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Buying a Home

What follows is an overview of the Home Buyer Process:

Planning
Shopping
Offer to Buy
Money
Financing
Protection
Closing

Planning

HOW MUCH HOUSE?

House hunting begins at home—with planning. The first step toward buying a house is to sit down. Before you grab the road maps and hit the streets, you need to do a little planning. Many lenders will pre-approve you for a mortgage, allowing you the opportunity to negotiate as a buyer. Simply, it’s determining how much house you can afford to buy. Knowing your affordable price range will bring your house-hunting into focus.

How much house you can afford to buy depends on many factors including: how much you can manage for the monthly housing payment, and how much you can contribute towards the down payment. Monthly payments include principal and interest on the mortgage loan, and property taxes and insurance against fire and other hazards. These four costs are often abbreviated “P.I.T.I.”. For some buyers, monthly housing costs may also include homeowners association dues, condominium fees, and mortgage insurance.

QUALIFYING

In today’s market, an “affordable” home is not so much determined by sales price as it is by the financing which translates that price into a monthly payment. A house hunter’s first step is to set a housing budget, then go shopping for the house (price) and payments (P.I.T.I.) that fit that budget.

Even though there are many ways to qualify to buy a home, make sure the monthly payment makes sense for you. The amount of the mortgage you might qualify for will depend upon a variety of factors. These factors include but are not limited to credit history, size of down payment, and length of employment. Everyone’s circumstances are different.

EFFECTIVE HOUSE HUNTING BEGINS WITH A PRIORITYBUYER® MORTGAGE PREAPPROVAL

A PRIORITYBUYER preapproval is based on our preliminary review of credit information only and is not a commitment to lend. We will be able to offer a loan commitment upon verification of application information, satisfying all underwriting requirements and conditions, and providing an acceptable property, appraisal and title report. A preapproval is not available on nonconforming products or for certain FHA transactions. It will let you know the maximum amount you may qualify for. So you and your sales professional can make the most of time spent looking at homes. With your application, credit check and first loan decision phase already complete, you are seen as a serious home buyer.

SOURCES FOR YOUR DOWN PAYMENT

Some of the more obvious source of money for your down payment is either your savings or the proceeds from the sale of a home you already own. But there are some other not so obvious sources, all of which consumers should carefully consider when researching.

Home Equity Loan. Parents often have considerable equity built up in their own homes—and many are tapping that asset through home equity loans to make a gift to their children. Ask your tax advisor for current information. Often lenders will require a “gift letter” to verify that parents don’t expect repayment.

Life Insurance. If you have built up a cash value on your life insurance policy over the years, you may be able to borrow from your insurance company up to the amount of this accumulated cash value. Often, they will even ask a more favorable interest rate than would be asked for other types of loans.

Stocks and Bonds. If you feel the market doesn’t favor selling your stocks or bonds now, you may be able to secure a bank loan using your portfolio as security.

Company Profit Sharing or Savings Plan. Look into the possibility of withdrawing what you have in your profit sharing or savings plan account or borrowing against it, if your company has these programs.

MORTGAGE INSURANCE CAN REDUCE DOWN PAYMENT

If you obtain a conventional loan, you may make a down payment of 20% or less. If you make a down payment of less than 20%, you will be required to have private mortgage insurance (PMI). This insurance provides protection from losses for the lender if you should default on the loan.

Mortgage insurance offers a variety of payment options. You may make an initial payment at closing and monthly payments with the house payment. You may make only an initial payment or only monthly payments. You may even increase your interest rate and have the lender pay the insurance. Be sure to ask your lender for a comparison of the benefits of each of these plans.

ONE CAUTION

The larger the down payment, the less money you need to borrow. This means a lower monthly payment. However, remember that in addition to your down payment and monthly payments, you will need money to pay for closing costs, moving, appliances, household setup, a reserve for family emergencies, and other miscellaneous items. So don’t plan to put your last penny down on the closing table.

Shopping

WHAT TO LOOK FOR

Choosing a place to live can be one of the most exhilarating experiences of a lifetime. We’ve learned through the thousands of home seekers we have helped that it’s good to be prepared. Literally, to do some homework. Our observation is simple. Your move can be an improvement if you duplicate what you like in your present community and avoid what you dislike.
HOUSE HUNTING BEGINS AT HOME
The search can begin in your present home so we’ve developed some questions to stimulate your thinking and help you identify your needs and preferences. Once you’ve clarified what you like in your present community, you will have a better idea of what you want to find. Plus, you will be able to express your preferences clearly to your Long & Foster Sales Associate who can help you find it.
One hint to keep in mind as you go house hunting is an old wisdom: “The best time to think about selling your home is when you’re buying it.” In other words, what appeals to you as a buyer today will probably also appeal (or what turns you off will be a turn off) to buyers tomorrow. A careful house hunter will benefit years from now when it’s time to sell to an equally value-conscious buyer. Build your buyer savvy by viewing real estate Websites, reading newspaper classified ads, homes-for-sale magazines, and visiting open houses.

COUNTY AND CITY QUESTIONS

Would you characterize your present area as urban, suburban, semi-rural, or rural? Is the population density low, medium, or high? Is the population decreasing, stable, or increasing? What natural features are the most significant? Woods? Hills? Flat land? River? Ocean shore? Man-made lakes? Streams and ponds?
How do you commute to work? Do you walk? Drive? Car pool? Taxi? Bus? Train? How far must you travel and how long does it take morning and evening? Do you use available public transportation for local trips or to visit close-by communities? Can someone reach your home on public transportation?

Where do you do your shopping? Central commercial districts? Shopping malls? Supermarket shopping clusters?
Community shops or home delivery? Imagine a list of typical stops in one week . . . How many miles and how much time would visiting the entire list require. Do you want greater convenience?

What types of schools does your family attend now? From grade school to graduate school, and from day care needs to special vocational training, what facilities will you require in the next few years? Are there any special needs or plans? Although it’s extremely difficult to compare quality of education, especially when the most important ingredient is the relationship between teacher and student, some statistical indicators can be helpful. Average class size at grade level. Comparative standardized text scores. Average salary of teachers. Percentage of high school graduates who go to college.

What does the area offer for recreation and entertainment? Music? Movies and live stage? Sports arenas? Museums? Nightlife? What types of indoor and outdoor sports facilities are available? Are there public parks, country clubs, athletic clubs, fraternal groups? Do you require any special facilities?

CHOOSING A NEIGHBORHOOD

After you take stock of the larger view of the county and city, this section helps you zero in on your neighborhood preferences. In real estate, an old maxim says there are three criteria that determine market value: “location, location, and location”.
The concept of neighborhood isn’t as precise as county or city. Some people consider the boundaries to be the district around a grade school. Others consider it “walking distance”, more or less within a half-mile radius. Wherever you draw the line, a neighborhood is the immediate area around your house.

PEOPLE, SERVICES

Every neighborhood can be described from three standpoints: its people (your future neighbors), what it looks like, and where its services are located. Yet any neighborhood description is highly subjective, which brings up another observation from our experience.
No matter how much hard data one gathers about a neighborhood, nothing compares with information that local people provide. Whether it’s fellow workers, letter carriers, or people at a bus stop . . . Neighbors are the best observers of a neighborhood. Talk to as many people as you can, and ask them the following questions:

NEIGHBORHOOD QUESTIONS

Do neighbors socialize regularly, or hold block parties, picnics, holiday parties, organize sports teams? What are the ways they have met their neighbors? Walking a dog, commuting, PTA, parties, little league, gardening?

What types of dwellings: high-rise or low-rise apartments, condominiums, multi-family structures, single-family houses, mobile homes? How much do the neighbors care for lawns and gardens? Are the houses maintained “like new”, adequately, poorly? Is there a

Homeowners Association?

Are cars parked mostly in garages, driveways, in the street? How old are the houses? More than 30 years old? 15 to 30 years? New? How far apart are the houses? Are property upgrades common? Swimming pools, tennis courts, fences, walls, patios, extensive landscaping?

For convenience, how does the neighborhood rate? Can you walk to shopping or is a car necessary? List your five most frequent destinations. Are they clustered in one stop-andshop location? Two stops? How much time is required for fire, police, or ambulance services to arrive in an emergency? How close are cultural centers, parks, restaurants, theaters, playgrounds?

How do the children routinely reach their schools, play areas, friends’ homes? By walking, bicycle, bus, or do parents drive them? Is public transportation available for commuting or shopping? Do any local ordinances affect pets, parking, lawn, etc.?

What are the disadvantages of the neighborhood? Freeway, railroad, or airplane noise? Factory pollution, heavy traffic, exposure to heavy storms, possible flooding?

AREA HOUSE STYLES

The metropolitan area is known for its variety of housing. This section is designed to introduce some of the basic styles most frequently found in the area. Numerous variations and other unique styles not mentioned here are also available.

CHOOSING A HOUSE

We’ve saved the best for last. In many ways, finding a home is easier than choosing a county and a neighborhood, because you are considering tangible details. Yet our experience suggests that many people “decide” with emotion and “justify” with facts. This section will help you find a better balance.

First, one should realize that thousands of houses are sold in the area every year. Inspecting the thousands of houses on the market is obviously impossible. But you can turn this overwhelming selection to your advantage. If you can clearly describe the features you require, your Long & Foster Sales Associate can make a preliminary screening for you. After you select the best houses, you can concentrate on inspecting your top choices. The key is knowing what you need.

HOUSE QUESTIONS

How many people will be living in the house? Do you prefer a new or resale home? What is your preferred housing style? Townhouse, colonial, contemporary, split level, split foyer, Cape Cod, rambler, or something else?
How many total rooms do you need? Bedrooms, bathrooms? How strongly do you require features such as: separate living room, dining room, laundry room, basement or attic, family room, fireplace, workshop area, garage? How much property do you require? Do you have preferences for any particular natural features?

HOUSE HUNTING

Many of our customers find it helpful to keep a record of the houses they inspect. A notebook is handy with pages large enough to record vital information, as well as hold stapled pictures of attractive houses and neighborhoods or clipped advertisements.

FINANCIAL DETAILS

Is the asking price comparable to other houses in the neighborhood? Higher or lower? However, when carefully comparing properties, be sure to take into account unique features and improvements that vary house-to-house, and consult your Long & Foster Sales Associate who can provide a Comparative Market Analysis (CMA).
Is the existing mortgage assumable? Required down payment amount? What financing method is acceptable to the seller?
What are the annual property taxes? Will the taxes increase with the transfer of deed and a new market price? Any local bonds or assessments?

PHYSICAL DETAILS

Outside. Address of property? House style? Lot size? Landscaping details? Degree of grounds maintenance required? Age of house? Structural condition? Are any major repairs or improvements necessary? Maintenance of building?

Inside. Make a sketch of floor plans. Total number of rooms and baths on each floor? Any extras such as intercom, fireplaces, phone jacks? Built-in appliances: dishwasher, garbage disposal, trash compactor? Adequate storage space?

Construction. Inspect quality of materials, present condition, craftsmanship both inside and outside. Insulation? Weather stripping or storm windows?

Major Systems. Plumbing, electrical, heating and cooling. What type of fuel does the heating system use? Approximate annual cost? A professional inspection of the major systems is recommended for a house that you are interested in purchasing.

HOUSE HUNTING ON THE WEB

At any moment a complete description of homes you would like to visit is available through Long & Foster’s Web site, www.longandfoster.com. Here’s how it works.

When a house is listed for sale by any area broker, the home’s vital statistics are fed into the computer: the lot size; the age and kind of home (condo, townhouse, single family); style (colonial, contemporary, Cape Cod, etc.); material (brick, stone, wood); the number, size, and use of rooms (4 bedrooms, 2 1/2 baths, kitchen, living and dining rooms, family room, finished basement and attic, foyer, utility room, garage).
Also included are features (fireplace, walkout deck, patio, wooded lot); equipment (stove, dishwasher, carpeting, etc.); the heating and/or cooling systems; the water and sewage systems; the annual taxes; the mortgage balance, monthly payments and the amount of funds a buyer would need to assume the existing mortgage (if it’s assumable), or the amount of funds required if the seller offers to take a second mortgage; and, finally, the price.

FINGER-TIP HOME SEARCH

A buyer’s requirements can be fed into the computer by a Long & Foster Sales Associate: particular neighborhoods, styles of homes; the number and kinds of rooms, and the price range. In minutes, the computer makes a quick search among the houses listed, and prints out all the houses that meet the buyer’s criteria.

The computer also helps buyers determine which home sellers will offer seller financing. It can calculate the amount of mortgage payments at various interest rates, under various financing plans. It can also help evaluate the investment and the financing that may be right for the buyer. Plus, it’s updated each morning, as houses enter and leave the market. In short, it’s the only way a buyer can check out almost everything that’s “out there”.

Offer to Buy

NEGOTIATING THE PURCHASE

You’ve found it—your “dream house”! You want to buy it. Now what? You make an offer by submitting a signed real estate offer to purchase with the type of financing you desire.

This will be the sales contract once the seller accepts. When you and the seller sign, you are agreeing to the contract conditions. Before you sign it, read it carefully and make sure you understand every detail. Ask questions. Verbal agreements should be written into the contract. If you plan to have a lawyer represent or advise you, retain one as early as possible. This is where your Long & Foster Sales Associate and an attorney can give you the assistance you need.

OFFERS AND COUNTER OFFERS

Your Long & Foster Sales Associate will take the offer to a “contract presentation” with the home seller and the listing broker. In some areas, the three of them will discuss the offer, and the seller will accept it as written, or make “counter offers” on unacceptable aspects, or reject it. The selling broker will then bring back the offer to buy to the homebuyer, who can accept it, counter-the-counter offer, or reject it. The offer to buy becomes a contract when all parties have initialed every counter and signed the offer.

When you sign the offer to buy, you also will have to submit a deposit to show that you are earnest about your desire to buy—appropriately called “earnest money”.

MAKING SURE YOUR CONTRACT IS COMPLETE

Sales contracts differ, depending on circumstances, but there are several provisions you may want to include in a contract for the purchase of real estate.

1. Deposit.

The amount of “earnest money” should be clearly stated, plus the amount of money you will be paying at settlement and your sources of financing. A common purchase deposit in many areas is 1-2% of the purchase price, deposited in escrow.

2. Contingency on Financing.

Be specific about the total loan amount, the date a second or third mortgage is due, and the exact financing terms. Many contracts have an “alternative financing clause” that allows buyers to accept different financing than that which is written in the contract, as long as it doesn’t affect seller’s net proceeds.

3. Contingency on Inspection.

You may make the contract contingent on a building inspection report. You will usually have to pay for this inspection, but the peace of mind or detection of a problem is well worth the cost of inspecting.

4. Termites.

The contract may require the seller or buyer, depending upon the area, to pay for a termite inspection. The results of this inspection may further require payment for removal of the infestation and repair of any damages from the infestation. You should get a written report at settlement indicating that the property is free and clear of any active termite infestation. In some areas, well and septic certificates are also required.

5. Personal Property.

Light fixtures, drapery rods, chandeliers, washers, dryers, refrigerators, heating oil in the tank, storm windows and doors, firewood, even swimming pool chemicals, and other items not physically attached should be specified in writing if they’re to be conveyed to the buyer. Misunder standings based on verbal agreements can delay settlement as well as cause friction.

6. Repair Work.

Standard contracts of sale require sellers to be responsible for plumbing, heating, mechanical, and electrical systems to be in working order at time of settlement. You should conduct a “pre-settlement walk-through inspection” which should be made several days before or not later than the day of settlement.

7. Title Attorney or Insurance Company.

The buyer has the right to select a title attorney or insurance company. You should shop and compare prices before deciding what attorney or title company will conduct your settlement. Also, be sure to clear the title company with the lender, whose interests are also involved. Ask your Long & Foster Sales Associate for a list of our Prestige Partners®, who provide settlement and insurance services throughout our seven state Mid-Atlantic Region and the District of Columbia.

8. Closing and Occupancy Date.

Include an arrangement with the seller in the event you can’t secure possession on the agreed date, such as a daily rent-back agreement for “post-settlement occupancy”.

Money

LOCATING LOAN OPTIONS

You have the option of shopping around for the terms that may fit your needs. Prosperity Home Mortgage, LLC is a full service mortgage banker, a wholly owned subsidiary of The Long & Foster® Companies, parent company to Long & Foster® Real Estate — the No. 1 independent real estate company in America.

Mortgage consultants are trained to pay attention to your home financing goals, help you understand your options, and clearly explain how different loan programs work, so you can make informed decisions.

They have a wide range of products to serve a large variety of home financing situations. You can count on them to provide help and information every step of the way.

BE INFORMED ABOUTMORTGAGE OPTIONS

Competition among lenders is lively, and informed borrowers shop carefully to find the home financing that fits their circumstances and needs. Here are some of the places to shop: Mortgage Lenders. Mortgage lenders issue mortgages to borrowers. They then process and often times sell those mortgages to large investors in the secondary mortgage market.

Mortgage Loan Brokers.

Some individuals or groups charge a fee (usually to the borrower) to match borrowers with lenders. Sometimes they make direct loans. An advantage of working with mortgage brokers is that they often represent many lenders and can provide you with more financing alternatives.

Financial Institutions.

Mutual savings banks, savings and loan associations, insurance companies, and some commercial banks are the traditional sources of mortgage loans. Savings and Loans often grant favorable terms to their own account holders.

Private Lenders.

Individuals (often home sellers) and groups (sometimes seller’s employers—if the seller is being transferred) lend money. This source is especially helpful in arranging second mortgages, but can also assist with first trusts, wrap-arounds, and other mortgage plans.

Credit Unions.

Federal credit unions can write 30-year conventional and government insured mortgages. Some will make loans; others may not. This may be a good source for credit union members.

Finance Companies.

To compete with the more traditional lenders, some finance companies promise quick service and some do not charge mortgage “points”.

TEN QUESTIONS MOST LENDERSWILL ASK YOU

Here’s the information most lenders will need:

  1. The amount of money you wish to borrow and the length of time you will need the money.
  2. Your current address and any other addresses covering the previous 24 months.
  3. Your social security number.
  4. Your current employer’s name, address and phone number and the same information for any other employers in the previous 24 months.
  5. Your gross monthly income including documentation: most recent pay stub, final pay stub for any job you may have left in the current year and previous year’s W-2 form(s).
  6. Complete account statements (all pages) for any bank, credit union, retirement, or brokerage accounts.
  7. Your assets (real estate, personal property, stocks and bonds, life insurance with cash value, etc.).
  8. A complete list of your debts including account numbers, balances and minimum payments.
  9. A copy of the sales contract.
  10. An account, in writing, of any problems concerning your application and any documentation of the circumstances of those problems.

With this information in hand, here are the general steps the lender will take to process your application:

  1. Review your application.
  2. Verify the facts.
  3. Get a credit report.
  4. Obtain a property appraisal.
  5. Decide whether or not to make the loan.

SOME QUESTIONS YOU SHOULD ASK MOST LENDERS

Here’s how to shop; a few of the questions to ask a lender: 4 Are both fixed-rate and adjustable mortgage loans available?

What is the interest rate?

What is the total origination charge?

How long can I “lock-in” the financing at the current interest rate?

What are the other fees a lender may charge me in conjunction with my loan?

Are funds for a second mortgage available?

On adjustable loans: How often will the interest rate be adjusted? Is there a maximum limit on each rate change? How often will the monthly payment be adjusted? Is there a ceiling on payment adjustments? Can the term of the loan be extended?

Is there a pre-payment penalty clause? This involves extra charges for paying off the loan before maturity.

What is the “grace” period? How late can a monthly payment be made before a late charge is assessed? What will happen if a payment is missed?

If you sell your house, will the new buyer be able to assume your mortgage at the same interest rate?

Do you have to pay “points” to get your new mortgage? Usually lenders charge points for the cost of giving you a mortgage loan.

Will the lender require mortgage insurance?

SLICING INTEREST RATES

It is important to keep the tax advantages in mind when considering whether to rent or buy. When you own a home there may be tax advantages that are not available to renters.

Remember a buyer may not realize this “tax advantage” until tax time comes around unless withholding taxes are decreased in anticipation of increased interest payment deductions. We are not tax professionals so please contact your tax advisor about your personal situation.

Financing

DIFFERENT MORTGAGE STRATEGIES

When it comes to paying for a home, buyers today have numerous financing options. Here are some of the options that are generally available by most lenders.

CONVENTIONAL/VA/FHA

Conventional Mortgage. A conventional loan is a mortgage made between a lender and a borrower. Conventional loans customarily require a 20% down payment, although down payments may be as low as 5%. Mortgage insurance is required if the down payment is less than 20%.

VA Loan. The letters ‘VA’ stand for Veteran’s Administration — a branch of the US government. The Veteran’s Administration is not a lender but rather guarantees mortgages for lenders to help eligible veterans. VA loans may require no down payment up to the VA maximum loan limit. VA loans can be assumed by qualified borrowers.

FHA Loan. FHA is the Federal Housing Administration, a division of the US Department of Housing and Urban Development. The Federal Housing Administration does not lend money; instead, like VA, it insures mortgages. Down payments are as low as 3.5%. Both fixed-rate and ARM mortgages are available. FHA loans are assumable by qualified borrowers.

Fixed Rate loans feature equal monthly payments that are made over the term of the mortgage. The interest rate remains the same which keeps the principal and interest payments the same over the term. Payments can vary if taxes or insurance escrow payments change.

Adjustable Rate loans are mortgages that allow for payments which change periodically over the life or term of the mortgage. An ARM loan has a set interest rate and payment for a period of time during the beginning years and then adjusts to the market rate at a predetermined point. ARM loans may feature lower rates during the initial loan period.

LONG & FOSTER® REAL ESTATE, INC. is not a mortgage lender. The actual terms of any financing are subject to the requirements of each individual borrower. Choosing a mortgage depends upon the circumstances of the individual borrower. Your Long & Foster® Sales Associate will be happy to refer you to a home mortgage consultant, including a mortgage consultant with Prosperity Home Mortgage, LLC.

Protection

FIRE AND HAZARD INSURANCE

Most lenders require a homebuyer to provide a one-year paid receipt at settlement for a fire and hazard insurance policy, often called homeowner’s insurance. These policies are available from several leading insurance companies through Long & Foster Insurance or the insurance company of your choice. Fire and hazard insurance provides protection for fire and other perils to your home and its contents.

WHAT TO EXPECT FROM A HOME INSPECTOR

What can homebuyers expect from a home inspector — besides a bill for $300 and up (depending on the size of property and/or complexity of the inspector’s report)?

First of all, require proof of membership in the American Society of Home Inspectors. Next, expect a quickly-delivered (one or two-day) written report.

Expect practical returns. While you can see for yourself many flaws in a house, the practiced eye of a professional inspector can probably spot more, especially in areas not easily accessible to a homebuyer. Specific information could even reduce the price of a house if the seller will agree the price has not already been discounted for defects.

POSSIBLE REPAIRS

Serious problems (heating, roofing, plumbing)

Medium problems (insulation, paint)

Minor problems (electrical outlets, kitchen sink)

If no serious problems are found, inspection can pay off indirectly in assurance that you are making a sound investment.

Many states now require that sellers provide buyers with either a residential property disclosure or disclaimer statement.

TITLE INSURANCE

Title insurance provides protection in the event any of a number of past actions threaten the title to your property. Most lenders will require title insurance to protect their interests. Be sure to ask about an “owner’s” policy as well, to protect your title. You may save money if you buy owner’s title insurance at the same time as mortgage title insurance, rather than buying it separately later.

As a homebuyer, you may be able to save money with a “re-issue rate” for title insurance, if the property changed hands within the last several years. The title insurance may allow a lower “re-issue rate” premium because the recent title search is still valid. Consult your title attorney and insurance company.

AFTER LOAN APPROVAL

After the lender approves the mortgage, the buyer will receive a “loan commitment letter” stating the mortgage amount, interest rate, and the loan term. The buyer should check it carefully, and return a signed copy to the lender or follow other specific instructions.

Next, the selling and listing brokers will coordinate a settlement date. You should be sent a letter confirming the date, place, time, and a checklist of everything you, as the homebuyer, need to bring.

WALK-THROUGH INSPECTION

The purpose of the walk-through inspection is to determine if all conditions in the contract are satisfied. Your final walk through should be done either the day of or a few days prior to your closing date. The time for the buyer to inspect and note defects for correction by the seller is during the contract negotiations and prior to signing the sales agreement. Repair or replacement items should be noted in the contract or contingent on a house inspection, otherwise, most resale homes are sold in “as is” condition.

It is up to the buyer to perform the walk-through inspection, not the seller, who may or may not be present. The buyer should be accompanied by the selling agent. The home seller should be sure utilities are on so that equipment can be operated.

ROOM BY ROOM

The buyer should try all lights and switches; turn all faucets on and off, run shower, flush toilets; turn on the furnace and central air conditioning (in the off-season, buyer should hire a professional to certify proper functioning of both heating and air conditioning); test all stove burners, oven at bake and broil; run some ice cubes through disposal to test blades; run dishwasher, washer, dryer through complete cycles; open and close all windows and doors. In short, try everything, even keys and the fireplace flue.

All deficiencies should be noted, and funds may be withheld from the home seller by the settlement attorney for repairs, if seller does not correct problems prior to settlement. The selling broker will coordinate with the listing broker and seller to make repairs before settlement, if possible. Upon receipt of bills and notification that repairs are complete, the attorney will release balance of funds to the seller, if money is escrowed for needed repairs.

Closing

THE BIG DAY!

The big day is here! Tonight you can celebrate, but today there will be a lot of paper signing and a poignant passing of the keys (don’t forget the garage keys and electric door opener, too).

At the settlement there will be an attorney or title company representative (chosen by the buyers), all buyers, listing and selling brokers, and all owners. The home seller should bring all warranties on equipment and any instructions on equipment maintenance or operation.

The attorney or escrow/title company will have searched the title, provided title insurance, and obtained old and new lender instructions. First, all unresolved walk-through deficiencies are resolved.

With the buyer, the attorney explains the deed of trust or mortgage; the deed of trust note or mortgage note; VA, FHA, or lender forms; and settlement sheets. Buyer signs all these and pays the balance of the down payment and buyer’s closing costs with cashier or certified check.

OPEN LOOK AT CLOSING COSTS

“Closing costs” have lost much of their mystery in recent years.

Under the Real Estate Settlement Procedure Act (RESPA), the homebuyer is furnished an estimate of closing costs by the lender, in advance of the closing. In some cases, some of the closing costs may be paid by the seller; this is particularly true for new housing, where the seller is the builder.

Settlement fees vary depending on price, location, and other factors, but overall the buyer’s costs usually average between 3% and 7% of the sales price. Some of the items that are usually included in the settlement fees are the loan origination fee, mortgage insurance premium (M.I.P.), attorney fees, owner and lender title insurance, recording fees, county tax stamps, state tax stamps, and the survey fee. In addition, the lender may require an appraisal fee and a credit report fee in advance of the closing.

A few other items may also have to be paid at a closing. These include advance deposits held in escrow for real estate property taxes and insurance. The lender collects a portion of these every month and then pays the insurance and taxes when they are due.

Because specific closing costs vary from area to area, and transaction to transaction, we encourage you to consult with your Long & Foster Sales Associate. Sometimes closing costs can amount to a sizable sum. Remember that some of the items are tax deductible. Check with your tax advisor.

SIGNING ON THE DOTTED LINE

With the seller, the attorney explains the settlement sheets and gets the home seller’s signature on them and the deed. Seller pays appropriate closing costs.

If the seller’s taxes or insurance have been escrowed, the seller will receive any money accumulated in the account for bills not yet due. Additionally, the seller will be reimbursed for any money paid in advance and not used, such as property taxes. The seller will receive these refunds at or after settlement, depending on the area. Taxes and homeowners association dues or condominium fees will be prorated on a daily basis. Seller, buyer, and brokers are supplied a copy of settlement sheets for their records.

The house keys are passed. You are now the proud owner! Congratulations!