Wednesday, August 26, 2009
You've picked out your title company, insurance company and you've stayed on top of the process. Now what?
21. Schedule your closing. Eeeek, we're getting close now (no pun intended). Your contract will specify a closing date. If you don't close by that date, technically the contract is void. Nobody wants that (usually). Try to get your closing scheduled for at least 2-3 days before then. If anything unforeseen comes up, you'll hopefully have time to get it resolved before you have a stroke.
22. Decide whether you want title insurance. I mentioned before that your lender will require a mortgage holder's policy. That benefits them alone. If you want any assurance that no one is going to come back and say that they inherited your house 30 years ago and never sold it to those crazy people that moved in later (you know, the ones you bought it from), you are going to want an owner's title policy. The first policy is the one that costs the most, the second one (yours) is available for a fairly nominal cost. Do yourself a favor and buy title insurance.
23. Review the settlement statement, also known as the HUD-1. This is a standard government issued form, so no matter where you live, it will look the same. Go over it with your Realtor to make sure that anything the seller agreed to pay is being charged to them and that your earnest money has been correctly credited. Also make sure that your lender closing costs are the same as what you agreed to when you first applied for the loan. If there are any changes needed be sure to contact your lender and the title company to get things corrected. Lastly, look at the last line on the left hand side of the first page. It will tell you the cash due at closing down to the penny. You will need certified funds in that exact amount made out to the title company. In some cases, the lender or seller may require you to wire the funds that day.
24. Do your final walk through. You'll go back to the house with your Realtor 1-2 days before closing. The purpose of this visit is just to make sure that nothing significant has changed with the condition of the property since you made the offer. You know, like trees falling through the roof, chandeliers taken down, holes in walls, things like that.
25. Show up for the closing, cashier's check and driver's license in hand, ready to sign away your first born. You may want to do a trial run by signing your name just as it appears on the contract about 422 times, just for practice. And don't pass out when you see the sheet that shows the total amount you are going to pay over the course of the next 30 years. Fair warning - it isn't pretty.
Congratulations! You are now the proud owner of your very own home. No one can tell you that you can't paint it purple*, no one is going to raise your rent every year**, no one can tell you that you aren't a grown up now***. You've done it!
*Unless your homeowner's association or local historical district says so
**Unless you got an adjustable rate mortgage - don't do it
***Except your mom
Shout out to Julie - thanks for lending me the picture of your house. I won’t tell people that I made it look even purpler if you won’t.
Tuesday, August 25, 2009
16. Pay for your appraisal. Your lender or another third party will order an appraisal from a licensed appraiser. Both the appraisal and the home inspection will usually need to be paid for up-front by you. The appraisal is a double check for your lender. They don't want to lend more money on a house than the house is worth. The appraiser comes in and puts in his two cents about whether or not s/he thinks the house looks good enough for the money you (or actually the bank) is putting into it. In some places, you'll also have a survey done, again, something you would pay for up front. In practice, this is not required and is rarely done in Chattanooga unless there is some type of property line dispute.
17. Honestly, there isn't much for you to do at this point. You'll need to start shopping for home owner's insurance - also called hazard insurance. Check with the company that has your auto and/or renter's insurance, you can often get discounts for having several policies together. Once you have decided on a policy, submit the agent's contact info to your lender. At least around here, you won't pay for the policy yourself right now.
18. Pick out a title company. These are the people who will handle the actual closing paperwork. They will also check out the title to the property and make sure there are no liens or back taxes owed. The title company will also provide a title insurance policy which protects the mortgage holder in the event that a previously unknown lien comes to light later on. For many foreclosures, the choice of title company may be somewhat out of your hands. Most will have already had the preliminary title work done and paid for by the seller. There isn't usually a good reason to have it done again so you might as well use what someone else has already paid for.
20. Check in with your Realtor and lender every 3-5 days just to make sure everything is on track. You'll have anywhere from 2-6 weeks of dead time between your contingency removals and closing. You don't want to get within a couple of days of your contract closing deadline only to find out that someone has been waiting for 3 weeks to hear back from you on something that can't be taken care of in time. Say things like "Just wanted to make sure the title work has been ordered" or "Have we heard back from underwriting yet?" Makes you sounds like a person who is really on top of things and who will not be trifled with.
30 yr fixed – 5.00% APR5.135% 360 P&I Payments @ $1073.64
15 yr fixed – 4.50% APR4.727% 180 P&I Payments @ $1529.99
30 yr FHA/VA fixed – 5.125% APR 5.967% 360 P&I Payments @ $1088.97
Great Rate – 5.20% APR – 5.762% 360 P&I Payments @ $540.63
Great Advantage – 5.50% APR– 6.075% 360 P&I Payments @ $556.13
Great Start –5.80% APR – 6.390% 360P&I Payments @ $574.71
-based on $100,000 sales price
Rates courtesy of Sarah Suits, for more information & details call or email:
Saturday, August 8, 2009
12. Write a check for earnest money. Earnest money is really just a deposit which lets the seller know you are "earnest" about going through with the deal if you eventually come to an agreement. Earnest money can vary from $0 up to 10% of the purchase price or more. For Chattanooga real estate, $500-1000 is typical although cash buyers are often asked for 10% as a sign that they actually have the cash. The amount of the earnest money and who holds it is a part of the offer and is a negotiable point. If you back out of the contract without exercising one of your contingencies, the earnest money goes to the seller. If you get to closing, the earnest money is credited toward the cash you need to bring to close.
12. Negotiating. You think they should leave the pool table, they think you should pay $20,000 more. That's where negotiating comes in. Decide what you are willing to give in on and what you aren't. Counter offers can go back and forth almost indefinitely. Once one of the parties agrees to the last offer/counter offer, the receiving party is notified. The date of that notification is the "binding agreement date" or BAD (how's that for a great acronym?).
13. Congratulations! You have a binding agreement! Now comes the fun part. Your contract will call for certain things to be done within a certain number of days of the BAD. First things, your earnest money will be deposited into the broker's escrow account if it hasn't already but that will go on without your involvement.
14. Next, you will need to make formal application with your lender if you haven't already. You may only have a preliminary approval which requires you to submit additional paperwork or information. If that's the case, get that stuff turned in ASAP. If you miss any of the deadlines in your contract, the seller could choose to terminate it based on a timeline default.
15. Arrange for a home inspection. This isn't a requirement but I always strongly recommend it. Almost all houses will have something wrong with them, even newly built ones, so don't freak out just because your inspector finds a long list of things s/he thinks should be corrected. Take a look at the list and decide which items are total deal breakers, which ones you'd like the seller to repair & which ones you are willing to live with - it's almost entirely up to you. Your contract might specify a pre-agreed repair allowance. The seller has agreed up-front to do a certain dollar amount in repairs. If this is the case, there is no reason NOT to ask for repairs that will cost up to that amount. If you don't have anything in the contract for this, which is usually the case in foreclosures and other distressed sales, you will need to decide whether you want to re-negotiate or walk away from the deal.
Done with steps 1-5? Are you ready to actually start looking for your new home? Nope, not yet, false alarm.
6. Start thinking about what type of loan programs you might qualify for. Are you a veteran? First time home buyer? Are you flat busted broke or have you been saving since elementary school? All of these things can influence your next step...
7. Find a lender. Your Realtor can give you some possible connections. Is it necessary to use someone your Realtor refers? Absolutely not, but even if your Realtor pushes you in a certain direction don't assume that there is some nefarious goings on with two people conspiring to drain you of your cash. The reality is that your Realtor and lender are going to have to work closely together and if they already have a good working relationship your purchase may very well go more smoothly and quickly. In addition, your Realtor might be able to steer you toward a lender who has the type of loan program that is best for you (or someone who has the best variety of programs out there).
8. Work with your lender to determine what your budget will be. Now is where we start thinking about the actual dollar amount of your purchase. Be sure to keep in mind how much you are comfortable spending each month, not the maximum for which you qualify. Your loan originator will give you a pre-approval letter that will likely be required when you eventually submit any offers.
9. You have a lender and pre-approval, you have a budget, you have a Realtor, are you ready to look? At long last, yes. If you want to search on your own you can do so but if you come up with too many possibilities a good Realtor (like me!) can do more detailed searches to narrow down your choices and keep things from becoming overwhelming. Try not to be too specific, many buyers find that the home they eventually fall in love with doesn't have everything they originally said they wanted.
10. OK, you've found the house of your dreams - or at least the house at the beginning of your dreams. Now what? It's time to make an offer. The thing that strikes fear in the hearts of prospective home buyers the world over. It's that little piece of paper (or 40) that binds you to the biggest purchase you'll probably ever make. Makes you a little nauseous huh?
Next up, what happens after the offer...
Friday, August 7, 2009
This is part I of my series on how to do just that: Chattanooga Real Estate 101
1. Unless you have the purchase price of a house hidden in your mattress, you are going to need to get your credit in order. Click here for more information about how to do this. Start on this at least 3-4 months before you are going to be looking to buy. You often will find errors on your credit report that can take a while to be corrected. You don't want to be scrambling to fix these things while a mortgage broker is staring you in the eye.
2. Make a list of "must-haves," "like-to-haves," & "must-not-haves." Do you have a Great Dane, an Irish Wolfhound, a Husky and a Chocolate Lab? You're probably going to have to have a fenced yard. If, however, Fido is a Pomeranian, that fenced yard might be nice to have but not essential.
3. Think about what areas you might like to live in. Interested in a historic home? Check out some of my blog posts about Chattanooga's historic neighborhoods. Consider where you work, where your kids go to school (or where you'd like them to), what amenities you want close by, what kind of vibe you'd like your new neighborhood to have, etc. Your must-haves & must-not-haves will factor into this. If your main concern is wooded privacy and room to spread out you probably shouldn't be looking in Highland Park. If, on the other hand, you want to be in the middle of Chattanooga's nightlife, a Market Street condo might be the way to go.If you don't know anything about Chattanooga or its real estate market, a good Realtor (like me!) can help you narrow down your search.
4. Think about what your budget should be. In this case, think of it in terms of a monthly payment, not a purchase amount (we'll get to that part later). Don't try to decide the most you want to pay, decide what you are comfortable paying each month. Are you going to be cooking steaks in your new kitchen or throwing ramen noodles in the microwave? You also need to realize that the monthly payment on the loan isn't going to be your only expense. There will also be property taxes, home owner's insurance (sometimes called hazard insurance), mortgage insurance if you aren't putting down a 20% down payment, not to mention potential repairs. Budget tip: Looking outside the city limits can sometimes stretch your dollars because you won't be paying city property taxes.
5. See, this isn't that hard so far! Your next step is to find a Realtor - luckily, if you're in the metro Chattanooga/NW Georgia area you can go ahead and check this one off your list by going here. If you live in Kalamazoo, you've got some looking to do. What should you be looking for? Number one: someone who answers the phone. I know it sounds simple but you would be surprised how hard it can be to get someone to return a call. Number two: someone who knows the area. Number three: someone who isn't the name on the sign sitting in the yard of a house you think you might like. Chances are, unless it is a limited service listing like some of mine, that person is working for the seller. It usually doesn't cost you anything more to have your own agent looking out for your best interests so why not make sure you have your own representation?
Stay tuned for Part II of Chattanooga Real Estate 101...