.Theyfigurethatasoldhomeminusthecommissionismoremoneythannotsellingthehomeatall.Plus,thefactisthataqualifiedandaggressiveSeller’sAgentcanusuallysellthehouseformoremoney,evenminusthecommissionthey’repaid,thanaFSBOwouldsavesellingitontheirown!AggressiveSeller’sAgentswhoaretryingtogetsomeonetobuythathomeforasmuchmoneyaspossibleasquicklyaspossiblearedoingtheirjob.Theyareworkingintheseller’sbestinterests.Remember,thenameyouseeonthe“ForSale”sign,nexttoapictureofahouseonline,orunderanadinthepaperormagazineisalmostalwaystheSeller’sAgentandislegallyobligatedtoansweryourquestionsassuch.
Matt halici l 202.431.1991 – 11 – www.mhrealtyplus.com
What to look for in an Agent?
Anunderstandingofyourneeds.
Awillingnesstoworkwithyouuntilyourneedsarefulfilled.
Asenseofprofessionalism.
Someonewhoisdedicatedtotheirprofession.
Afamiliaritywiththeareainwhichyouhaveaninterest.
Afamiliaritywiththepricerangeinwhichyouhaveaninterest.
Professionaldesignations:forexample,GRI--GraduateoftheREALTORS®Institute,orCRS--
CertifiedResidentialSpecialist.
Strongreferencesfrompreviousbuyers.
Questions to ask a prospective Agent
HowlonghaveyoubeeninRealEstate?
Areyouafulltimeagent?
Areyoufamiliarwiththeareainwhichwewanttolook?
Howmanyhomesalesdidyouparticipateinlastyear?
Whatistheaveragesoldpriceofthehomesyousoldlastyear?
Doyounormallyworkwithsellersorbuyers?
Howmanybuyersareyoupresentlyworkingwith?Howmanysellers?
Wheredoyoufeelyourstrengthslie?
What3buyersthatyouhaveworkedwithcanyougivemeasreferences?
Matt halici l 202.431.1991 – 12 – www.mhrealtyplus.com
What you should know about
Home Buying?
Matt halici l 202.431.1991 – 13 – www.mhrealtyplus.com
What kind of home do you really want?
Shoppingforahomecanbeoneofthemostenjoyable,exhilarating,andhappyexperiencesinlife.Itcanbethemostdifficultoneattimes.IwillbeguidingandcoachingyouaregularbasiswheneverIfindahomethatfitsyourcriteria.Icanshowyouanyhomeon
themarketanytime,anywhere.
Iwillhaveongoingdiscussionswithyoutodetermineexactlythekindofhomeyouareseeking.Herearesomequestionstoponderasyoubegintodefinethekindofhomeyoureallywant:
1.Whatismoreimportanttoyou,thequalityandsizeofthehomeorthelocationandattributesoftheproperty?
2.Whatstyleortypeofhomeinterestsyoumore,contemporaryorhistoric,ranchorcolonial?
3.Howmanybedroomsandbathsdoyouabsolutelyneed?
4.Wouldyouconsiderbuyingahomethatisinneedofsomerenovationorexpansion?
5.Whatcanyoucomfortablyafford?
Takenotesonwhatyoulikemostaboutthehomesyousaw:
HOME:___________________________________________PRICE:________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
HOME:___________________________________________PRICE:________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
HOME:___________________________________________PRICE:________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Matt halici l 202.431.1991 – 14 – www.mhrealtyplus.com
10 biggest home-buying mistakes
Basedon25yearsofhome-buildingexperiencefor30,000people,Weeklyoffersthese10biggestmistakesinhomebuying:
Not doing your homework.Knowledgeispower.TremendousinformationisavailableontheInternet.Thereisnoexcuseforenteringthemarketunprepared.
Trying to make a shrewd investment.Peopleneedtobuybasedonwhatfitstheirfamily.Don’ttrytoguesswhatwillhappentothemarket.
Choosing a poor location.Evenwithinaneighborhood,locationmatters.Isitonthebusieststreet?Isthereashoppingcenteroutthebackwindow?
Overlooking an inferior floor plan for an attractive exterior. Itmayhavegorgeouscurbap-peal,butyoudon’tliveonthelawn.Nomatterhowattractivetheexterior,youneedalivablehome.
Overlooking how the house will function for your family. Howdoyoureallylive?Doyoure-allyneedaformaldiningroomandlivingroom?Wouldyoubehappierwithaneat-inkitchenandagreatroomandadentouseasahomeoffice?Thehouseonlyneedstofitonefamily--yours.
Not having the home properly inspected in a resale. Thisisnotthetimeforsurprises.Getaninspectionfromaqualified,respectedprofessional.
Not checking out the builder’s reputation on a new home.Talktothreeorfourpeoplewholiveinthebuilder’shomesandseewhattheyhavetosay.Ifonebuilderdidallthehousesinaneighborhood,talktotheresidentsandgettheirinput.(It’salsoagreatwaytoseewhatyourneighborswouldbelike.)
Not getting what you want because you’re impatient.Thisisabigdecision.Youneedtime.Impatientdecisionscanleadtomistakes.Waitingforabettermarketandinterestrates.Ifyoucanaffordahomeandyoudon’tmakethatpurchase,you’lllosethebenefitoftaxdeductions,buildinghomeequityandtheappreciationinvalue.
Matt halici l 202.431.1991 – 15 – www.mhrealtyplus.com
What is involved in making an offer?
Onceyouhavelookedatanumberofhousesandhavefoundthehousethatmeetsyourneedsanddreams,youwillprobablyfindyourselfgettingemotionallyinvolved.Youmayimaginemovingyourfurniturein,plantingflowersandhostingyourfirstbig
holidayparty.Buttrynottogetattachedprematurely.Therearenumberofstepsyoumusttakebeforeyouareholdingthekeysinyourhand,andyouneedtothinkclearlyandobjectivelyatthispointsothattheofferyoumakeisarealisticone.
WhatshouldIoffer?Thisisthequestion.Therearenumberoffactorsthatwillaffecttheof-feryoumake.Supplyanddemand,theconditionofthehome,howlongthehousehasbeenonthemarket,andyourpersonalcircumstanceswithregardtohowsoonyouneedtocloseonahomeallcomeintoplaywhenmakinganoffer.Inanactivemarket,youarelikelytoloseoutbymakingalowbid.Ifmultiplebidsareanticipated,itiswisetogowithyour“bestoffer”.YourAgentwillpresentyourofferinwriting.Toshowthatyourintentionsareserious,itiscustom-arytosubmittheofferwithadeposit.Ifyourofferisaccepted,yourdepositisplacedinatrustaccount.Ifnot,depositwillberetunedtoyou.Ifthesellercounteroffers,youmayagreetothatpriceandterms,ormakeyourowncounteroffer.Onceyouandtheselleragree,bothsidesini-tialthefinalpriceandtermsshownontheagreementofsale.
Thefinalcontractwillspecifytheitemsinthehomeincludedorexcludedinthesale,aswellasanyadditionalprovisionseithersidewantstohaveaspartofthecontract.Datesforcontingen-ciessuchasobtainingfinancing,arealsofilledinbeforethecontractissigned.
Aspartofyoursalescontract,youwillagreetoobtainfinancingwithinaspecifiedperiod.Ifyouareunabletosecurefinancing,thecontractbecomesnullandvoid.
Itisstandardforthebuyertopayforacomprehensivehomeinspection.Accompanyingthehomeinspectorisrecommendedforlearningallaboutthehouse,includingsuchbasicsasthelocationofthemainwatershut-offandelectricaldistributionboxes.
Mortgagelenderstypicallyrequiretermiteinspection.Theresponsibilityforanyrepairsbasedininspectionissubjecttonegotiationsbetweenbuyerandseller.
Matt halici l 202.431.1991 – 16 – www.mhrealtyplus.com
What you should know about
Mortgage?
Matt halici l 202.431.1991 – 17 – www.mhrealtyplus.com
What is a mortgage?
Amortgageisalong-termloanthataborrowerobtainsfromabank,thrift,independentmortgagebroker,onlinelenderoreventhepropertyseller.Thehouseandthelanditsitsonserveascollateralfortheloan.Theborrowersignsdocumentsatclosingtime
givingthelenderalienagainsttheproperty.Ifthatborrowerdoesn’tmakepaymentsasagreed,thelendercantakethehomethroughforeclosure.
PAY OUT OvER TimEBecausemortgagesaresuchlargeloans,consumerspaythemoffoverlongperiods–usually15to30years.Theirmonthlypaymentsgraduallywhittleawaytheprincipalbalance.
Amonthlymortgagepaymentissometimescalleda PiTi payment.That’sbecauseeachonecoversaportionofthefollowingfourcosts:
Principal–theloanbalanceinterest–interestowedonthatbalanceReal estate taxes–taxesassessedbydifferentgovernmentagenciestopayforschoolconstruction,firedepartmentservice,etc.Property insurance–insurancecoverageagainsttheft,fire,hurricanesandotherdisasters
Borrowerscanchoosetopaytheirrealestatetaxesandinsuranceinlumpsumswhentheycomedue,ratherthaninmonthlyinstallmentstotheirescrowaccounts.Dependingonthekindofmortgageaborrowerhas,themonthlypaymentmayalsoincludeaseparatelevyforprivatemortgageinsurance(PMI)orgovernment-backedmortgageinsurancepremiums.
Thebreakdownofeachpayment(theamountthatgoestowardprincipal,interest,etc.)changesovertimebecausemortgagesarebasedonarepaymentformulacalledamortization.That’safancytermmeaningthelenderspreadstheinterestyouoweonthemortgageoverhundredsofpaymentssothattheoverallloanisasaffordableaspossible.
Matt halici l 202.431.1991 – 18 – www.mhrealtyplus.com
Howdoesamortizationwork?Here’showtheprincipalandinterestchangeoverthelifeofaloan:
Here’s how the principal and interest change over the life of a loan (30-year, 6.0% fixed-rate mortgage of $500,000)
Payment Principal Payment Interest Principal New number balance amount paid applied balance
1 $500,000.00 $2,997.75 $2,500.00 $497.75 $499,501.25 60 $465,271.78 $2,997.75 $2,326.36 $671.39 $464,600.39 120 $418,428.62 $2,997.75 $2,092.14 $905.61 $417,523.02 240 $270,017.93 $2,997.75 $1,350.09 $1,647.66 $268,370.27 359 $5,950.84 $2,997.75 $44.52 $2,953.23 $2,982.84
Source:Bankrate.comonJanuary25,2008
Mortgageescrowaccountsexisttohelpborrowersaccumulatemoneyforpropertytaxesandhomeowners’policypremiumsalittleatatime.Escrowcanhelpavoidfinancialsurprisessuchasmissedpaymentstothegovernment,butfoul-upscanhappenandborrowersneedtokeepacloseeyeonwhatmoneyisgoingwhere.
Astaxesandinsurancepolicybillschange,sowillescrowpayments.Mostlendersrunananaly-sisprogrameachyeartoseewhethertheamountaborrowercontributedoverthecourseofthepast12monthswasenoughtocoverallthetaxandinsurancebillsdueduringthatperiod.Customersreceiveatranscriptoftheresultsshowingwhatwaspaidoutandwhatwascollected.
Matt halici l 202.431.1991 – 19 – www.mhrealtyplus.com
Which mortgage option is better for you: adjustable or fixed?
Thereareseveraldifferenttypesofmortgages.ThemostcommonaretheFixedRateMortgage(FRM)andtheAdjustableRateMortgage(ARM).ThemostcommonmortgagesoughtbyfirsttimehomebuyersisaFixedRate,30yearmortgage.Tohelp
youunderstandeachtypeofmortgage,we’vegivenabriefexplanationforcomparisonbelow.
FIxEd RATE - 30 YEARSThisisthemostcommonlyusedmortgageplan.Yourmonthlypaymentsarelowerthantheywouldbeonashorter(15yearFRM)termloan.Theinterestrateislockedinwhenyousecurethemortgageanddoesnotchangeoverthelifeoftheloan.
Advantages: Fixedmonthlypaymentsoverthelifeofthemortgage.Longerlife,lowerpayments.Fixedinterestrateoverthelifeofthemortgage.Canrefinanceifratesgodown
Disadvantages: Interestratehigherthan15yearFRMandVRM.Interestratedoesnotchangeifratesgodown.Totalinterestpaidoverthelifeoftheloanismuchhigherthanashortertermmortgage.
FIxEd RATE - 15 YEARSAlsobecomingverycommon,the15yearmortgageresultsinhighermonthlypayments,butalowerinterestrate.
Advantages:Fixedmonthlypaymentsoverthelifeofthemortgage.Fixedinterestrateoverthelifeofthemortgage.Totalinterestpaidoverthelifeofthemortgageismuchlowerthanthatofa30yearFRM.
Disadvantages:Shorterlife,higherpayments.Interestratedoesnotchangeifratesgodown.Smallertaxdeductionbecauselessinterestispaid.
Matt halici l 202.431.1991 – 20 – www.mhrealtyplus.com
AdJuSTABlE RATE MoRTgAgE (ARM)Anadjustableratemortgagehasafixedinterestrateatthetimethemortgageissecured.Atthestartoftheloan,thepaymentisalsofixed.Neithertheinterestrate,northepaymentarefixedforthelifeofthemortgage,however.Aftertheinitialfixedperiod,boththeinterestrateandthemonthlypaymentsareadjustedtoreflectthethencurrentmarketinterestrates.Thecalculationstodeterminetheadjustmentisatthediscretionofthelender,eachusingtheirownformulaandindex.
Advantages:Lowermonthlypaymentatthebeginningoftheloan.Ratesandpaymentsmaygodownifratesgodown.Aborrowermayqualifyforalargerloan.
Disadvantages:Higherrisk.Paymentsmayriseasratesrise.
Adjustable-ratemortgagescanbeverytemptingtohomebuyers,yettheycarryagreatdealofuncertainty.Fixed-ratemortgagesofferrateandpaymentsecurity,buttheycanbemoreexpen-sive.HerearesomeprosandconsofARMsandfixed-ratemortgages:
All of these things should factor into your decision between a fixed-rate mortgage and an adjustable one. But there are other important questions to answer when deciding which loan is better for you:
1. How long do you plan on staying in the home?Ifyou’reonlygoingtobelivinginthehouseafewyears,itwouldmakesensetotakethelower-rateARM,especiallyifyoucangetareasonablypriced3/1or5/1ARM.Yourpaymentandratewillbelowandyoucanbuildupmoresavingsforabiggerhomedowntheroad.Plus,you’llneverbeexposedtohugerateadjustmentsbecauseyou’llbemovingoutbeforetheadjustablerateperiodbegins.
2. How frequently does the ARm adjust, and when is the adjustment made?Aftertheinitialfixedperiod,mostARMsadjusteveryyearontheanniversaryofthemortgage.Thenewrateisactuallysetabout45daysbeforetheanniversary,basedontheindexatthattime.Butsomeadjustasfrequentlyaseverymonth.Ifthat’stoomuchvolatilityforyou,gowithafixed-ratemortgage.
Matt halici l 202.431.1991 – 21 – www.mhrealtyplus.com
3. What’s the interest rate environment like?Whenratesarerelativelyhigh,ARMsmakesensebecausetheirlowerinitialratesallowbor-rowerstostillreapthebenefitsofhomeownership.Thechancesarefairlygoodthatrateswillfalldowntheroadtoo,meaningborrowerswillhaveadecentchanceofgettinglowerpaymentseveniftheydon’trefinance.Whenratesarerelativelylow,however,fixed-ratemortgagesmakemoresense.Afterall,7percentisagreatratetoborrowmoneyatfor30years!
4. Could you still afford your monthly payment if interest rates rise significantly?Ona$100,000,1-yearadjustable-ratemortgagewith2/6caps,your5.75percentARMcouldendupat11.75percent.
Matt halici l 202.431.1991 – 22 – www.mhrealtyplus.com
Arranging the financing…
THE MoRTgAgE PRocESS Theprocessofobtainingamortgagecanbebrokendowninto5distinctsteps.Thissectionpro-videsaverybriefoverviewofthosesteps.
1. Deciding Which Loan Type is Right For You:Therearenearlyasmanyloantypesastherearetypesofbuyers.Wewillonlycovertheverybasictypeshere.
Fixed Rate: Interestratedoesnotchangeoverthelifeoftheloan.
Adjustable Rate: Interestratechangeswiththegeneralinterestrates.
Government Guaranteed: Theseusuallyprovideaslightlylowerinterestrateandareguaran-teedbyagovernmentagencysuchastheFHAandtheVA.Rememberwhenchoosingamortgagetype,totakeintoconsiderationthatwhilesomeloansmaycarryverylowinterestratesatthebeginning,butmaynotbethebestchoiceoverthetermoftheloan.Choosecarefullyandtalktoyourlender.
2. Apply For A Loan:Applyingforaloancaneitherbedonebeforeyouhavefoundyourhome,orafteryou’vesub-mittedapurchaseoffer.Pre-approvalgivesyoutheaddedbenefitofknowingexactlyhowmuchyoucanspendandcanhelpyouavoidthecommonpitfalloflookingathomesthatarebeyondyourmeans.Thereisalsotheaddedadvantageofincreasingtheseller’sconfidencethatyourloanwillinfactbeapprovedifyouhavepre-approval.Thismaymakethepresentownerofyourdreamhomesomewhatmorewillingtoacceptyourpurchaseofferandmayspeeduptheentireloanprocess.
3. Loan Processing:Uponcompletingandsubmittingyourpaperwork,severalthingshappenalmostimmediately.Anappraisalofthepropertytoensurethatthebuyingpriceiswithinrangeoftheproperty’svalue.Withinthreedays,youwillreceiveapacketofmortgagedocuments.Thispacketwillcontainitemsthatwillrequireyourcarefulattentionandunderstanding.Ifyouneedhelpwithanyofthesepapers,contactyourlender,yourrealestateagent,oryourattorney.It’simportanttofullyunderstandeverythingpertainingtoyourmortgage.Assoonasyouhaveappliedforthemortgage,youshouldfindalicensedsettlementagent,possiblyyourattorney,torepresentyouattheclosingofyourloan.
Matt halici l 202.431.1991 – 23 – www.mhrealtyplus.com
4. Loan Approval:Ifyouhaven’talreadybeenpre-approved,anunderwriterwillanalyzeyourinformation,lookatyourincomeandexpenses,yoursavings,yourcreditrating,andthepropertyitself.Thedecisionwillbemadetoeitherapproveordenyyourapplication,generallywithinjustafewdays.Iftheloanisapproved,aclosingorsettlementdatewillbeset.
5. Closing or Settlement:Thisisthemomentyou’vebeenwaitingfor.Ontheappointeddate,you,anyco-applicants,andyoursettlementagent,willsitdownwiththelendinginstitutionsrepresentatives.Loandocu-mentswillbeexplainedandyouwillreadandsignthem.Yoursettlementagentcanassistyoubyansweringanyquestionsyoumighthaveaboutthedocumentsyouaresigning.Theloanamountwillthenbesenttoanescrowaccountorsenttoaclosingagent.Thisvariesfromstatetostate.Atthispointyournewhomeawaitsyousostartpackingandplanning.
Matt halici l 202.431.1991 – 24 – www.mhrealtyplus.com
What is a credit score and what is it designed to do?
AcreditscorenumberisoftencalledaFICOscore,forFair,IsaacandCo.,theCaliforniaCom-panythatdevelopedthesystemuponwhichitisbased.
Thescoreissupposedtodistillalltheinformationinyourcreditreport,usingaformulatocal-culateasinglenumberthatindicatesyourcreditworthiness.
It’sdesignedtogivelendersafast,accuratepredictionoftheriskinvolvedingivingyoualoan.Lendershaveattestedtothescore’svalueinstreamliningtheunderwritingprocessandcreatingmoreopportunitiesforconsumerstogetmortgages.
Scoresrangefromthe300stoabout900,withthevastmajorityoffolksfallinginthe600sand700s.Thehigherthescore,thebetter.
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Items Needed for a loan Application
iNCOmEEmploymentinformationfortwofullyearsGrossmonthlyincomeW-2’s(ifavailable)Proofofpensions,retirement,disability,orSocialSecurityProofofincomefromrentals,investments,etcProofofchildsupportoralimonypaid/receivedYear-to-datepaystubIfself-employedprovide1040taxReturnsforfulltwoyears
CREDiTORSEachcreditor’sname,address,andtypeofaccountAccountnumbersMonthlypaymentsandapproximatebalancesAmountofchildcareexpenses
BANKiNGNameandaddressesofsavingsinstitutionsAccountnumbersofallaccountsTypesofaccountsandpresentbalances
OTHER DOCUmENTS NEEDEDListofassetsinstocks,bonds,landandetcLifeinsurancecashvalueCopyofsalescontractifapplicantissellingapropertySocialSecuritynumbersofallapplicantsVeteransCertificateofEligibility&DD14Cashorcheckforapplicationfee
FROm REAL ESTATE AGENTCopyofthesalescontractCopyoflistingprintoutforpropertytobepurchasedInstructionsforappraisertogetintotheproperty
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Ready to buy…
10 QuESTIoNS To ASk WHEN APPlYINg FoR A MoRTgAgE
Knowingwhattoaskyourlenderwhenyou’rereadytoapplyforamortgagewillsaveyoulotsofmoney,stressandheartache.Getanswersforeachofthesequestionsbeforesigningyourmortgageapplication.
1. What is the interest rate on this mortgage?Toknowexactlywhatyou’llbepayingininterestoverthelifeoftheloan,youneedtoknowtherate.Thisisthemostimportantfiguretoobtain.
2. How many discount and origination points will i have to pay to get this rate and loan?Lenderscanchargepointsthatloweryourinterestrateandpointsthatprovidenobenefitwhatsoevertoyou.Findouthowmanyyou’llbeexpectedtopayfortheloanandwhichkindofpointsthey’llbe.
3. What closing costs will be charged on this loan, and will you provide the “good faith esti-mate” of those costs up front?Mortgagescomewithfeesforvariousservicesthatlendersandotherpartiesinvolvedinthetransactionprovide.Youneedtofindoutwhatyou’llbechargedasearlyaspossible.Manyexpertssaythatyoushouldn’tusealenderorbrokerunlessthatpersonwillprovideagoodfaithestimateupfront.
4. When can i lock in the interest rate and what will it cost me to do so?Theinterestrateofthemortgageyou’reapplyingformaygoupordownbetweenthetimeyouapplyandthetimeyouclose.That’swhyyoumaywanttolockintherateforaspecifiedperiod,ratherthanlettheratefloatuntiltheclosing.Besuretoaskthelenderifthereisanyfeeforlockingintherateandwhetheryoucanalsolockinpoints.
5. is there a prepayment penalty on this loan?Theprepaymentquestionismostimportantforloanshopperswithless-than-perfectcreditbe-causepenaltiesaboundinthesubprimelendingworld.Butevenconventionalborrowersshouldaskaboutanyprepaymentpenaltiesthatmayapply.Insomecases,theycangetlowerratesbyacceptingpenaltiesontheirloans.
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Findoutthedurationofanypenaltyperiodandhowthefeewouldbecalculated.Somepenal-tiesare1percentoftheloanamount;othersareequaltosixmonthsworthofinterest.Someapplyonlywhenyourefinanceorreducetheprincipalbalanceoftheloanbymorethan20percent;othersalsowillkickinifyousellthehouse.
6. What is the minimum down payment required for this loan?Dependingontheamountofyourdownpaymentanditsrelationtothepriceofyourhome,youmightbechargeddifferentinterestratesorquoteddifferentloanterms.Loansmadeathighloan-to-valueratioscancostmorethanloanswithlargerdownpayments.Still,customerswithgoodcreditwhoarewillingandabletopayprivatemortgageinsurance(PMI)cangetconven-tionalloanswithdownpaymentsthataremuchsmallerthan20percent.
7. What are the qualifying guidelines for this particular loan?Thequalifyingguidelinescanrelatetoyourincome,employment,assets,liabilitiesandcredithistory.Somefirst-timehomebuyerprogramsandgovernment-sponsoredloanshaveeasierqualifyingguidelines.
8. What documents do i have to provide?Youwillneedtoprovideproofofincomeandassetstogetamortgageloan.Findoutwhatdocu-mentswillberequiredinyourparticularsituationbyaskingyourlender.
9. How long will it take to process my application?Thisvariesfromlendertolender.Itoftendependsonhowmuchbusinessyourparticularlenderisdoingandhowmuchbusinessthemarketisseeingasawhole.Whenborrowersareknockingdowndoorsallovertown,underwritingdepartmentsbackup,appraisalstakelongertoobtainandotherbottlenecksdevelop.Getarealisticestimate,andusethattofigureouthowlongaratelockyou’llneed.
10. What might delay the approval of my loan?Ifyouprovidethelenderwithcomplete,accurateinformation,everythingshouldgosmoothly.However,therecouldbeadelayifthelenderdiscoverscreditproblems,whichiswhyitiscriti-caltogetyourcreditinorder.
Matt halici l 202.431.1991 – 28 – www.mhrealtyplus.com
Your mortgage broker “to-do” list
• Getadescriptioninwritingoftheexactprogrambeingoffered.Becausemanypeoplewhogotobrokersaregettingspecializedmortgagesthatmaynotbeasstraightforwardas30-yearfixed-rateloans,it’sespeciallyimportanttoknowwhatyouwantandknowifthat’swhatyou’rebeingoffered.Thatway,youcancomparerates,feesandpointsonanapples-to-applesbasis.
• Makesureyougetadetailedgood-faithestimateandcheckthatagainstyourfinalbillbeforeclosing.Brokersaresometimespaidbyboththelenderswhounderwritethemortgagesandtheconsumerswhogetthem,andit’simportanttolookatthedocumentstomakesurethebrokerisn’tgettingpaidtoomuchordouble-chargingyou.
• Ratelocksfromabrokercanbeabigtrip-upifyou’renotcareful.Getproofintheformofasigneddocumentthatthelockhasbeenexecutedifthat’swhatyouwanttodo.Keepinmindthisusuallyhastotakeplaceduringbusinesshoursforthelocktobeeffectivethatday.Missedfaxesorothersnafuscandelaythetransactionandleaveyouwithahigherrateifyou’renotontopofthings.
• Thinkreferral,referral,andreferralwhenit’stimetofindabroker.It’sgoodtohaveabrokerwho’snice;it’sbettertogetratesandcoststhatarereasonable.
• Considercheckingtoseeifyourbrokerormortgagebrokeragehasfacedstateregulatorysanctionsinthepast.Moststatesmaintainsomekindoflistofpeopleandcompanieswhohavebeenfinedorhadtheirlicensesrevoked.
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Tax Benefits of Home ownership
Purchasingahomecanbringwithitincometaxbenefitsthatareworthyofconsiderationwhendecidingwhethertobuyahome.Yes,buyingahomeisaratherlargeexpense,butwhenyouthinkaboutthefactthatthemoneyyoupayouteachyearintaxesbringslittle
tangiblereturn,whilemoneyspentonyourhomebringsthepleasuresofownershipplusequitybuilt,youmightwanttocheckintothetaxbenefitsofbuying.Followingisalistandexplanationofthetypicaldeductions.
MoRTgAgE INTERESTPerhapsthelargestdeductionforanewhomeowneristheinterestpaidonthemortgageloan.Rememberthatinthefirstyearsofanymortgage,mostofthemoneypaideachmonth(orbi-weekly)appliestowardinterest.Interestisgenerallyfullydeductible.
EXAMPLE:You’vetakenoutamortgageof$500,000at6.0%onyournewhome.You’vemadepaymentstowardtheprincipalandinterestforthefullyear.Thosepaymentstotaledalmost$36,000.00.Ofthe$36,000.00,approximately$30,000.00wenttowardinterest,andalmost$6,000wenttowardtheprincipal.The$30,000.00istaxdeductible. (Source:Bankrate.com)
Toclaimthemortgageinterestdeduction,youmustfilloutaSchedulea,“ItemizedDeductions”.Youshouldreceiveaform1098fromyourlenderinJanuaryforthetaxyearprior.Theform1098containsinformationneededtotaketheinterestdeduction.
PoINTS PAIdPointspaidatclosingonyournewhomearedeductibleiftheyareconsideredpre-paidinterest.Therearecertainrestrictionsinvolvedinthedeductionofpoints.Allofthefollowingrequire-mentsmustbemet:Themortgageloanmustbesecuredbyyourmainhome.Payingpointsmustbethenormforyourarea.Thepointspaidmustnotbemorethanwhatisconsiderednormalinthearea.Youmustusethecashmethodofaccounting.Themortgageloanmusthavebeenusedtobuy,improveorbuildyourhome.Thepointsmustbecalculatedasapercentageoftheloanprincipal.Thepointsmustbeclearlysetapartonyoursettlementstatement.Youmusthaveusedyourowncash(downpayment)towardyourhomepurchaseinanamountatleastequaltothepointsyouwerecharged.
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PRoPERTY TAxESYourpropertytaxesarefullydeductibleonyourincometaxreturn.Moneyheldinescrowtowardthepaymentofyourtaxesisnotdeductible,buttheactualpaymentsfromtheescrowaccounttowardthepropertytaxesare.
Settlement
Settlementiswherethemoneyanddeedchangehands:youpaythesellerandthesellergivesyouthekeysanddeedsthepropertytoyou.
Before Settlement…Whenyoursettlementattorneyreceivesyourcontractfromyouragent,theywill:• Ordertitleabstractandsurvey• Reviewtitleabstractandsurveytodeterminemarketabilityandinsurability• Contactyourlendertoschedulesettlementandprepareanyrequireddocuments• ContacttheSeller’slendertoobtainpayoffinformationontheexistingloan• Preparetitleinsurancecommitmentpursuanttoyourlendersrequirements• Contactthelocaltaxingauthoritytoverifytheamountofpropertytaxes,determinethe
prorationsbetweenBuyerandSeller• ContacttheHomeowner’sAssociationtoverifytheamountofduesanddeterminethepro-
rationsbetweenBuyerandSeller• Obtainthelender’sloandocumentsandproceedscheck• Preparesthesettlementsheetandanyotherrequireddocuments.
Who Attends Settlement?Representativesfromthesettlementcompany,therealestateagentsinvolvedinthetransactionyouandthesellerswillbetheretoexecutethedocuments.Itissettlementattorney’sjobtocol-lectthefunds,havethepaperssignedandfiledatthecourthouse,disbursethefunds,issuethetitlepolicyandresolvewhateverissuesariseatoraftersettlement.
How Long Will Settlement Take?Ifallgoeswell,settlementwillbecompletedinabout45minutes.
What do you do at Settlement?First,makesurethatyouhavebroughtcertifiedfundsorabankcheckforthebalanceofyourdownpaymentandclosingcosts.Youalsoarerequiredtobringacopyofahomeowner’sinsur-ancepolicy(forfire,theftandothercontingencies)andapaidreceiptshowingoneyear’scover-age.Insomecases,thelenderwillrequiredeliveryofthisandthetermiteinspectiondocumen-
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tationpriortothesettlement.Althoughthelenderwillhaveprovidedyou,thepurchaser,withaGoodFaithEstimateofClosingaspartoftheloanapplicationprocess,yoursettlementattorneywillalsocalculateforyouapproximatelywhatyouowe.Thesettlementattorneywillthengothroughallthesettlementdocumentswithyou,explainingtheirpurpose.Youwillsignallthedocuments,giveusourcheck,andreceivethekeystoyournewhome.
The following checklist includes some of the items in the closing costs:
Loanoriginationfee
Loandiscountsorpoints
Appraisalfee
Creditreportfee
Underwritinganddocumentpreparationfees
Mortgageinsurancefee
Assumptionfee
Settlementorclosingfee
Abstractortitlefee
Titleexamination
Titleinsurancebinder
Surveyfee
Termiteinspectionfee
Taxservicefee
Transfertax
Recordationtax
Escrowfortaxesandinsurance
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What to Expect after SettlementInordertocompletetheprocessofsettlement,thesettlementattorneywill:• Recordthedeed,deedoftrust,orassumptiondocumentsinthelandrecordsatthecounty
courthouse• Auditthedisbursementsheet• Disburseallproceeds• Issuethetitleinsurancepolicy• Sendthelenderthesignedpacketofallsigneddocuments• PayofftheSeller’slender(s),ifany,andobtainandrecordareleaseoftheSeller’sdeed(s)of
trust• Disburseanyfundsrequiredtobeescrowedatclosing.• Withintenweeksyouwillreceiveyouroriginalrecordeddeedandowner’stitleinsurance
policyfromthesettlementcompany.Keepyoursettlementstatementinasafeplace.
What is Title?
Whenapropertyissoldorrefinanced,thelenderand/orbuyerneedapreliminarytitlereporttoseeexactlywhatisagainstthesubjectproperty.Itemsonapreliminarytitlereportwillshow:
1.Taxesonthesubjectproperty,amountowed,amountpaidandassessorsparcelnumber2.Easementsofrecord,ifany3.Restrictionsonsubjectproperty,ifany4.Liensand/orjudgementsofrecord,ifany5.Exactvestingofownerofrecord.
Whenthesaleorloanofthesubjectpropertyisfinal,andthetitlecompanyhasrecordedthenecessarydocumentsinordertocloseescrow,theythenissueapolicyoftitleinsurancetothenewlenderand/orbuyershowingcleartitletothesubjectproperty.
Matt halici l 202.431.1991 – 33 – www.mhrealtyplus.com
What is Title Insurance?
“Title”istheownershipinrealproperty.Itmeansthatyouhavethelegalrighttopossess,oc-cupy,peacefullyenjoy,andsellyourpropertywithoutinterferencefromotherssubjectonlytorestrictionsimposedbygovernmentalauthoritiesorpreviousowners.Inmostcases,titleistransferredbydeedwhichisrecordedinthelandrecordsofthecountyinwhichthepropertyislocated.Generally,whenpropertyissold,anattorneyfortheBuyerortitleexaminergoestotherecordroomandsearchesthelandrecordsforanytitledefects.Atitledefectisanythingintheentirehistoryofownershipofrealestatewhichmayencumbertheowner’srightsunderthetitle.Atitledefectmaycausetheownerofrealpropertytoloseallorpartofhislandtoasupe-riorownershipinterestorclaimofanother.ThisisthetypeoflossagainstwhichTitleinsuranceprotects.Inshort,ifyouownatitleinsurancepolicy,thetitleinsurancecompanywilldefendyouwithoutcost,againstanattackorclaimuponyourownershipinterestinyourpropertyasinsuredandyouwillbeprotectedagainstfinanciallosscausedbyatitledefect.Thetitleinsur-ancepremiumispaidonetimeatclosingandcoverageextendstoyouforyourprotectionaslongasyouownthepropertyandeventhereafterinsomecases.
important Reasons Why You Should Have Title insurance:• Forgery• Fraudinconnectionwithexecutionofdocuments• Undueinfluenceonagrantororexecuter• Falsepersonationbythosepurportingtobeownersoftheproperty• Incorrectrepresentationofmaritalstatusofgrantors• Undisclosedormissingheirs• Willsnotproperlyprobated• Mistakeninterpretationofgrantors• Conveyancebyaminor• Birthofheirssubsequenttodateofwill• Inadequatesurveys• Incorrectlegaldescriptions• Non-deliveryofdeed• Unsatisfiedclaimsnotshownonrecord• Deedsexecutedunderexpiredorfalsepowersofattorney• Confusionduetosimilaroridenticalnames• Dowerorcourtesyrightsofex-spousesofformerowners• Clericalerrorsinrecordinglegaldocuments• Deliveryofdeedsafterdeathofgrantor
Matt halici l 202.431.1991 – 34 – www.mhrealtyplus.com
What is a Home Inspection?
A home inspection is a thorough visual examination of the home and property.Theprocessusuallytakestwotothreehours,duringwhichtimethehouseisexaminedfromthegroundup.Theinspectionincludesobservationand,whenappropriate,operationoftheplumb-ing,heating,airconditioning,electrical,andappliancesystems,aswellasstructuralcompo-nents:roof,foundation,basement,exteriorandinteriorwalls,chimney,doors,andwindows.
When conducted by a professional, a home inspection covers about 1,000 checkpoints in ap-proximately 400 items around the home. Findingsshouldbeprovidedtoyouintheformofacomprehensivereport.Itisvitalthatsuchareportincludeanobjectiveevaluationoftheconditionthehome,clearlyrelatingexistingdefectsandindicatingpotentialproblems.
WHAT A HoME INSPEcTIoN IS NoT...
A home inspection is not an appraisal and vice versa. Anappraisalistheformalprocessofestimatingaproperty’svalueasitrelatestoamortgageloanormortgageinsurance.Itdoesnotitemizedefectsorreflectpotentialproblemsinthehome.EvenanFHAappraisalcurrentlydoesnotattesttotheconditionofahome.Infact,theU.S.DepartmentofHousingandUrbanDevelopmentencourageshomebuyerstouseprivateinspectionservices,andauthorizesthatclosingcostsmayincludeinspectionfeesofupto$200.
A home inspection report is not a warranty. Becauseahomeinspectionisavisualexaminationofthehomeandoperatingsystems,itisnottechnicallyexhaustive.Thereisnoassurance,expressedorimplied,thatequipmentwillnotbreakdownatsomefuturedate.However,suchprotectionisavailablewhenahomeinspectioniscomplementedbyahomewarranty.Whentheservicesareusedinconjunctionwithonean-other,ahomewarrantycoverstheitemsthatwereserviceableatthetimeoftheinspectionandsubsequentlyfailduetonormalwearandtear(consultyourrealestateagentabouttheavailabil-ityofahomewarranty).
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A home inspection does not detect every conceivable flaw. Itisaninspectionofthoseareasanditemsthatcanbeseen.Homeinspectorscannotseethroughfoundations,floorsorwalls,andcannotinspectareasoritemsthatareinaccessible.
Buyingahomeislargelyanemotionalexperience.Sometimesit’sloveatfirstsight.Butoftenloveisblind,andmanybuyerslearntoolateofsuchunseenconditionsascrackedfoundations,deterioratedplumbing,wornoutheatingsystems,ordangerouswiring.
A professional home inspection is your best defense against pitfalls and their consequences, such as: Costlyrepairs.Inconvenience.Animosity.Disappointment
Youmayhavesomeknowledgeofconstruction,orafriendorrelativemayhaveabackgroundinplumbingorcarpentry,butthereisnosubstitutefortheobjectiveeyeofaskilledhomein-spectorwhoknowswheretolook,whattolookfor,andhowtoevaluatehundredsofkeypointsthroughouttheproperty.Unlikethehomebuyerwhoseobservationsarelikelytobepartial,thehomeinspectorperformshis/herrolewithanunbiasedattitude.Keepinmind,ahomepurchaseisoneofthelargestlong-terminvestmentsofyourlife.Asaresult,youneedtoknowasmuchaspossibleaboutyourprospectivepurchase.Byidentifyingexistingorpotentialareasofconcern,theinspectionreportwillhelpsecureyourinvestment,avoidpost-closingsurprises,andprovideyouwithpeaceofmind.Aninsightfulreportisfunda-mentaltomakingtherightbuyingdecision.
WHEN To ARRANgE A HoME INSPEcTIoN Assoonasyoubecomeseriousaboutthepurchaseofahome,youshouldconsideraprofession-alinspection.Whenyoucometoadecisiontopurchaseaparticularhouse,haveaprotectiveclauseintothepurchaseagreementwhichprovidesyouwiththerighttohaveahomeinspectionconductacompletegeneralhomeinspection.
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PlAN To BE THERE
Itisimportantthatyou,asthehomebuyer,bepresentduringthetwotothreehourinspection.Byaccompanyingtheinspectoryouwillgainadditionalinsight.• Seefirsthandtheconditionofeachkeycomponentthroughoutthehouseandpropertyso
youwillhaveabetterunderstandingofyourhouseandoftheinspectionreport.• Alleviateconcernsaboutfindingswhich,onpaper,mayseemdistressingbutinfactmaybe
superficial.Forexample,theinspectormightexplainthatanalarmingnoisecomingfromanappliancecanbequietedbysomelubricant;thatanunsightlycolumnneedsonlyacoatofpaint,orthattheproblemthatcausedawaterspothaspreviouslybeencorrected.
• Learnabouttheoperationofyournewhome;howtheheatingsystemworks,howtocontrolpilotlights,howtoturnonvariousappliancesandcomponents,whereshutoffsaretosavetimeandavoidfrustration.Theinspectorcanpointoutmaintenanceneedsandproceduresandexplainhowandwhentocheckitemsneedingperiodicmonitoring.
• Haveallofyourquestionsandconcernsaddressedimmediatelyastheyarise.
Priortotheinspection,preparealistofquestionsorconcernsabouttheproperty.Relatethesetotheinspectioncompanyinadvancetoensurethatsuchmatterswillbeproperlyaddressedandthatanyspecialarrangementscanbemadeifnecessary.Bringyourlisttotheinspection.
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BEYoNd HoME INSPEcTIoNExtensiveasitis,ahomeinspectionisnotallinclusive.Dependingonyourlevelofconcernandthelocationofthehouse,youmaywanttoconsiderthefollowingoptionalserviceswhichgenerallycanbeperformedinconjunctionwiththehomeinspection:Radon Testing AccordingtotheU.S.EnvironmentalProtectionAgency(EPA),radongasisthesecondleadingcauseoflungcancerintheUnitedStates.Theradioactivegas,commonlyfoundinthesoil,hasbecomeamajorhealthconcernforhomebuyers.MakesuretheinspectorisfamiliarwithEPAprotocolsandusesonlyapprovedequipment.Water Analysis Some84%ofAmericanssurveyedinaHarrispollbelievetheirwatersupplyathomeispol-lutedand,accordingtotheEPA,nearly70%areconcernedspecificallyaboutthequalityoftheirdrinkingwater.Somehomeinspectioncompaniesnowprovidewaterqualityanalysis,butitisimportantthattheyutilizeonlylaboratoriescertifiedbytheEPAortheHealthDepartment.Itisadvisabletotestforlead,bacteria(suchascryptosporidium),andinsomeruralareas,nitratesandcoliforms.Carbon monoxide Testing This“silentkiller”maybeanissueinhomesusingfossilfuels(oilandnaturalgas).Carbonmonoxidecanbedetectedonlywithananalyzer.Aclearandworkingventilationsystemmini-mizestheeffectsofthegas,sohaveyourinspectorcheckit.Foradditionalprotection,installacarbonmonoxidedetector.Energy Assessment Onevaluableandmoneysavingserviceofferedbyleadinghomeinspectioncompaniesisanenergyassessment.Itdeterminesmajorareasofenergyuseandwastewhilesuggestingstepsthatcouldsaveyouhundredsofdollarsannuallyinutilitybills.Italsohelpsprotecttheenviron-ment.Termite inspectionAlthoughapestinspectionisnoguaranteethattermiteswillnotinfestyourhomeinthefuture,willprovidea“wood-destroyingpestanddryrot”reportonanyexistingthreat.Bewareofter-miteinspectorswhoarealsoexterminatorsand/orproviderepairs.Lead Paint Testing UnderTitleXlegislationhomebuyersareentitledtotestforthepresenceofhighlevelsofleadpaintinhomesbuiltpriorto1978.Leadpaintcancausehealthanddevelopmentalproblemsforsmallchildrenifthepaintisdeterioratedorifitispresentindust.Askyourhomeinspectorwhatoptionstheymayofferfortestingforleadinpaint.
Matt halici l 202.431.1991 – 38 – www.mhrealtyplus.com
What exactly is the appraisal and how is it done?
Youneedtoviewtheappraisalthroughtheeyesofthebank.Simplyput,thebankwantstoknowhowmuchthehomewillsellforinafairandopenmarketinatimelymanner.Why?Ifyoudonotmakeyourmortgagepayments,thebankmayforecloseonyou
andtakeownershipofthehouse.Banksarenotinthebusinessofowninghouses,sotheywillturnaroundandsellthehouseforfairmarketvalue.Thebankwantstomakesurethemoneyitwouldgetfromthesaleofthehouseisatleasttheamountofmoneytheylendtoyou-therebyprotectingthemfromlosinganymoneyatall.
Differentappraisalcompaniescanusedifferentmethodstoappraiseahome.Usually,anap-praiserwilluseacombinationofmethods.ThemostcommonmethodistodoaCMA-Com-parableMarketAnalysis.ACMAliststhegeneralattributesofthehouseinquestionsuchasnumberofbedrooms,squarefootage,etc.,andcomparesthehousetootherhouseswithsimilarattributesinthesameneighborhoodorgeneralarea.Theappraiserthenlooksathowmuchthosesimilarhouseshavesoldforrecently.Basedonthataverage,anestimatecanbemadeastohowmuchyourhousewillsellforinafairandopenmarketinatimelymanner.
Theothermostcommonmethodfordeterminingahome’svalueisanitemizationofinventorywithinthehome.Theappraiserwillgothroughaveryextensivechecklistofattributesinclud-ingfireplace,tilefloors,appliances,hottubs,etc.Eachitemhasapre-determinedvaluedeter-minedbythelicensedappraiser.Addalltheitemsup,andyouhavethevalueofthehome.
Alicensedappraiserwillalsotakeintoaccountthegeneralrealestatemarketinagivenarea.Ifthemarketisslow,thevalueofthehomemaybelower-andviceversa.
Matt halici l 202.431.1991 – 39 – www.mhrealtyplus.com
What can I expect at the final walk-through & closing?
Thefinal“walk-through”istypicallyscheduledwithin24hoursoftheclose/settlement.Itgivesyouonelastopportunitytomakesurethatthehomeyouarepurchasingisintheconditionthatyouandthesellermutuallyagreedtointhesalescontract.
Shouldaproblemariseduringthewalk-through,youragentwillcontacttheseller’srepresen-tativetolethimorherknowwhatthedeficiencyis.Iftheselleracceptsresponsibility,moneyfortherepairscanbeallocatedtoyouattheclosing/settlement.Ifthesellerdoesnotagreetorepairs,youragentwillactasthego-betweentohelpyouandthesellerreachasatisfactorycom-promisesothattheclosingisnotdelayed.
Attheclosing/settlement,themortgageandmanyotherdocumentsaresigned,adjustmentsaremadeforsuchitemsaspropertytaxes,thesellerispaid,andyouarebestowedwiththetitleordeedandthekeystoyournewhome.Bepreparedtosignyournameoverandoveragain.
Fromtheinitialmeetingtodeterminethekindofhomeyouareseekingtothefinalclosing,youragentwillhelpyoutostepconfidentlyforwardbyconductingthoroughsearches,network-ing,employingoldfashionedtenacity,andbycoachingandguidingyouthroughtheentirejourney.
Matt halici l 202.431.1991 – 40 – www.mhrealtyplus.com
Additional Information You Should
Know
Matt halici l 202.431.1991 – 41 – www.mhrealtyplus.com
glossary of Real Estate Terms
Annual Percentage Rate (APR):theactualfinancechargeforaloan,includingpointsandloanfeesinadditiontothestatedinterestrate.
Appraisal: anexpertjudgementofavalueorworthofaproperty.
Associate Broker: sameasbroker,exceptthatheisnotdesignatedasthebrokerofrecordandmustbeaffiliatedwithandunderthesupervisionofabroker.
Assumption of mortgage:theBuyerassumesliabilityforanexistingmortgagenoteheldbytheSeller.ThisissubjecttoapprovalbythelenderwhomustbewillingtoapprovetheBuyerandreleasetheSeller.
Assessed value:thevalueplacedonapropertybyamunicipalityforthepurposeoflevyingtaxes.Itmaydifferwidelyfromtheappraisedormarketvalue.
Balloon Payment:alargeprincipalpaymentdueallatonceattheendofthesomeloanterms.
Broker:arealestateprofessionalwhohasahigherleveloftrainingthananagent.Abrokerislicensedbyajurisdictiontodorealestatebusiness,anddesignatedasthebrokerofrecordforafirm.Abrokermayactasanytypeofrealestateagent.
Certificate of Title:thedocument,TitletolandsetsouttheCrowndescriptionoftheland,theregisteredproprietors,registeredmortgages,charges,easementsandencumbrances.
Commission: thefeepayabletoaRealEstateAgentbythevendorforsellingthehouse.Usuallyapercentageofthesaleprice.
Condominium (Condo): typeofrealestateownershipwheretheownerhastitletoaspecificunitandsharedinterestincommonareas.
Contingency: aconditioninacontractthatmustbemetforthecontracttobebinding.
Contract of Sale:anagreementinwritingsettingoutthetermsandconditionsofthesaleoftheproperty.
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Conveyancing:thelegalprocesstransferringownershipandtitletoaproperty.
Deed:legaldocumentthatformallyconveysownershipofpropertyfromSellertoBuyer.
Deposit: anamountofmoneyplacedintrustasevidenceofcommitmenttobuy.Ifthepurchaseiscompleted,itwillbeappliedtowardsthepurchaseprice.
Down payment: percentageofathepurchasepricethattheBuyermustpayincashandmaynotborrowfromthelender.
Earnest money Deposit: alargedepositpaidwhenthesalescontractissignedbeforeclosing.
Equity:thevalueorpropertyactuallyownedthehomeowner,purchasepriceplusappreciation,plusimprovements,lessmortgageandliens.
Escrow: adocumentisinescrowifithasbeendeliveredtoandisheldbyathirdparty(thees-crowagent)andonlytotakeeffectwhencertainconditionshavebeenmet,suchasthedeliveryofasimilardocumentbyanotherpartytothecontract.
Finance Charges:thetotalcost,includingallfees,pointsandinterestpaymentsaborrowerpaystoobtaincredit.
Fixed Rate mortgage:interestratesonthistypeofmortgageremainsthesameoverthelifeoftheloan.
Fixtures and Fittings:itemswhichareaffixedtothepropertyandwhichgenerallycan’tberemovedwithoutcausingdamage.Theycan’tberemovedwhenapropertyissoldunlessthecontractpermitsitandthesellermustgenerallymakegoodanydamagecausedtothepremisesbytheremoval.
Hazard insurance:protectionagainstapossibleeventwhichmayormaynotoccur,suchasafirewhichdestroysaproperty.
interest: achargeformoneyadvancedorlentbyabankorotherlender.
Lien:asecurityclaimonapropertyuntiladebtissatisfied.
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mortgage:securityclaimbyalenderagainstapropertyuntilthedebtispaid.
mortgage Term: thelengthofaloaninyearsormonths.
mortgagee:aformofsecurityforonewholendsthemoney.
mortgagor:oneborrowingthemoney.
multiple Listing Service (mLS) or metropolitan Regional information Service (mRiS):asystemthatprovidestoitsmembersdetailedinformationaboutpropertiesforsale.
PiTi:principal,interest,taxes,andinsurance,formingthebasisformonthlymortgagepay-ments.
Point: onepercentoftheloanprincipal.Chargedinadditiontointerestandfees.
Prepayment Penalty: afeepaidbyaborrowerwhopaysofftheloanbeforeitsduedate.
Principal: Theamountthatyouborrowfromthelender.Itisthe‘capital’amountuponwhichinterestispayable.
REALTOR: designationgivetorealestateagentwhoisamemberofarealestateassociationaf-filiatedwiththeNationalAssociationofREALTORS.
RESPA statement:RealEstateSettlementProceduresAct,aprecisebreakdownofclosingcostsforbothBuyersandSellers(AlsoknownasHUD-1SettlementStatement).
Settlement:Meetingsofrepresentativesofallthepartiestothetransactiontocompletethesale,moniesaretenderedinexchangeforrelevantdocumentskeysetcandthepurchasercanthenlegallytakepossession.
Title: documentthatindicatesownershipofaspecificproperty.
Title insurance:protectsagainstlossresultingfromlegaldefectsinthetitle.
Title Search: asearchcarriedoutfromtherecordsoftheLandTitlesOfficetodetermineregis-tereddetailssuchasownership,mortgages,caveats,easementsetc.
Matt halici l 202.431.1991 – 44 – www.mhrealtyplus.com
MehMet “Matt” haliciAssociate Brokertop 1% Nationwidelicensed in Va, MD & Dccell: 202.431.1991Office: 301.656.2500Fax: 301.907.8572www.mhalici.come-mail: [email protected]