Home Buyer's Handbook

The Home Buyer’s Handbook The Complete Guide to North Carolina’s Home-Buying Process (Resale or New Construction)

Offered By:

Warren Moore Real Estate 1

This Book has been designed and prepared for you by:

WARREN MOORE, CRS, GRI REALTOR®/Broker/Owner

License #218430 Table of Contents The Advantages of Working with the Eastern NC Home Team....................................................2

The Advantages of Working with the Eastern NC Home Team This book is designed to assist you with the purchase of your new home.

Our team understands the many questions and concerns of home buyers and how this information will be helpful throughout the transaction. It is our goal to provide you with the most professional and informative service available and we are always just a phone call (toll-free, if needed/800-693-1120) away when you have a question.

Real estate can be a complicated business. There are a million details that must be handled in a timely basis in order to provide the quality of service that you deserve. We will search the world over for the home of your dreams. We will insure that all of our customers and clients receive memorable real estate service … not just satisfactory, but MEMORABLE! Buying a home is certainly one of the most rewarding experiences most of us will ever have; it’s also one of the most challenging. If you’re buying for the first time, the process may seem overwhelming, and even if you’ve been through it several times, every move is different, and presents new challenges. So, one clear advantage of enlisting Warren’s help is that you don’t have to go it alone.

Warren holds both the CRS and GRI designations, two of the most coveted symbols of knowledge and professionalism in the real estate industry. He has the 2

training, the knowledge, and the experience to help you through each step of the process, making finding, buying, and moving into your new home as smooth, quick, and enjoyable as possible.

Another advantage is that Warren represents a valuable source of information about market trends, communities, neighborhoods, and especially homes for sale throughout the area. He offers you access to complete, regularly updated information about every home listed by area agents through the Multiple Listing Service (MLS). Through his highly sophisticated computer search system, he can constantly alert you to properties that meet your requirements as they hit the market and before many other real estate agents and buyers even know about them.

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My Pledge to Buyers To provide unsurpassed service to help you buy your home at a fair market price, in the shortest time, with the least inconvenience to you, I will: ♦ Explain real estate agency relationships ♦ Maintain communication during the term of the agreement ♦ Analyze buyer’s property needs and desires ♦ Orient buyer to current market conditions ♦ Provide helpful community data ♦ Explain local real estate practices and procedures ♦ Provide information on lenders and financing alternatives ♦ Search the Multiple Listing Service (MLS) for suitable properties ♦ Coordinate appointments and show all properties of interest, regardless of whether or not the properties are our listings ♦ Provide relevant market data to determine fair market values of homes ♦ Disclose all known material defects of the property ♦ Discuss known, relevant information about the seller ♦ Explain the process of “offer presentation” ♦ Deliver any state-required Property Disclosure Form ♦ Carefully explain and prepare Offer to Purchase forms ♦ Make arrangements to present all offers to seller in a timely manner ♦ Strive to obtain the best possible price and terms for buyer ♦ Explain post-purchase activities and responsibilities ♦ Follow up on all post-purchase activities ♦ Keep confidential any information designated by buyer in writing as confidential

We feel so strongly about our “Pledge to Our Clients” that we go a step further and put it in writing!

Our Guarantee To You:

Whether you are buying or selling property, if you are not satisfied with our services, we will be happy to release you from any agency relationship with 24 hours written notice. _____________________________________ Clifton Warren Moore, Jr. CRS, GRI 4

Why Should I Buy instead of Renting?

Pride in Owning:

Most people buy homes to have control over where they live.

Although investment features are important, the psychological reasons for buying – the satisfaction of owning and freedom from paying rent – are at least as important.

A survey done by the National Association of REALTORS® OF 6,000 homeowners and 2,000 renters – perhaps the largest survey ever of attitudes toward home ownership – showed that 76% of owners and 66% of renters considered pride of ownership an important reason for buying.

Dislike of Paying Rent:

Almost equal portions of owners and renters – close to 7 in 10 – said a dislike of paying rent was an important reason to buy.

Renting offers a lifestyle that’s nearly maintenance free. That may appeal to you, but consider that renting offers you no equity, no tax benefit, and no protection against regular rent increases.

Writing a rent check is just like watching your hard earned money sail away!

Settling Down:

More than 6 in 10 renters said “settling down” was an important reason to buy.

Good Investment:

76% of owners and 69% of renters said the investment aspect of ownership was important.

Tax Advantages:

Property taxes and qualified home interests are deductible on Schedule A, for itemized deduction.

Long-term Appreciation:

People consider home ownership a good investment because they view it as a long-term venture. Historically, home prices have risen at relatively steady rates. Existing home prices rose an average of 4% per year between 1980 and 1992.

Leverage Investment:

People borrow a great deal to buy a home, yet they receive the full benefits of price appreciation. In the long run, investments in homes far outpace inflation.

Source of Savings:

Home ownership always has and continues to comprise the single largest source of savings for American households. Homeowners build equity and can borrow against it.

Sacrifices Are Worth It:

Almost 7 in 10 renters in the National Association of REALTORS® home ownership survey said they planned to buy a home in the future. More than three-quarters of these people said

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they were willing to make sacrifices in order to do so.

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The Real Cost of Renting Based on a 6% Rental Increase Each Year, If You Now Pay …

$400

$450

$500

$600

$700

$800

$900

per month per month per month per month per month per month per month for rent for rent for rent for rent for rent for rent for rent today today today today today today today You’ll Pay

You’ll Pay

You’ll Pay

You’ll Pay

You’ll Pay

You’ll Pay

You’ll Pay

This year

$4,800

$5,400

$6,000

$7,200

$8,400

$9,600

$10,800

Next year

$5,088

$5,724

$6,360

$7,632

$8,904

$10,176

$11,448

3rd year

$5,393

$6,067

$6,742

$8,088

$9,438

$10,787

$12,135

4th year

$5,717

$6,431

$7,147

$8,575

$10,005

$11,434

$12,863

5th year

$6,060

$6,817

$7,576

$9,054

$10,605

$12,120

$13,635

6th year

$6,424

$7,226

$8,031

$9,635

$11,241

$12,847

$14,453

7th year

$6,809

$7,660

$8,513

$10,210

$11,916

$13,618

$15,320

8th year

$7,218

$8,120

$9,023

$10,824

$12,630

$14,435

$16,239

9th year

$7,651

$9,023

$9,564

$11,472

$13,388

$15,301

$17,214

10th year

$8,110

$9,564

$10,138

$12,164

$14,192

$16,219

$18,246

Total

$63,272

$71,175

$79,094

$94,856

$110,719

$126,537

$142,353

You will pay…….. and pay…….. and pay……… and pay!

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Thinking About Buying a New Home?

Should you use a REALTOR® when buying a new home?

By Valerie Wilkinson Think of planning a trip to Europe without the help of a travel agent … or how about buying insurance without an insurance agent? Then imaging being involved in a major league business dispute and you’re representing yourself in front of the judge and jury. If you depend on people in the service industry for travel needs, filing a claim for hail damage to your roof, or handling legal matters, then why would you want to represent yourself in the most expensive and probably most important purchase of your lifetime … your new home?

It is common misconception that buying an new home directly from the builder, without the assistance of a REALTOR®, will save you money. Not so! The price of the new home is the same whether you have a REALTOR® or not. Since this is the case, common sense would tell you to utilize a professional to help you with contract negotiations, researching loans or helping you to decide which lot is best suited for you!

One broker associate has been on both sides of the fence. For ten years she represented builders as on onsite salesperson. During the past three years she has represented both buyers and sellers, in resale and the purchase of new homes. Here’s what she found: New home sales is a one-price policy … buyers receive all of the services and don’t pay any extra, but hey also don’t receive any discounts. “I always felt concern for buyers who weren’t associated with a REALTOR®, as they didn’t have the support system they deserve in such a major lifetime transaction.”

In our current, fast paced real estate market, there are many new home communities to choose from. You need to ask yourself some pertinent questions when looking for a new home. Is this a good builder? Do they have a solid business reputation, years in business, etc.? How does the quality of their product compare to that of other builders? What are the existing inventories of the various builders? How do builder models meet your needs (floor plans, square footage, location, etc.)? If I sell in a few years what upgrades should I include to be competitive?

When you find the answers to these questions, ask yourself if the time spent in researching these answers was time well spent – put a dollar value on your time. Real estate professionals can be a valuable asset in collecting information in areas which may affect your decision on the purchase of a new home.

If builders rely on real estate professionals to sell their homes, then why wouldn’t you, the buyer, take the same precaution in assuring yourself the best service and expertise in making this important decision?

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Why should I use an agent to purchase a new home?

The advantages of having me help you purchase a new home are the same as those for purchasing a resale home. I can provide you with valuable insight into the market, help you find the perfect home quickly and provide you with expertise in contract writing, negotiation, and closing assistance.

The builder has a professional real estate representative watching out for their interests and you need and deserve the same expert representation watching out for your interests. Buying a new home is a little more difficult and timeconsuming than buying a resale. I can professionally guide you through this process.

It is very important that your interests be professionally represented when you are entering into a contract for a semi-custom or a build-to-suit home. These transactions are complex and the contract details must be exact in order to protect you and to ensure you get exactly the home you want!

Is there any advantage to not using an Agent to purchase a new home?

NO. There is no financial advantage for you to buy directly from the builder.

Builders have a “single-price� policy meaning you will be charged the same price whether your interests are represented by an Agent or not. Just as in any resale, the Seller pays for Agent’s fee. If we currently have an active agency relationship, please indicate your affiliation with me when you stop by any new home communities.

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Definitions of Real Estate Brokerage Relationships Seller’s Agent: A seller’s agent works solely on behalf of the seller and owes duties to the seller which include the utmost good faith, loyalty and fidelity. The agent will negotiate on behalf of and act as an advocate for the seller. The seller is legally responsible for the actions of the agent when that agent is acting within the scope of the agency. The agent must disclose to potential buyers or tenants all adverse material facts about the property actually known by the broker. A separate written listing agreement is required which sets forth the duties and obligations of the parties.

Seller’s Subagent: A subagent owes the same duties of utmost good faith, loyalty and fidelity to a seller as the seller’s agent and must make the same disclosures to buyers concerning adverse material facts about the property. A subagent will negotiate and act as an advocate for the seller, who is legally responsible for the acts of the subagent when acting within the scope of sub-agency. Seller must have written permission for the listing agent to employ subagents.

Buyer’s Agent: A buyer’s agent works solely on behalf of the buyer and owes duties to the buyer which include the utmost good faith, loyalty and fidelity. The agent will negotiate on behalf of and act as an advocate for the buyer. The buyer is legally responsible for the actions of the agent when that agent is acting within the scope of the agency. A separate written buyer agency agreement is required which sets forth the duties and obligations of the parties.

Dual Agent: ?

Designated Agent: 10

?

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Buyer Agency: As part of a mutual agreement, you can elect to create a buyer agency relationship between us that will entitle you to the fiduciary client level services that include: * Confidentiality * Obedience * Accounting in Dealings * Loyalty * Disclosure As a buyer’s agent, I will represent you and your interests in the purchase of your home. This is different from a typical sub-agency transaction where the buyer is not technically represented.

However, the selling agent has the duty to exercise reasonable skill and care in the performance of the Broker’s duties. This is a duty of honest and fair dealing and a duty to disclose all facts known to the broker that materially and adversely affect the consideration to be paid for the property.

A dual agency situation can arise if we have entered into an agency relationship and subsequently look at a property listed with our company. This is a potentially challenging situation because it is difficult to afford both parties full client level services.

Dual agency should only be entered into with the written agreement of both buyer and seller.

Agency is a legal relationship and a written agreement should be completed to explain all the duties and responsibilities.

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Before We Begin the Home Search Process we will ‌ Review your financial position to determine the price most suited to your ability to pay and comfort level. I have a list of preferred lenders with proven track records to save you time in your lender selection process. Pre-qualifying will help you in the following ways: 1. Interest rates are usually locked in for a set period of time. You will know in advance exactly what your payments will be on offers you choose to make.

2. You won’t waste time considering homes you cannot afford.

3. You can select the best loan package without being under pressure.

4. Sellers may choose to make concessions if they know that your financing is secured, and this may make your offer more competitive.

Discuss home styles, availability, location, schools and any specific features that you desire.

Explain the Offer to Purchase Agreement in detail, as well as the Multiple Listing Service (MLS).

Prepare a market report, pricing recommendations and an estimate of equity from the sale of your present home, if applicable.

Provide you with information on all properties currently for sale, including new and preowned homes, single family homes and condominiums.

Confidential Personal Counseling to Determine Your Needs A personal consultation will help me find you the type of home that meets your needs. I will also discuss your financial situation with you in order to determine the price range that will be suitable, if you have not already been pre-qualified.

It is important for me or your lender to know: 1. How much of your savings you intend to use toward down payment and closing costs.

2. Your annual gross income (before taxes).

3. The length of time with your current employer and previous employers, for the last 2 years.

4. Your monthly payments on long term debts (such as car payment) and credit card balances.

5. Child care expenses and/or alimony, if any.

6. Whether or not there have been any bankruptcies or credit problems.

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The information which you provide will be held in strict confidence.

Viewing Homes After your initial counseling appointment, we will have a good idea of your wants, needs, price range, and location and will enter your requirements in the Multiple Listing Service (MLS) computer. From the many listings in its inventory, the computer will print a list of homes tailored just for you. We will make arrangements to show you those that seem to best meet your desires.

As you walk through the homes, feel free to open the cabinets and closets. Most often the sellers will be absent, but should they be present, they will understand your need to examine the home carefully. When a home appeals to you, make notes. It is easy to forget details.

Often there will be a brochure available for you to take along to help you recall the home as you review your tour, and whenever possible, we will have given you a copy of the MLS information on homes you are viewing.

Don’t be surprised if the first home you see is the perfect one for you, and don’t be discouraged if none of those you visit the first day are what you want. We are committed to finding the one that you want to call “home” and will work diligently until you find it.

Usually, I will be able to find the home of your dreams rather quickly and will find 3-5 homes that best fit the desires you expressed.

We see a new home in your future!!!

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During the Home Search I will …

Discuss the benefits and drawbacks of each home in relation to your specific needs.

Keep you informed on a regular basis.

Check the MLS data base and with other brokers daily for new listings that meet your criteria.

Prepare an itinerary and “tour” map on which all homes meeting your criteria have been located.

Keep you up to date on changing financial conditions that may affect the housing market.

Be available to answer your questions or to offer assistance regarding your home purchase.

Discuss market trends and values relative to properties that may be of interest to you.

Show you new homes as well as pre-owned homes if you desire.

Introduce you to local builders to discuss building your next home. I can work with most builders and can get all the information you need to make any decision, but I will need to accompany you to the property on the initial visit. By letting me help you with builders, you get all the services offered in this presentation and those offered by the builder as well. You will get more, but you won’t pay more for it!

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After Your Home is Found we will ‌ Prepare an Offer to Purchase agreement and explain each detail.

Prepare a market evaluation on the selected property to ascertain the true value.

Provide you with copies of all the documents involved in the purchase agreement and financing.

Assist you in determining the appropriate financing and help you select the best financial institution to handle your mortgage.

Accompany you to the loan application if you so desire.

Coordinate any necessary inspections of the property to evaluate the major elements of the home.

Purchase Contract: (Offer and Acceptance) In negotiating the purchase of your new home, the initial step will be to make an offer to purchase. This offer should be in writing and accompanied by an earnest money check to show good faith. The offer will include: 1.

2.

3.

4.

5.

6.

The amount you are willing to pay Financing terms Any personal property specifically included Loan commitment date Closing and occupancy date Other contingencies, including inspections

The offer will be written on a standard North Carolina Offer to Purchase and Contract form.

If the initial offer is not accepted by the seller, further negotiations generally reach terms agreeable to both buyer and seller. When buyer and seller agree on terms, the buyer immediately applies for financing and arranges for inspections. I will assist you in these processes.

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Earnest Money Deposit At the time a written offer on a property is initiated, you will be required to make a deposit in the form of a personal check or cashier’s check. The amount deposited will be kept in the trust fund account of the real estate company and will not be turned over to the seller. This money represents your sincerity in the attempt to purchase and is fully refundable if the offer is not accepted, if your loan is not approved, or if some other condition of the contract is not met by the seller. You should anticipate a minimum of $1,000 for homes under $150,000. In homes over this price range, expect to deposit one to five percent of the purchase price. This earnest money will be credited to you at closing as part of your down payment and/or closing costs.

Title Insurance When property is sold or refinanced, the lender and/or Buyer needs a preliminary title report to see exactly what liens and encumbrances are against the property. Items that a preliminary title report show include: 1.

2.

3.

4.

5.

Easements of record Restrictions, covenants and conditions Liens and/or judgments Exact vested owner of record Legal description

When the sale of the subject property is final and the necessary documents have been recorded, then a policy of title insurance will be issued to the new lender and the buyer showing clear title to the property.

Prior to the Closing we will ‌ Confirm the mortgage loan approval.

Provide you with a transaction checklist of items to prepare for the closing.

Remind you to coordinate the following one week prior to final closing or settlement: Transfer utilities Check keys Check Electric Garage Door Openers

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Questions and Answers: “Everything you’ve always wanted to know about buying a house but were afraid to ask …”

When I start visiting homes, what should I be looking for the first time through?

The house you ultimately choose to call home will play a major role in your family’s life. A home can be an excellent investment, of course, but more importantly, it should fit the way you really live, with spaces and features that appeal to everyone in the family.

At each home, pay close attention to these important considerations: Is there enough room for you now, and in the near future?

Is the home’s floor plan right for your family?

Is there enough storage space?

Will you have to replace the appliances?

Is the yard the size the you want?

Are there enough bathrooms?

Will your present furniture work in this home?

Is an older home as good a value as a new home?

This is a matter of personal preference. Both new and older homes offer distinct advantages, depending upon your unique taste and lifestyle. New homes generally have more space in the rooms where today’s families do their living, like a family room or activity area. They’re usually easier to maintain, too. However, many older homes offer more total space for the money, as well as larger yards. Taxes on some older home may also be lower. Some people are charmed by the elegance of an older home, but shy away form them because they’re concerned about potential maintenance costs. Consider a home warrant to get the peace of mind you deserve. A good Home Warranty plan protects you against unexpected repairs on many home systems and appliances for a full year or more after you move in.

Do I need to bring anything along when I’m looking at homes?

Bring your own notebook and pen for note taking and a flashlight for seeing enclosed areas. Be prepared to “snoop around” a little. After all, you want to know as much as possible about the home you buy. Sellers understand that because their home is on the market, it will be looked over pretty thoroughly. Don’t forget to bring along this Home Buyer’s Workbook as a reference guide when you are looking at homes. The pages in the back of the book allow you to make notes on specific homes, which will make it easier to remember the specifics about each home.

If you need to go back to a home for another look we will be happy to schedule an appointment.

Be sure to ask any questions you have about the home, even if you feel you’re being nosy. You have a right to know. It’s important to know that the seller will supply the buyer with a Residential Property Disclosure, which will disclose any defects know by the seller. A copy of this form is found towards the back of this book.

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What should I ask about each home that I look at?

As a rule of thumb, ask any questions you have about specific rooms, features or functions. Pay particular attention to areas that you feel could become “problem” areas – additions, defects, areas that have been repaired. And above all, if you don’t feel your questions have been answered, ask until you do understand and are satisfied. In most cases, we will be able to provide you with detailed information.

What should I tell my buyer specialist about the homes I look at?

Tell me what you liked and didn’t like about each home you saw. It is important for me to really get a feel for what you’re looking for in a home in order to find your dream home. Don’t be shy about talking about a home’s shortcomings. Was the home perfect except for the carpeting? Let me know that, too!

How many homes should I look at before I buy?

There is no set number of homes you should look at before you decide to make an offer on one.

That’s why providing me with as many details as possible up front is so helpful. The perfect home may be waiting for you on your first visit. Even if it isn’t, the house-hunting process will help you get a feeling for the homes in the community and narrow your choices to a few homes that are worth a second look.

If you’re looking in more than one community, try to make the most of each house-hunting trip.

Stop by the local Chamber of Commerce to pick up promotional literature about the community.

Or ask me for welcome kits, maps, and information about schools, churches, and recreational facilities. Also, be sure to take along a camera and snap some pictures of all the homes you like.

That’ll make it easier to remember.

What should I think about when I’m deciding which community I want to live in?

Good city services, nice parks and playground facilities, convenient shopping and transportation, a track record of sound development and good planning – these are just a few considerations that are important to many people when they choose a community in which to live.

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How can I find out what homes are selling for in a given neighborhood?

Home sales are a matter of public record. The Register of Deeds, a local residential appraiser, the real property tax department for the locality are all resources a buyer can call on. All can be searched for recent sale histories or sale prices in any given area.

However, a better and easier way for you to get this information is to ask me. If you’re interested in a particular home, I may be able to provide you with a list of comparables – sale prices of homes in your area that are roughly the same size and age as the home you’re considering. Although there will certainly be some differences between the homes – the house next door may have an extra bedroom, or the one down the block may be older than the one you’re looking at – it’s a good way to evaluate the seller’s asking price.

I’d like to have a professional look at the home before I buy it. What does a home inspector do?

For your own safety, and to make sure you’re getting your money’s worth in the home you choose, using a professional home inspector is highly recommended. A home inspector will check a home’s plumbing, heating and cooling, electrical systems, and look for structural problems, such as a damp or leaky basement.

Usually, you call an inspector immediately after you’ve made an offer on a home. However, before you sign any written offer, make sure that it includes an inspection clause or other language which says that your purchase obligation is contingent on the findings of a professional home inspector. My contracts automatically contain this important verbage.

You home cannot “pass” or “fail” an inspection, and your inspector will not tell you whether he or she thinks the home is worth the money you are offering. The inspector’s job is to make you aware of repairs that are recommended or necessary.

A seller may be willing to renegotiate a price to accommodate needed repairs, or you may decide that the home will take too much work and money. A professional inspection will help you make a clear-headed decision. In addition to the overall inspection, you may wish to have separate tests conducted to check for termites, or the presence of radon gas. Talk to Warren Moore for information about these test and companies in the area that perform them.

In choosing a home inspector, consider one that has been certified as a qualified and experienced member by a trade association. Warren Moore will be happy to refer you to several qualified inspectors.

Should I be present during the inspection?

Yes. It’s not required, but it is very much to your advantage. You’ll be able to clearly understand the inspection report, and know exactly which areas need attention. Plus, you can get answers to many questions, tips for maintenance, and a lot of general information that will

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help you move into your new home. Most importantly, you’ll see the home through the eyes of an objective third party.

Do I need to talk to my insurance agent?

Yes, and the sooner, the better. Most insurance professionals have a lot of experience in working with homeowners and can offer useful tips about home ownership, particularly regarding home safety and keeping your premiums low.

What is “earnest money” and how much do I need?

When you sign an offer to purchase, we will ask you for earnest money—that is, money that shows you are serious about wanting to buy. Usually, you will be asked to write a check for one percent to five percent of the sales price, made payable to the real estate company.

This money will be held by the company, if your offer is accepted, your earnest money will be included as part of your down payment. If your offer is not accepted, you’ll get back all your earnest money. But keep in mind that if you back out, you forfeit the full amount.

Is there any way I can protect myself against emergency repair bills in my new home?

Yes. Home warranties offer you protection against many potentially costly problems not covered by your homeowner’s insurance. They’ve become increasingly popular in recent years, and for good reason: the coverage can save you thousands in the event of a major mechanical breakdown, at a time when your cash reserves have been depleted by your down payment and moving expenses. Ask me whether a Home Warranty is offered when looking at homes. But remember, if it is not offered, feel free to ask for it when writing the offer to purchase. The Home Warranty will give you the peace of mind necessary to feel comfortable in your new home. In most cases, the warranty plan will cover appliances, hot water heater, air conditioning units, electrical systems, garage door openers, plumbing systems, heating systems, faucets, etc.

How do I determine the amount of my initial offer?

There is really no rule to use in calculating a realistic offer. Naturally, the buyer wants the best value and the seller wants the best price, but negotiations can be influenced by many factors, such as a seller who may be changing jobs and wants to sell quickly, or a buyer who really wants a specific home.

After you’ve looked at the home’s features, asked questions, checked comparables, and talked about it with the Warren Moore, you should have a good idea of what the home’s value is in the current market. Consider what you can afford and make an offer that you consider to be fair.

Most buyers and sellers negotiate on price, with both sides “giving” a little until both agree.

When the price is agreed upon, the paperwork will be initiated by both parties. At that point, you typically will begin the process of arranging for an inspection and applying for a mortgage.

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What is a mortgage, and what are the benefits of different kinds of mortgages?

Simply put, a mortgage is a loan that a home buyer obtains directly from a lender to purchase real estate. The mortgage is a lien on the property that secures a promissory note (promise to repay the debt) that states the terms of the loan, including the interest rates, and the number of payments.

The most popular mortgages available to home buyers today can be divided into two general categories: those which offer fixed interest rates and monthly payments, and those where one or both of those factors are adjustable.

Fixed rate/fixed payment loans are more traditional, and remain the most popular home financing method, currently accounting for about two-thirds of all residential mortgages. Their advantages are well-known: You always know what your monthly principal and interest payment will be, so your basic housing cost will remain unaffected by interest rate changes until the mortgage is paid off.

Mortgages that entail flexible rates and/or payments have grown in popularity during periods of high interest rates and/or rapidly rising home prices. Many, including the popular ARMs (Adjustable Rate Mortgages), offer lower-than-market initial interest rates that allow buyers a measure of affordability unavailable in fixed-rate loans. The tradeoff may be higher interest rates and higher monthly payments later on.

What are the different types of lenders, and how do I choose the right one for me?

Before someone lends you the money to purchase your home, they will want to know a lot about you. And you are entitled to know as much as you can about them, too.

It is important because getting a mortgage is not just a one-time signing of documents, a handshake and a check. You will be depending on your lender to fund the loan as promised, on time, and over the life of the loan, to keep good payment records, pay your taxes and insurance (if included in your monthly payment) and many other continuing services.

Look for a lender that has the authority to approve and process your loan locally. It is easier to obtain information on the status of your loan and discuss conditions directly with the person who will approve your loan, rather than some far away loan committee. It is important that your lender know home values and conditions in your local area.

Are there any mortgages especially designed for first-time buyers?

Today, first-time buyers enjoy a number of mortgage options that make purchasing a home more affordable by minimizing down payments and keeping monthly payments as low as possible during the early years of the loan.

Most ARMs feature an interest rate this is often below market for the first year, and only rise gradually after that.

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VA and FHA-insured loans call for extremely low down payment (0-5% of the purchase price), and often offer a below market interest rate. Similarly favorable terms can also be arranged with the help of Private Mortgage Insurance or PMI. Finally, 100% loans are available in certain instances.

Can I get an FHA or VA mortgage?

Just about anyone can apply for an FHA insured mortgage through banks and other lending institutions. They are particularly well-suited for buyers of moderate income; the low down payment requirements (as low as 3% of the purchase price) are matched by a relatively low maximum mortgage amount.

Similarly, VA-guaranteed loans often require no down payment for up to four times the amount guaranteed by the VA. These loans are reserved for either active military personnel or veterans, or spouses of veterans who died of service-related injuries.

If there is a downside to these loans, it is the qualifying process. Though you apply for government-insured financing through a lending institution, the Federal Housing Administration or the Department of Veterans Affairs must insure or guarantee the loan and may require specific documentation or procedures not necessarily required for conventional financing. That may take more time than is generally required for conventional mortgage approval.

Additionally, FHA-required insurance must be added to your payment. TIP: Anyone can apply for a FHA mortgage, provided the loan amount does not exceed the maximum allowed by law.

How much of a down payment will I need to buy a home?

A down payment of 20 percent has been the benchmark for conventional financing, but today many options are available, some requiring as little as 0 percent down. For buyers who qualify for conventional financing but cannot handle the high down payment requirements, lenders offer this financing with PMI, or Private Mortgage Insurance. Designed to protect the lender against default by the borrower, PMI allow you to obtain traditional financing with a down payment significantly lower than the standard 20 percent. By using PMI, you may be able to get a fixed rate or adjustable rate mortgage by putting as little as 0 percent down. Additionally, some loans are available with no money down.

As with an FHA-insured loan, you must pay premiums for PMI coverage, the amount of which are determined by the lender. Moreover, PMI premiums are often lower than FHA insurance, and may be paid as part of your monthly mortgage payment, in annual installments, or in a lump sum at the time you obtain the loan. Your mortgage expert can help you determine which down payment option is right for you and your budget.

How does a lender determine the maximum mortgage I can afford?

23

The three primary areas lenders examine in determining the size of mortgage you can handle include your monthly income, non-housing expenses, and cash available for down payment, moving expenses and closing costs. There are a number of different ways lenders interpret these variable to estimate your mortgage capacity. The most popular method is detailed here. Most lenders feel a family should spend no more than 28% of its gross monthly income on housing costs, including the mortgage, insurance, and real estate taxes. Also, these housing costs plus your long-term debts (car loans, student loans, etc.) should not exceed 36% of your income. If your down payment is 10% or lower, most lenders will tighten these restrictions even further.

Some lenders may also include home maintenance costs and utility payments in their calculations.

What are the steps involved in the loan process?

The information your lender needs is not much different than what is needed when you apply for a major credit card: names and addresses of your employer and bank account numbers and balances. The lender will also need other financial information such as installment payments, auto loans, charge cards, and department store accounts. The location and description of the property also are required. Your lender will verify this information with your present and past employers, order a routine credit report on your current and past accounts, and order a professional appraisal of the property you are wanting to purchase.

Allow yourself two to four weeks to complete the application process. Then once all the verifications have been completed, your lender will underwrite and approve the loan. Overall, the time from the date of application to the date of move-in is generally four to five weeks for conventional loans and five to seven weeks from the date of application for FHA and VA loans.

What are “Points”?

In real estate, the term “point” refers to 1% of the total mortgage loan amount. Buyers often pay lenders this supplemental fee, calculated in points, to get a better interest rate on a particular mortgage.

For instance, a lender may offer you a choice of two 30-year mortgages: the first at 10% with no points, and the second at 9 ½% with an additional three points. If the loan is for $100,000, those three points will cost you an extra $3,000 up front—but you will get a payback of significantly lower monthly payments ($840.85 vs. $877.57) for the lifetime of the loan.

Many lenders will advise you to pay the points for the better rate if you can afford it, especially if you plan on keeping the home for more than a few years. Like interest, the money you pay for points may be tax-deductible, and the investment may pay for itself through savings generated by lower monthly payments. We suggest you call your tax preparer.

What is APR, and how is it calculated?

The Annual Percentage Rate is a calculated rate of interest for a loan over its projected life.

This rate includes the interest, all points (which are considered prepaid interest), mortgage 24

insurance, and other charges associated with making the loan that the lender collects from the borrower. The APR is calculated by a standard formula that all lenders use. This enables the borrower to comparison shop between lenders and/or loan products.

25

What is a good faith estimate?

Your lender or loan agent must provide you with a good faith estimate within three days of your application. This is the information you need to make a fair and accurate judgment when shopping for a loan. Your estimate is a written document that shows all the costs that can be estimated in advance by the lender. You need this information so there are no surprises on the day you close your sale on the property to be purchased. You will be expected to pay closing costs.

You should review all costs, know which are non-refundable in the event your loan is not approved, and be prepared to pay outstanding fees at closing. You may also want to compare these costs to those charged by other lenders when shopping for your home plan.

What does my monthly mortgage payment include? And what does PI and PITI stand for?

The bulk of your monthly mortgage payment goes toward paying off the principal and interest of your loan. (You may hear lenders refer to this as “PI”, for Principal and Interest). In addition, most lenders require that you pay a sufficient amount to cover your local real estate tax, plus your homeowner’s or hazard insurance. (You may hear this “total” payment referred to as “PITI”, or Principal, Interest, Taxes and Insurance.) This amount is placed in an escrow account, from which your lender then pays your tax and insurance bills as they come due.

When shopping for a loan, it is important to ask the lender if the monthly payment you are being quoted is PI or PITI. What are the respective advantages of 15-year and 30-year terms?

The 30-year fixed rate mortgage remains the standard mortgage, with an array of valuable benefits designed especially for buyers who expect to stay in their homes for a long time.

Because the borrower pays more interest than principal for the first 23 years, the tax deduction is substantial. And as inflation causes income and living expenses to increase, your unchanging monthly mortgage payments account for a relatively smaller portion of income as the years go by.

As you would expect, a 15-year monthly mortgage means higher monthly payments than an equivalent 30-year loan … but not as much higher as you may think. At the same rate of interest, payments on the 15-year mortgage are roughly 20-25% higher than a loan that takes twice as long to pay off. And one of the benefits of choosing a 15-year mortgage is that you can generally get a lower interest rate for an otherwise similar loan. Another advantage is faster equity build-up because a larger portion of your early payments are going to pay off principal.

This makes the 15-year mortgage an ideal alternative for couples approaching retirement or anyone else interested in owning their home free and clear as quickly as possible.

Do adjustable rate mortgages offer any protection against rising rates?

Yes. ARMs and other variable rate or payment plans offer lower-than-market interest rates initially, but because they are tied to the interest rates of U.S. Treasury bills or other indexes, 26

interest rates later in the loan term may rise. However, many such loans offer built-in safeguards designed to minimize the effect of any rapid escalation in interest rates.

One such safeguard is the rate cap. Many ARMs include provisions for the maximum amount your rate can rise, both annually and over the life of the loan. For example, if your initial rate is 8%, the loan may include 1% annual and 5% lifetime caps … which means even if rates rise dramatically, you will pay no more than 9% next year, 10% the following year, and so on until a maximum rate of 13% is reached.

ARMs may also allow your rate to decrease when the index it is tied to goes down. As you might expect, decreases are usually capped as well.

A second protective device included in some ARMs is the payment cap. Under this provision, your monthly payments may rise by only a set dollar amount. The potential disadvantage of this type of cap is that it can slow or even reverse your equity build-up. If rates rise dramatically, you could actually wind up owing more principal at the end of the year than you did at the beginning.

Of course, ARM holders can also consider refinancing to a fixed rate loan after a few years.

Some ARMs even include provisions for converting to a fixed rate after a set period of time.

How can I find out what my property tax bill will be?

Usually, the total amount of the previous year’s property taxes is included on the listing information sheet for the home you are interested in. Remember, tax rates change from year to year, so the previous year’s bill should be considered simply as a “ball park” figure of what you would pay.

What can I do if I have a fixed rate loan, and interest rates go down?

When interest rates drop significantly, the homeowner should investigate the financial advantages of refinancing. Essentially, this means taking out a new loan to pay off your existing loan.

What is the difference between pre-qualifying and pre-approval?

Pre-qualifying for a mortgage up to a certain amount is an increasingly popular practice among buyers who do not want to worry about going through the approval process after they have found the home they want. It is a verbal exchange in which the lender tells you in advance approximately how much money you are able to borrow, based upon the information you provide the lender on your debt and income.

Pre-approval goes a step further than pre-qualifying. It is an actual commitment to lend, provided that, when the borrower is ready to buy, he or she still meets all the qualifying conditions that were met at the time of conditional approval. We strongly recommend it!

27

Financial Information Name ________________________________________________________________ Address _______________________________________________________________ City _________________________ State ____________ Zip ____________________ Telephone (Home) __________________ (Work) _______________________ Including taxes & insurance, what monthly payments do you want: $______________ What approximate price range do you want to look in: $______________ How much cash do you have available for a down payment: $______________ Does this include closing costs?

Yes ________ No ________ Are you currently renting?

Yes ________ No ________ Do you currently own?

Yes ________ No ________ Do you need to sell before buying? Yes ________ No ________ How much do you think your home is worth? $_______________________ What is the unpaid balance? $_____________ Interest rate _________% Term _________yrs.

Dated ____/____/____ Type of Loan _____________ Monthly Payment $______________ List your regular monthly payments (installment debt, auto, revolving charges, student loan, etc.)

1.___________________ Mo. Payment $_____________________Balance$_______________ 2. .___________________ Mo. Payment $_____________________Balance$_______________ 3. .___________________ Mo. Payment $_____________________Balance$_______________ 4. .___________________ Mo. Payment $_____________________Balance$_______________ Are you current on all debts?

Yes No Are you aware of any problem with your credit?

Yes No What is your gross monthly income: $_____________________ Employed Your spouse’s gross monthly income: $________________________ Other monthly income?

Yes No Where are you employed and for how long? __________________________________________ 28

Self-Employed

Have you or your spouse ever taken bankruptcy?

Yes

No

If yes, explain:

_____________________________________________________________________________ _ Have you or your spouse had a home foreclosure?

Yes

No

If yes, explain:

_____________________________________________________________________________ _

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5 Great Reasons to be Pre-Qualified by a Lender ♦ You will know in advance what your payment will be. ♦ You won’t waste time considering homes you cannot afford. ♦ You can select the best loan package without being under pressure. There are many options to choose from in today’s market. ♦ Sellers may find your offer to purchase more favorable if they know in advance of your ability to secure financing. This may make your offer more competitive if you are in competition with other offers. ♦ Peace of mind.

My advice to you: Take the pre-qualification one step further and get a full loan approval. This is the best approach. Jonathan can help you with all of the details!

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Loan Application Once the purchaser(s) and the seller(s) have agreed on the price and terms of a contract, the next step is the loan application. We have an excellent local lender on our team who we recommend, but can offer several lenders if you would like to interview several before making a decision.

Then, a preliminary loan application is completed with a loan originator. The loan originator’s goal is to expedite all the necessary paperwork and information, including ordering a credit report and appraisal of the property. It is very important for you to get the appraisal as soon as possible. You will need to furnish the lender with the information as outlined on the terms needed for loan application page.

The information you provide the lender is confidential. The application generally takes place at either the lender’s office or at my office. All people who will be on the title as new owners should be present. The application normally takes about one hour. AT this time, you will be required to pay in advance for your credit report (usually $45-50) and the appraisal (usually $250-350), which is required by the lender to determine that the amount of the loan does not exceed the value of the property. These are normally the only charges required by the lender prior to the closing.

Your loan originator understands your concerns and is there to help with the approval of your loan. Feel free to ask questions at the loan application about anything that you do not fully understand. Also, you will receive a GOOD FAITH ESTIMATE OF CLOSING COSTS at this time so you will not have any surprises at the time of closing.

Total time from loan application to loan approval averages between 20 and 45 days or more, depending on the loan type, market conditions and/or the complexity of verifying the borrower’s information and qualifications.

Homeowner’s (Hazard) Insurance A Homeowner’s Insurance Policy (or a Binder), also referred to as Hazard Insurance, will be required to be brought to and paid for at closing. This is true in absolutely all cases when financing of any type is involved. Even if you are paying cash for the home, and no one is requiring the insurance, it would be foolish not to protect your investment with Hazard Insurance. There are many variables to consider in choosing which insurer and which policy best meets your individual needs and preferences. These variable should be carefully discussed with your insurance agent before purchasing the policy.

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Items Needed For a Loan Application Employment ● Addresses for two full years ● Gross monthly income ● W-2s, if available ● Proof of pensions, retirement, disability or Social Security ● Proof of income from rentals, investments, etc. ● Year to date day stub ● If self-employed: Two years 1040 Tax Returns Current year profit and loss statement

Creditors ● Each creditor’s name, address and type of account ● Account numbers ● Monthly payments and approximate balances ● Amount of child care expenses

Banking ● Names and addresses of saving institutions ● Account numbers for all accounts ● Type of accounts and present balances

Miscellaneous ● List of assets in stocks, bonds, land ● Life insurance cash value (documented if used as cash down payment) ● If applicant is selling a home, a copy of sales contracts ● Social Security numbers for all parties ● Veterans – Certificate of Eligibility & DD-214 ● Cash or check to pay for application fee

Real Estate Agents ● Copy of sales agreement ● Copy of listing on property ● Instructions on how appraiser is to gain entrance

32

30-Year Mortgages: How Much Will You Pay? The chart below shows the amount of principal and interest you can expect to pay on a 30year mortgage over a range of interest rates and loan amounts. You can use it to estimate a “ballpark� figure for monthly payments you can expect to pay on a home. Keep in mind that the figures do not include the escrow portion of your payment most lenders require for real estate tax, mortgage and hazard insurance. %$

50,000

60,00 0

70,00 0

80,00 0

90,00 0

100,00 0

110,000

120,000

130,00 0

140,000

5.875

295

354

414

473

532

591

650

709

768

828

6.000

299

359

419

479

539

599

659

719

779

839

6.125

303

364

425

486

546

607

668

729

789

850

6.250

307

369

431

492

554

615

677

738

800

862

6.375

311

374

436

499

561

623

686

748

811

873

6.500

316

379

442

505

568

632

695

758

821

884

6.625

320

384

448

512

576

640

704

768

832

896

6.750

324

389

454

518

583

648

713

778

843

908

6.875

328

394

459

525

591

656

722

788

854

919

7.000

332

399

465

532

598

665

731

798

864

931

7.125

336

404

471

538

606

673

741

808

875

943

7.250

341

409

477

545

613

682

750

818

886

955

7.375

345

414

483

552

621

690

759

828

897

966

7.500

349

419

489

559

629

699

769

839

908

978

7.625

353

424

495

566

637

707

778

849

920

990

7.750

358

429

501

573

644

716

788

859

931

1002

7.875

362

435

507

580

652

825

797

870

942

1015

8.000

366

440

513

587

660

733

807

880

953

1027

8.125

371

445

519

593

668

742

816

890

965

1039

8.250

375

450

525

601

676

751

826

901

976

1051

8.375

380

456

532

608

684

760

836

912

988

1064

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Mortgages at a Glance: Mortgages used to be so simple. You made a down payment on the house of your dreams and borrowed the balance at a fixed rate of interest, promising to pay it back in regular monthly payments over a period of years.

Today you must make choices. Do you want the traditional 30-year fixed rate mortgage with its guarantees of unchanging monthly payment? Perhaps a 15-year loan would be better?

Or would you prefer an adjustable rate mortgage with monthly payments that can rise and fall in accordance with an index reflecting economic conditions?

Below is a brief synopsis and the pros and cons of some of today’s most popular mortgage loans: TYPE 30-YEAR FIXED RATE

15-YEAR FIXED RATE

ARM (Adjustable Rate Mortgage)

FHA/VA MORTGAGE LOANS

DEFINITION A long-term loan in which principal and interest are amortized over 30 years; both interest rate and amount of monthly payment remain unchanged for life of the loan.

As above but payback period is 15 years.

A mortgage whose rate changes over time according to terms specified by the lender, usually according to shortterm Treasure Bill rates.

Governmentinsured or guaranteed mortgages that can make purchase more affordable

ADVANTAGES DRAWBACKS Considerable tax Slow equity benefits build-up. especially in early years.

Payments never rise, regardless of inflation.

COMMENTS The most common mortgage in the U.S., a particularly good investment when rates are low.

Usually lower interest rate than 30-year.

Faster equity build-up.

Less interest paid out over life of loan.

Low initial interest rate, sometimes below market.

Payments may decrease over time.

Higher monthly payments.

Less taxdeductible interest.

An excellent option for middle aged and older buyers.

Payments may increase over time.

Risky if rates rise significantly.

Good option for buyers whose income will rise and/or when rates are expected to drop.

Little or no down payment required.

Marginally better rate than conventional 30-

Lower limits on the maximum that can be borrowed.

VA requires current or past

Good option for first time buyers with little to invest in a down payment.

34

than conventional loans.

year mortgages.

military service.

Understanding Closing Costs Application Fee: Fee charged by lender to offset fixed costs related to mortgage loan processing such as appraisal, credit report, and underwriting.

Attorney’s Fee: The fee charged by the closing attorney who prepares the closing documents, performs the title search and closes the loan on behalf of the lender.

Origination Fee: This is sometimes called a commitment fee and is generally computed at 1% of the mortgage amount.

Discount Points: Each point is equal to 1% of the mortgage amount. Points are used by the lender to adjust the yield on the mortgage when it is sold to an investor. By paying more points, the borrower can obtain a lower mortgage interest rate.

Funding Fees: Normally applicable on VA loans only, equal to 1% of the loan amount. The fee is due at closing or may be added to the loan amount and financed.

Homeowner’s Insurance: One year premium is due in advance at time of closing.

Private Mortgage Insurance: Insurance required by the lender when the down payment is less than 20%. In the case of loan default, this insurance reduces the lender’s loss.

Pre-paids: Adjustment to escrow accounts from the date of closing to the date of the first payment. Interest is paid through the end of the month of closing, taxes are paid through the end of the month of closing plus the following month. Two months of PMI (Principle Mortgage and Interest) are collected. Two months of homeowner’s insurance may be collected. A homeowner’s insurance policy must be provided along with a receipt showing that the first year’s premium is paid.

Recording Fees: Fees charged by state or municipal entities for entering the closing documents into the public record.

Survey Fee: Is usually required and is used by the lender to check for encroachments from within or from outside the subject property.

Title Insurance: Provides protection for lenders and homeowners against financial loss resulting from legal defects in the title.

Underwriting Fee: Usually included in the application fee. However, practices vary from lender to lender.

35

Home Warranty Insurance If the seller does not provide a home warranty policy, the buyer may purchase one at the time the contract is accepted: We can help facilitate your purchase of a home warranty.

Why a home warranty is so important to your peace of mind: If you are buying a home, your expenses only begin at closing. Most people have lots of renovations to make. Or furniture to buy. And so on. So the last thing you want is to have to spend additional money for repairs due to unexpected mechanical failures of certain working components in the home. With so much that could go wrong, the odds are against you.

Benefits when you are the buyer: Your home is one of the biggest investments of your life. Why take chances? Be covered against the expense of an unexpected repair or replacement for a full year after closing, less standard deductible. Think about it. No matter how closely you inspect a home before you buy, you just can’t predict certain things. Like breakdowns from normal wear and tear, or the possibility of mechanical failure during the first year of ownership. Things like internal plumbing, electrical wiring, or vital parts of the air conditioning and heating systems. Working components such as the washer, dryer, over, refrigerator, and other items. Only a good home warranty program can give you the protection you need.

Coverage by home protection plans: When the major systems and appliances in your home are protected by a home warranty, both buyer and seller can relax. Because home warranty protection is solid and reliable. The kind you can count on for the peace of mind you want in your home.

Toll-free, 24-hour claim service: What could be easier when something goes wrong than making a single, toll-free phone call?

Well, when your home is protected by a home warranty, that is how easy it is – 24 hours a day, seven days a week. As soon as your company receives your call, the claim is entered into their state-of-the-art computer system. They will notify a contractor in your area who contacts you for an appointment. When the contractor arrives at your home, he/she will verify the claim, prepare a repair or replacement estimate and call their claims department. He/she is then authorized to complete the necessary repairs or replacement on covered items.

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After Finding Your Home: The Home Inspection It is easy to make sure the home you have chosen is a smart buy. By having a home inspection, the home’s vital systems are checked. A home inspection allows you to purchase your home with confidence. Warren will help you set one up after you have chosen the home you like. He recommends the following minimum standards when choosing an inspector: 1.

2.

Membership in ASHI (American Society of Home Inspectors) and adherence to its Standards of Practice and Code of Ethics.

Written report at the time of inspection.

Items on your inspection report will include: FOUNDATIONS, BASEMENTS AND STRUCTURES Basement floor and walls, proper drainage and ventilation, evidence of water seepage.

EXTERIOR SIDING, WINDOWS, DOORS Exterior walls, windows, and doors; porches, decks, and balconies; garage.

ROOF Roof type and material, condition of gutters and downspouts.

INTERIOR PLUMBING SYSTEM Hot and cold water system; the waste system and sewage disposal; water pressure and flow; and hot water equipment.

ELECTRICAL SYSTEM Type of service, the number of circuits, type of protection, outlet grounding, and the load balance.

CENTRAL HEATING SYSTEM Energy source, type of cooling equipment, capacity, and distribution.

INTERIOR WALLS, CEILINGS, FLOORS, WINDOWS AND DOORS Walls, floors, ceilings, stairways, cabinets, and countertops.

ATTIC Structural, insulation, and ventilation information.

FIREPLACE Notes about the chimney, damper and masonry.

GARAGE Doors, walls, floor, opener.

APPLIANCES Includes a wide range of built-in and other home appliances, smoke detectors, and television/cable hookups.

LOT AND LANDSCAPING Ground slope away from foundation, condition of walks, steps and driveway.

37

Moving Checklist …

For Long Distance Moves!

PLAN AHEAD BY: Deciding what to move and what not to move. Possible plan a garage sale.

Getting estimates from several moving companies or truck rental companies, depending on how you plan to make the move.

Planning your travel itinerary and making transportation and lodging reservations in advance.

(Leave a copy with a friend or relative.)

Transferring your bank accounts. They will be happy to open your accounts by mail.

Requesting records from doctors and dentists, including eye glass prescriptions, dental x-rays and vaccinations.

Obtaining your childrens’ school records to make for an easier transfer.

Drawing up a floor plan of where your furniture should be placed. This will help avoid confusion for you and your movers.

Paying existing bills and closing out local charge accounts.

Recording expenses incurred during your house-hunting trips. You will also want to save your moving expense receipts (if the move is employment-related) for tax deductions.

For Local Moves!

Deciding what to move and what not to move. Possibly plan a garage sale (extra cash and less to move).

Getting estimates from several moving companies, or truck rental companies if you are moving yourself. Be sure to obtain a hand truck (appliance dolly) if you are moving yourself.

Arranging transfer of children’s school records if applicable.

Drawing up a floor plan of where your furniture should be placed to avoid confusion for you and/or your movers.

Arranging any special movers, such as for an expensive piano, or such as is necessary to break down and move a pool table or above-ground swimming pool.

38

Don’t Forget To: Cancel or transfer deliveries, newspaper, garbage collection, etc. Coordinate the transfer of gas, electric, (water & sewer when not handled by title company), with the next occupant of your old home, as well as with the previous owner of your new home, so as to avoid lapses in service and extra re-start expenses.

Check on personal items that might be at the photo shop, bank safe deposit box, a neighbor’s house, on lay-away or in the repair shop (i.e., shoe repair, jewelry store, small appliance repair or dressmaker).

Make arrangements for transporting your plants and pets.

Save the phone book from your former city residence for typing up loose ends or for future correspondence.

Transfer insurance policies or arrange for new policies.

Gather all valuables, jewelry, important papers (birth certificates, deeds, documents) to take with you personally.

Have the care serviced for the trip.

Pack an arrival kit of necessities just in case you arrive before the mover.

Get refunds form your present utility and phone companies and arrange for service at your new home.

Purchase moving insurance. Your mover’s liability for lost or damaged goods will not equal their replacement cost.

Appraise valuable items such as antiques, art pieces, etc.

Check with your attorney about your will if crossing state lines.

Ask for professional referrals if available (i.e. doctor, accountant, attorney, etc.)

Change these addresses: Post office, charge accounts, subscriptions (at least four weeks in advance), relatives and friends, national and alumni organizations, church, mail order clubs (books, tapes, catalogues), firms with which you have time payments, past employer in order to receive your W-2 form.

Save your old address labels to speed up your change of address forms.

39

Glossary of Terms Abstract of Title: A summary of the public records relating to the ownership of a particular piece of land. It represents a short legal history of an individual piece of property, and traces the ownership of that property from the time of the first recorded transfer to present.

Acceptance: Consent to an offer to enter into contract.

Adjustable-rate mortgage (ARM): A mortgage that allows the interest rate to be changed periodically.

Agency: A legal relationship in which an owner-principal engages a broker-agent in the sale of property or a buyer-principal engages a broker-agent in the purchase of property.

American Society of Home Inspectors (ASHI): A professional trade association that provides training and education in home inspections. Members must meet qualification requirements to join.

Amortization: The gradual repayment of a mortgage by periodic installments.

Annual percentage rate (APR): The total finance charge (interest, loan fees, points) expressed as a percentage of the mortgage amount.

Appraisal: An evaluation of a piece of property to determine its value.

Appreciation: Increase in value due to any cause.

Asbestos: A mineral fiber used in some building materials such as flooring, siding, insulation and roofing. It is presently banned for most uses in real property.

Assessed value: The valuation placed on property by a public tax assessor as the basis of property taxes.

Assumption of mortgage: An agreement whereby the buyer assumes responsibility for a mortgage owed by the seller.

Balloon mortgage: A mortgage where the amount financed is not fully amortized over the period of the loan. When the loan becomes due, a large sum or “balloon� payment is required to satisfy the mortgage.

Bridge loan: A short-term mortgage made until a longer-term loan can be made; it is sometimes used when a person needs money to build or purchase a home before the present one has been sold.

40

Broker: A person licensed by a real estate commission to act independently in conducting a real estate brokerage business. Although requirements vary from state to state, an individual must usually have at least one year of experience in the industry and pass an examination to earn a broker’s license.

Building codes: State and local laws that regulate the construction of new property and the rehabilitation of existing property.

Cap: The maximum amount an interest rate or monthly payment can change, either at adjustment time or over the life of the mortgage.

Closing: The final step in the sale and transfer of ownership of a property. The title is transferred from the seller to the buyer; the buyer signs the mortgage and pays costs of settlement; any money due the seller and purchaser are paid.

Closing Statement: A financial statement rendered to the buyer and seller at the time of transfer of ownership, giving an account of all funds received or expended.

Cloud on the title: Any condition which affects the clear title to real property.

Commercial bank: A financial institution authorized to provide a variety of financial services, including consumer and business loans (generally short-term), checking services, credit cards, and savings accounts.

Comparables: Properties similar in size and character to the one being bought or sold.

Condominium: Ownership of a unit only, rather than of the entire building with the land.

Consideration: Anything of value to induce another to enter into a contract (i.e. money, services, a promise).

Contingency: A condition that must be satisfied before a contract is binding.

Contract: An agreement to do or not to do a certain thing.

Conventional mortgage: A fixed rate, fixed-term mortgage not insured by the federal government.

Deed: A legal document conveying title to a property.

Deed (quit claim): A deed that transfers only that title or right to a property that the holder of that title has at the time of the transfer. It does not warrant or guarantee a clear title.

Department of Housing and Urban Development (HUD): A. U.S. Government agency established to implement certain federal housing and community development programs.

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Disclosure laws: State and federal regulations which require sellers to disclose such conditions as whether a house is located in a flood plain or whether there are known defects in or affecting the property.

Earnest money: A portion of a down payment given to the seller by a potential buyer indicating the buyer’s intent to complete the purchase of the property.

Easement: A right to use the land of another.

Encroachment: A condition that limits the interest in a title to property such as a mortgage, deed restrictions, easement, unpaid taxes, etc.

Equity: The value of real estate over and above the liens against it. It is obtained by subtracting the total liens from the value.

Equity mortgage: A mortgage based on the borrowers’ equity in their home rather than on their credit worthiness.

Escrow: The placement of money or documents with a third party for safekeeping pending the fulfillment or performance of a specified act or condition.

Federal Housing Administration (FHA): An agency within the Department of Housing and Urban Development (HUD) that administers loan guarantee programs and loan insurance programs to make more housing available.

Fannie Mae: Nickname for Federal National Mortgage Corp. (FNMA), a tax paying corporation created by Congress to support the secondary mortgages insured by FHA or guaranteed by VA, as well as conventional home mortgages.

FHA Insured mortgage: A mortgage under which the Federal Housing Administration insures loans made, according to its regulation, by approved lenders.

Fixed rate mortgage: A loan that fixes the interest rate at a prescribed rate for the duration of the loan.

Foreclosure: Procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default.

Freddie Mac: Nickname for Federal Home Loan Mortgage Corp. (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market. It purchases and sells residential conventional home mortgages.

Graduated-payment mortgage: A mortgage that starts with low monthly payments and increases at a predetermined rate.

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Growing-equity mortgage: A mortgage loan in which the monthly payments increase by a specific amount each year, with the “Overpayments” applied to the principal.

Installment debts: Long-term debts that usually extend for more than one month.

Investor: The holder of a mortgage or the permanent lender for whom the mortgage maker services the loan. Any person or institution that invests in mortgages.

Joint & Survivorship Deed: (Also known as “Warranty deed creating tenants in common with right of survivorship”) Upon death of one of the owners, title to the interest transfers “by contract” to survivors.

Lease purchase agreement: Buyer makes a deposit for the future purchase of a property with the right to lease the property in the interim.

Lien: A legal claim against a property that must be paid when the property is sold.

Loan-to-value ratio: The relationship between the amount of a home mortgage and the total value of the property. Lenders may limit their maximum mortgage to 80-95 percent of value.

Lock-in-rate: A commitment made by lenders on a mortgage loan to “lock in” a civilian rate pending mortgage approval. Lock-in periods vary.

Market value: The highest price a buyer will pay for a property and the lowest price the seller will accept.

Mortgage: One type of document used to make property the security for the payment of a loan.

Mortgage broker: An individual or company that obtains mortgages for others by finding lending institutions, insurance companies, or private sources to lend the money; may also make collections and handle disbursements.

Mortgagee: The lender of money or the receiver of the mortgage.

Mortgagor: The borrower of money of the giver of the mortgage document.

Negative amortization: An increase in the outstanding balance of a mortgage resulting from the failure of periodic debt service payments to cover required interest charges on the loan.

Note: A written promise to pay a certain amount of money.

Origination fee: A fee or charge for work involved in the evaluation, preparation and submission of a proposed mortgage loan.

Pre-payment penalty: A fee paid to the mortgagee for paying the mortgage before it becomes due. Also known as pre-payment fee or reinvestment fee.

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Private mortgage insurance (PMI): Insurance issued to a lender by a private company to protect the lender against loss on a defaulted mortgage loan. Its use is usually limited to loans with high loan-to-value ratios. The borrower pays the premiums.

Promissory note: A written contract containing a promise to pay a definite amount of money at a definite future time.

Radon: A colorless, odorless gas formed by the breakdown of uranium in subsoils. It can enter a house through cracks in the foundation or in water and is considered to be a health hazard.

REALTOR® and REALTOR®- Associate: Registered collective membership marks that identify real estate professional who are members of the National Association of REALTORS® and who subscribe to its strict Code of Ethics.

RE/MAX Associate: Averaging more production and more advanced industry education than other agents, RE/MAX Associates are truly “The Real Estate Leaders”® in quality customer service.

Rent with option: A contract which gives one the right to lease property at a certain sum with the option to purchase at a future date.

Savings bank: A financial institution organized to hold individual depositors’ funds in interestbearing accounts and to make long-term investments, such as home mortgage loans.

Second mortgage/Second deed of trust/Junior mortgage or Junior lien: An additional loan imposed on a property with a first mortgage. Generally a higher interest rate and shorter term than a “first” mortgage.

Severalty ownership: Ownership by one person only. Sole ownership.

Shared equity mortgage: A home loan in which an investor is granted a share of the equity, thereby allowing the investor to participate in the proceeds from resale.

Survey: The process by which a parcel of land is measured and its area ascertained.

Tenancy in common: Ownership by two or more persons who hold an undivided interest without right of survivorship. (In the event of the death of one owner, his/her share will pass to his/her heirs.)

Title: A document that is evidence of ownership.

Title defect: An outstanding claim or encumbrance on property that affects marketability.

Title insurance: Protection for lenders and homeowners against financial loss resulting from legal defects in the title.

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Veterans Administration (VA): A government agency that provides services for eligible veterans of the armed forces. Among other programs, it guarantees mortgage loans made by private lenders to veterans.

Variance: A special suspension of zoning laws to allow the use of property in a manner not in accord with existing laws.

Zoning restrictions: Local municipal ordinances that classify property according to specific uses such as single family, residential, commercial, industrial, multi-family, etc.

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Notes on Properties Viewed Address: __________________________________________ Price: _________________ Bedrooms: ___________________ Baths: ________________ Style: _________________ Positives

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Notes on Properties Viewed Address: __________________________________________ Price: _________________ Bedrooms: ___________________ Baths: ________________ Style: _________________ Positives

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Contracts and Other Important Documents

Contracts and Other Important Documents NOTE: Most of the sample contracts, etc. in the following pages are related to buying a property. If you have questions about or would like one or more samples of seller related contracts, contact me and I’ll be happy to respond to your needs promptly.

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