Decide to Pay Cash. Escrow Deposit. Rejection or Conditions. Title Exam, Insurance, Survey MOVING DAY!!

Transcription

1 Finding a Home

2 UNDERTSTANDING THE HOME-BUYING PROCESS Choose the right Agent for YOU Consultation to Analyze Needs Get Pre-Approved by Lender Decide to Pay Cash View New/Resale Homes with your Dedicated Buyer Specialist Select Home Present Offer Escrow Deposit Acceptance of Contract Inspections Remove Contingencies Mortgage Application Credit Report Appraisal Verifications Underwriting Rejection or Conditions Loan Approval Sign Closing Papers and Loan Docs Title Exam, Insurance, Survey Assemble Documents Recording & Closing MOVING DAY!!

3 You Want to Buy a Home It s a BIG decision and there s a lot to know. But if you have decided that now may be the right time to buy a home, Our comprehensive, quick reference guide provides key steps, Information, and tools to find, finance, and purchase a home that meets all of your wants and needs. 1. Choosing the Right Agent to Represent YOU. 2. Assess Your Credit and Finances 3. Assess your Wants and Needs in a Home 4. Home Search 5. Negotiate Terms 6. Obtain a Mortgage 7. Prepare for Closing Day 8. Close Escrow 9. Move 10.Celebrate You re more likely to be satisfied with your purchase if you understand each step, as well as nuances of market conditions in the area where you want to buy a home. Being an informed buyer and getting the right assistance-including working with a qualified agent can make a BIG difference in your home buying experience and the final result.

4 1 Choosing the Right Agent to Represent YOU. Choosing the Right Agent for you can be difficult but if you understand the relationship between you and your agent it will help to understand the expectations of that Agent. Cut and paste the link below into your browser and get all the information about the topics we have listed below. oregon.gov/rea/licensing/documents/sample_initial_agency_disclosure_pamphlet. Real Estate Agency Relationships An "agency" relationship is a voluntary legal relationship in which a licensed real estate broker or principal broker (the "agent") agrees to act on behalf of a buyer or a seller (the "client") in a real estate transaction. Oregon law provides for three types of agency relationships between real estate agents and their clients: Seller's Agent -- Represents the seller only. Buyer's Agent -- Represents the buyer only. Disclosed Limited Agent -- Represents both the buyer and seller, or multiple buyers who want to purchase the same property. This can be done only with the written permission of all clients. The actual agency relationships between the seller, buyer and their agents in a real estate transaction must be acknowledged at the time an offer to purchase is made. Please read this pamphlet carefully before entering into an agency relationship with a real estate agent. Definition of Confidential Information Duties and Responsibilities of a Buyer s Agent Duties and Responsibilities of a Seller s Agent Duties and Responsibilities of an Agent Who Represents More than One Client in a Transaction

5 Benefits of Buyer Agency Although the typical agency agreement spells out the fiduciary duties an agent must fulfill for the seller, the buyer is often left, in a sense, unrepresented. However, buyers too have the option of being represented exclusively by their own agent. Consider the following benefits: 1) Loyalty The real estate agent must act in the best interest of the buyer. 2) Obedience Must follow the lawful instructions of the principal (buyer). 3) Disclosure of all material facts Examples, but not limited to: Relationships between agent and other parties Existence of other offers Property s true worth Status of earnest money Commission split with other brokers Seller s financial condition Legal effects of contract provisions 4) Confidentiality Any discussions, facts or information can be shared freely with the kind of CONFIDENTIALITY you expect from someone working in your best interest 5) Accounting in dealings Reporting of where any money placed in the hands of the broker is kept 6) Reasonable skill and care Arriving at a reasonable purchase price and advising buyer of such. Affirmatively discovering material facts and disclosing them to the buyer. Investigating the material facts related to the sale.

6 Your Home Buying Specialist should be committed to assist you with 1) Locating the best home for your needs. 2) Negotiate the lowest price. 3) Secure the best financing. 4) Meet your home buying needs with the least amount of hassle. 5) Provide you with superior client service. If you would like to speak with a Home Buying Specialist about representing you.

7 2 Assess Your Credit Determine Your Credit Status Because any mortgage lender will review your credit history, It s wise to verify your credit rating in the beginning of your home search. Even if you are sure you have an excellent credit record, there may be blemishes in your credit history about which you are unaware. Identifying and resolving any credit problems to improve your credit rating will provide benefits, such as preferred rates from lenders and home insurers. Acquiring a copy of your credit report is simple. Three major credit bureaus- Equifax, Experian, and TransUnion- Compile consumer credit data. The Fair Credit Act allows consumers to obtain one free credit report from each of the three major reporting bureaus every 12 months. To obtain a copy of your report, visit annualcreditreport.com or call While you can find many other sources for credit reports, this is the only one authorized by the Federal Trade Commission FICO Score Distribution 0.02% 0.34% 8.2% 21.2% and Finances 24.5% 32.7% 13.0% % All Loans Conventional FHA VA Average FICO Score

8 Financing Pre-Approval Program Many buyers apply for a loan and obtain loan approval online before they meet with an agent and begin looking at homes for sale. If that is what you have done, great! If you have not completed this process yet, it is one of the very things your Home Buying Specialist can help you accomplish before beginning the home buying process. Its as Easy as A home loan credit report is generated by the credit bureau 2.Your employment, bank accounts and rental payments (if applicable) are verified 3.All information is forwarded to the underwriter for approval

9 Rates and Terms Two of the most important factors in choosing a mortgage are the interest rates and terms. Combined with the amount you borrow, they will largely determine the amount of your monthly payment. The interest rate is the percentage of the loan you are charged to borrow money; the higher the rate, the more you pay. Your monthly payment will also be hinged on the term of your mortgage. Paying off the same total loan amount at the same rate over less time will result in a higher monthly payment. To determine monthly payments for different rates and terms, use the mortgage calculator at REALTOR.com. Mortgage rates change, subject to various economic factors. To be more certain of what they will pay, most buyers lock in an interest rate when they apply for their mortgage. A lock means that the rate in the approved application will be valid for a set period of time-during which the deal must be closed-regardless of what the market interest rates are doing at the time of closing. With fixed-rate mortgages, usually 15 or 30 year terms, you pay the same rate over the life of the mortgage. With an adjustable-rate mortgage, or ARM, the interest rate changes after a predetermined number of years.

10 Pre-Qualification / Pre-Approval Typically you will first pre-qualify for a mortgage, then get pre-approved before you find the specific home you wish to purchase. It s essential to understand the difference, and to clarify which your lender is providing: Pre-qualification: An informal determination by a lender or a mortgage broker stating the amount of the mortgage you can afford. Pre-approval: A guarantee in writing by a lender to grant you a loan up to a specified amount (subject to receiving full documentation) 3 Key Benefits to Loan Pre-Approval 1) You know exactly HOW MUCH YOU CAN AFFORD (Eliminating wasted time looking at homes that are above or below your price range) 2) You get the BEST FINANCING (I.e. lowest interest rate, lowest down payment, which will allow you to get the most house for your money) 3) You can make a STRONGER OFFER (You get the power of immediate action, you can beat out other buyers and you can negotiate the lowest price & best terms)

11 Down Payments & Mortgage Insurance To help insure that buyers have some skin in the game, lenders require a down payment on mortgages. Typically, down payments may range from3 to 10 percent of the appraised value of the home. You can obtain a mortgage with a lower down payment, but you will need to obtain mortgage insurance, which helps protect the mortgage underwriter from default. This is an additional monthly expense that you will need to consider when evaluating the total cost of homeownership. Next Steps When you are ready to make your mortgage application, several additional steps and documents will be required. See step 6 for more details on obtaining your mortgage. Bendrealestateworks@gmail.com If you would like to have a Preferred Lender assist you through the Pre-Approval Process.

12 3 Assess Your Wants and Needs Finding a new home can be exciting. But deciding what you truly want and need-and within your budget-can be challenging. Making these decisions begins with setting priorities among many different preferences. Most home buyers invariably face trade-offs. Your Agent can play a key role in helping you sort out your options. They can offer different insights specific to your local market. Be sure to discuss these and other preferences with your Agent

13 Avoiding the Most Common Mistakes Home Buyers Make. 1) Not understanding the local market and all that is available. 2) Thinking that it is both safe and easy to buy a foreclosure and short sale homes. This is a biggie! 3) Not understanding pricing and the value of certain amenities. 4) Weak negotiating. This mistake alone can cost the buyer thousands of dollars 5) Not requiring the proper inspections and/ or not understanding these reports when an inspection is done. 6) Not understanding the importance of being pre-approved by a Lender prior to beginning the home buying process.

14 Understanding the Different Types of Homes Available Distressed Properties: Short Sales, Foreclosures and REO s Purchasing a distressed property can be a time-consuming process, but you can also get a great deal on a house you love. A SHORT SALE occurs when a homeowner sells their home for less than (short of) what they still owe on their mortgage and their bank has agreed to accept the proceeds from the sale as payment in full of the loan balance. A FORECLOSURE occurs when a homeowner has defaulted on the mortgage and lender initiates a foreclosure against the property. The property will eventually be put up for sale at auction. A REAL ESTATE OWNED (REO) occurs when the bank has successfully foreclosed on the property and the foreclosure auction did not result in a sale to an outside bidder. Thus,the lender ends up as the new owner of the home. Distressed properties often have challenges not typically found with a traditional real estate transaction.

15 What You Should Know About Buying Distressed Properties: Buying a short sale or REO property is a complex process. The overview below is intended to give you an idea of what you may face if you decide to pursue a purchase of a distressed property: Short Sale Properties Short Sale properties may often be in better condition than properties that are in foreclosure, as the homeowner is working with the bank to release them of their debt and is trying to avoid foreclosure. Before making an offer on a Short Sale, please keep the following in mind: Any offer must be approved by seller s lender. Because of the required approval process by the lender, approval of your offer (and therefore the short sale) could take months. A lender may change the terms of the agreement made between the seller and the buyer. Foreclosed Properties (REO) Lenders will typically sell the homes as-is, meaning that REO properties will often need repairs. Before making an offer on an REO, please keep the following in mind: The lender most likely will not agree to make any repairs to the home. The lender may require you to finance with them. While most REO properties are already vacant, there is the possibility of tenant problems which may cause a delay in closing, and may also increase the price. If you are not using the REO bank as your lender, it is possible that certain repairs will be required to be made to the property before your lender will agree to close

16 NEWLY CONSTRUCTED AND RENOVATED BUILDINGS WHY USE AN AGENT TO PURCHASE A NEW HOME? The advantages of having an agent help you purchase a new home are the same as those for purchasing a resale home Knowledge of the market Help in finding the perfect home quickly Expertise in contract writing/negotiation Closing assistance The builder has a professional representative watching out for his/her interests, and you need the same expert representation. Buying a new home or newly renovated property is a little more difficult and time-consuming than buying a resale. Our team 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! REMEMBER the Builder often requires that your Agent accompany you on your first visit to the Builder s sales office in order for your representative to participate in the process. Bendrealestateworks@gmail.com to have a home buying specialist assist you through the process of finding your perfect home.

17 4 Home Search Choosing a home involves choosing a neighborhood. Although it s important to consider future resale value, it s also important to choose a home and neighborhood that you and your family will enjoy living in Scout out the Neighborhood! It is important that you scout the neighborhood in person. You live in more than your house. Talk to people who live there. Drive or walk through the entire area at different times of the day, during the week and on weekends. Travel to and from places that you would typically frequent to be sure you are comfortable. Look for access to major thoroughfares, highways and shopping. Check with local civic, police, fire and school officials to find information about the area. Look at traffic patterns around the area during different times of the day and drive from the area to work. Is the neighborhood near parks, places of worship, recreation centers, shopping, theaters, restaurants, public transportation, schools, etc.? Your Agent can direct you to helpful sources of information for evaluating neighborhoods, but may not be allowed to answer all of your questions. This is because, under federal fair housing laws, it is unlawful for an agent to engage in any conduct that is discriminatory on the basis of race, color, national origin, sex, handicap, or familial status.

18 Viewing and Comparing Homes Once you ve decided on a neighborhood, it s time to begin viewing houses. Some buyers find it helpful to review their home preferences (Home Buyer Analysis Worksheet) and prioritize their needs versus wants. Setting up a comparison table with your highestpriority factors listed first will help you objectively evaluate different properties. Buying a home is more than an objective decision-there is also a certain amount of emotion and intuition to factor in. In addition to meeting your criteria, ideally, a home should feel right. If you are not finding what you want, share your reactions with your Agent so they can help you refine your search. If you decide to view homes on your own (an open house, for example) make sure the other agent knows that you are working with someone, and share your Agent s business card or contact information, If possible. Be carful not to divulge too many details about your situation (e.g. motivation to buy a home, timetable to buy a home,) as this may hurt your future negotiating position if you are interested in the property. Using Websites The internet makes shopping for a home, even in the preliminary stages, easier than ever before. Realtore.com, NAR s property listing site, provides online information on millions of properties, as well as information on neighborhoods and other topics. Many real estate companies and agents have their own sites too, witch often include homebuying information and links, in addition to property listings. It s important to understand, however, that even, realtor.com, is not an all inclusive source of real estate property listings. Your agent is still an important source for property information. He or she can share listing information with you faster and easier than any public web site, including houses that buyers might not find on their own. Your agent can also provide the most current details, such as whether or not a property is under contract.

19 THINKING ABOUT BUYING? WHAT ARE YOU CONCERNED ABOUT? NOT CONCERNED VERY CONCERNED LOAN QUALIFICATIONS? HOME VALUES? LOCATION & VALUE? DOWNPAYMENT? MONTHLY PAYMENTS? PREVIEWING HOMES? PRICING? CLOSING COSTS? SHORT SALES & REO S? APPRECIATION? FINANCING?

20 There s No Place Like Home HOME SEARCH INFORMATION What things are most important to you in a home?: Are schools important? yes no If yes, which ones and why: Where do you want to live? What style home do you prefer? When do you want to move in? How many bedrooms? How many living areas? How many baths? What size garage? Where do you work? When is the best time to look at homes? If we found the right home for you today, would there be anything that could keep you from buying it? Does anyone else have to approve of your purchase? Your Name: Date: this information to: Bendrealestateworks@gmail.com and let our team of professionals find the perfect home for you

21 5 Negotiate Terms Making the Best Deal When deciding what to offer for a property, Current market prices are the most important factor. Your agent can provide valuable assistance in this regard-counseling you on the market conditions, price ranges and negotiating strategies. To help you make a more informed decision on price, your agent may do a comparative market analysis (CMA) on the property you are interested in buying. This will give you a better sense of weather the seller s listing price is higher or lower than prices of comparable properties and help guide your decision of how much to offer for the home. If the property is over priced, the CMA will help you determine a more reasonable price. It is rarely advisable, however, to make an excessively low offer on any property. The strategy is more likely to backfire, prompting negative reactions from the seller and reducing your likelihood of successfully negotiating a purchase.

22 Negotiating Considerations Beyond price, there are several other factors that can affect your negotiating position. For example, your bargaining position is strong (the seller will look favorably at your offer) if: You are an all cash buyer. You are pre-approved for a mortgage. You do not have to sell your current home or meet other contingencies before you can complete the purchase With these factors in your favor, you may be able to negotiate a lower price. On the other hand, in a hot sellers market, if your perfect home comes on the market, you may want to offer list price (or more) to beat out other offers. Your agent may be able to learn more about the sellers situation and motivations. Knowing factors such as whether the house is already vacant, how long it has been on the market, and reasons for selling could help you determine how eager the seller may be to complete a transaction.

23 Making an Offer Once you have found the home you wish to purchase, you will need to determine what offer you are willing to make for the home. Negotiations will begin with an initial offer and conclude with acceptance of the final offer. Real estate transactions require a written contract, which conveys the initial written offer. When the seller accepts an offer, it becomes a legal contract. When you write an offer, you should be prepared to pay an earnest money deposit. Typically the earnest money deposit should be between 1-5 percent of the purchase price but it is not set by law. This is to demonstrate that your intention is to purchase the property. Your offer will specify price, plus all the terms and conditions of the purchase you want to negotiate. Your agent provides valuable service by helping you use standard forms that are kept up-to-date with changing real estate laws, which vary from one state to another. Your agent can also guide you through structuring your offer and negotiation strategy. If you have questions about your offer that involve topics that real estate agents are not allowed to address, such as specific legal or tax advice, your agent can refer you to qualified experts.

24 What Does an Offer Contain? Keep in mind that if the seller accepts your initial offer, or a subsequent counteroffer, it becomes a binding sales contract-known in some area as a purchase agreement or earnest money agreement-and serves as a blueprint for the final sale. That s why it s important that your initial offer contain the terms that you want. The more demands you make of the sellers, the less favorable they may look on your offer. Some things, however, should be included in most purchase offers, such as: Property address (sometimes its legal description) Sales price and terms (case and monies acquired for the purchase through a mortgage) Seller s promise to provide clear title (ownership) Date for closing (the date the actual transfer of title will take place) Earnest money, whether a check, cash, promissory note, with provisions for how it will be refunded if the offer is rejected or kept as damages by the seller if you are found in breach of contract. Prorated amounts for payment of real estate taxes, utilities, assessments and other costs that may be incurred by the seller before closing but not billed to the property until afterwards. Who will pay for title insurance, surveys, inspections, and similar costs associated with the transaction. Type of deed to be transferred Federal and state requirements, such as environmental review, hazard and property disclosures Provision for attorney review Final walk-through inspection shortly prior to closing Length of time that the offer is valid Fixtures and personal property that will be included

25 We recommend your offer request the Seller Include a 1 year Home Warranty Protects you from unplanned expenses when you don t know how reliable your appliances will be. Includes furnace, air conditioner and many other protections that can be extremely valuable in the event unforeseen trouble occurs.

26 Contingencies A contingency is a term or condition that must be met for an offer to become a binding contract. Contingencies always weaken an offer. Yet some are considered normal. Some common purchase offer contingencies include: Approval of agreed-upon third party inspections within a stipulated period of time after the seller s acceptance of the offer. This allows you to walk away from the contract if you find the inspection unsatisfactory. (See Step 7 for more information on inspections.) Obtaining specific financing terms, such as interest rate and duration of the mortgage. If you can t find the mortgage terms you were looking for, as specified in your offer, you cannot be bound by a contract based on your offer. Securing a specific job. If buying this home depends on consideration for a job transfer, you will want to include this provision. Selling your current home. Sellers may view a contingent sale unfavorably, but an accepted offer on your home will improve your negotiating position. After your offer has been drawn up, it is presented to the seller(s). Exactly who presents your offer can vary. Your agent may present your offer to the listing agent and the seller. Or the listing agent may receive your offer from your agent, then present it to the seller.

27 Other Important Questions What is earnest money? This is a cash deposit you make when submitting your written offer on a property to show your good Faith. Sellers are understandably suspicious of offers that are not accompanied by such a deposit. The amount expected can very by the negotiating situation and from market to market. You earnest money is held by one of the brokers, the title company, or an attorney. If your offer is accepted, these funds become part of your down payment at closing. If negotiations fail to result in a sales contract, your money is usually refunded. These funds will be handled in accordance with state law. What are seller disclosures? Most states and many local areas require sellers to disclosure any known material defects. Lead-based paint disclosure for example, is required in all states for properties built before Make sure you read and understand these documents because your recourse options will be limited once you sign any disclosures. What if there are multiple offers? If other buyers are interested in the same property, the seller may be comparing your offer to others. Multiple offers do occur, even in slow markets. If you learn that you are in a multiple offer situation, don t panic and immediately withdraw your offer. It is quite possible that you have submitted the winning bid. Stay involved for at least one round of negotiations, but also establish your maximum price.

28 The Seller s Response to Your Offer Remember that sellers have already decided how much money they want from the sale of their property, and have probably planned a negotiating strategy. When your offer is presented, the seller s options are to: Accept. If, after viewing your written offer, the sellers sign their unconditional acceptance, then you will have a binding contract as soon as you are notified of the offer s acceptance. Reject. If the sellers reject your offer, you are released of any obligation. The sellers cannot change their minds later and expect to bind you to that offer. Counteroffer. If the sellers like most aspects of your offer, they may present a counteroffer that includes the changes the sellers want to make. You are then free to accept their counteroffer, reject it, or make your own counteroffer to their counteroffer. The process can repeat it s self as many times as it takes for you and the sellers to agree on the sales contract. A Counter offer becomes a binding contract when either 1) you sign unconditional acceptance of the sellers counteroffer, or 2) the seller signs unconditional acceptance of your counteroffer. At this point, negotiations are over and the terms of the sale are final.

29 Withdrawing an Offer Can you take back an offer? In most cases the answer is yes, right up until the moment your offer is accepted. In some cases, you can withdraw an offer before you have been notified of its acceptance. If you want to withdraw your offer after acceptance, be sure to do so only after consulting a lawyer who is experienced in real estate matters. You want to avoid losing your earnest money deposit or a lawsuit for damages the seller incurred because of your actions. From Contract to Closing Many details included in the following steps happen or occur simultaneously. You agent is a valuable resource in helping you keep every aspect of your transaction on track, from now until closing. Bendrealestateworks@gmail.com to have a Home Buying Specialist assist you through the process of writing an offer

30 6 Obtain a Mortgage If you have already done the legwork discussed in Step 2, you are one major step closer to obtaining a mortgage. Still, securing a mortgage is more complex, and often more expensive, than many customers realize. There are numerous documents and details that must come together in a short period of time. This is why it s important to be organized and find a competent mortgage loan officer. Your agent has already helped other buyers work through the mortgage application process and can also provide valuable assistance. Applying for a Loan If you have already made an offer on a house, decided what type of mortgage you want, and selected a lender, your next step is to complete the loan application. Together, your agent and lender can help you understand: Pre-application steps The information your lender needs at the time of your application Decisions you will have to make at the time of your application Application costs Application legal requirements Closing Costs and the Truth in Lending Statement There are various costs associated with a mortgage. These might include an appraisal and origination points. Depending on the amount of your down payment, you may also be required to pay for mortgage insurance, a policy that protects the lender if you default on the mortgage. To help you see everything you ll be paying for the home over the life of the length of the mortgage, you should receive a Truth in Lending Statement, which is a federally required good-faith estimate of all the coasts associated with the mortgage.

31 Mortgage Application Checklist Lender requirements differ, but the following list includes the most common items that you and any co-borrower will need to supply to your lender. If you were pre-approved for a mortgage, you may have already completed some of this process. Your application will probably be approved faster if all required documents are submitted at the same time. Social Security Number(s) and Birth Date(s) Photo Identification Card Paychecks(s): most recent pay stub showing year-to-date earnings W-2 or 1099 tax forms: for the past 2 years Employers: names, addresses, and telephone numbers of any employers over the past 2 years Accounts: current statements of checking, savings, and other accounts Current Assets: Most recent statement of assets such as individual Retirement Accounts (IRAs), employee retirement accounts, certificates of deposit (CDs), stocks and bonds. If you own securities, your lender may require a current brokerage statement with names of the stocks, value per share, and number of shares owned. Liabilities: for each outstanding loan, provide the lender with the name and address of the creditor, monthly payment, and total balance due. Liabilities include auto loans, student loans, credit cards, and other installment debt. Current and Previous Addresses: If you currently own a home, provide your lender with the property address, current market value, current mortgage lender s name, account number, current monthly payment, and outstanding balance. If you rent, provide your current address, the name and address of the landlord or the management company, and, and the monthly rent. Provide the same information about previous residences. ( Usually this additional information is only required if you have lived at your current address for less than two years.) Sale contract: Bring along a signed copy of the completed Agreement to Purchase for the property you are buying, and amendments to the Agreement, a copy of the listing form for the property, the legal description of the property, and receipts for earnest money or down payment deposits already paid.

32 Special Situations Lenders will require some applicants to provide additional information under certain circumstances. Check the list below to see if any of these situations apply to you. Different lenders may have different requirements. Self-employed or compensated on a commission basis Provide your federal tax forms for the past two years, along with a current year-to date profit and loss statement. Employment and business locations of self employed must be independently verified. Tip income must also be verified. Separated or divorced Provide a copy of your divorce decree and separation agreement, including details on alimony or child support payments. If you receive alimony of child support and would like the lender to consider these monies as income, provide proof of this income for the last 12 months. Social security, pension, disability, or any form of public assistance benefits considered as income Provide a copy of an award certificate or a check from the issuing agency. Bankruptcy, foreclosure, or any judgements against you in the past seven years Provide information about the proceedings. For bankruptcies, documentation should include a copy of the bankruptcy discharge and a schedule of both debts and assets. Judgments against you should include an attorney s letter that explains the outcome of the proceedings. Department of Veterans affairs (VA) Loan application Provide your DD214 Form (discharge Papers) or your certificate of eligibility. Your lender may also ask you to provide documentation that seems odd to you. For example, if you have been a student, your lender may want a copy of your degree. Or, if the source of your down payment is a gift or money borrowed from relatives, your lender may request special documentation for these details. While all the forms and paperwork involved in applying for a mortgage may seem excessive, these are necessary steps for meeting various mortgage program requirements and ensuring that lenders are extending safe credit to consumers.

33 Other Important Considerations Points and rate options Some stated mortgage rates include points. A point is one percent of the amount of the mortgage. Lenders can charge borrowers a percentage of the loan amount equal to the number of points to cover the lender s costs. Sometimes borrowers pay higher points in exchange for lower interest rates. Changing your financial picture Note that your financial picture cannot change between the time you apply for a mortgage and close on the property, even after you have been approved. For example, don t buy a new car, purchase major appliances using credit, or change jobs during this time. Your financial position must be the same at closing as it was when you were approved, or it could prompt your lender to revoke their mortgage commitment.

34 Homeowners insurance The financial institution providing your mortgage will require you to obtain homeowners insurance before closing and provide proof of the policy. In some areas flood insurance is also required. Allow plenty of lead time before closing to secure homeowners insurance. Cost and coverage can very. When evaluating which companies policy is right for you, consider questions such as: What is and is not covered? How much will the insurance cost? How much is the deductible? Is the home in an area prone to hurricanes where wind insurance may be a separate policy Is the home in a flood zone where separate flood insurance is required? Escrow Accounts You will need to decide if you want to pay your property taxes and the homeowners insurance policy on your won, or wrap them into your monthly mortgage payments. Most lenders include a portion of the property tax from funds held in escrow. This assures payment of property taxes and help buyers smooth these substantial expenses out over 12 months. Bendrealestateworks@gmail.com If you would like to have a Preferred Lender assist you through the mortgage process.

35 7 Prepare for Closing Many important details must fall in place before you close on your home. Your agent will help you stay on track. Some of the most important details include: Home Inspections Complete a home inspection. Assuming this contingency was in your offer, schedule a through inspection of the property with a qualified home inspector. Your agent can assist you in identifying several inspectors to choose from. The inspector should provide you with a written report detailing any flaws found in the home, including information about the severity of his or her findings. When major defects are identified, it will help determine which, if any, should be corrected by seller. What is a Major Defect: any defect that would have a negative effect on the long term value of the home or the safety of it s inhabitants if not replaced or corrected. Often, it is best to get quotes for repairs and request dollar amount at closing. If the seller declines, you will have the option of the return of your deposit monies in full, or continue with the purchase. If severe problems are found, your contingency clause should permit you to cancel the contract without obligation. But also remember that no home is perfect and small repairs and maintenance issues should not derail the transaction or require another round of negotiations.

36 Request Attorney Review. If specifies in your offer, ask your attorney to review your sales contract and, if desired, schedule his or her participation in your closing. Finalize Your Mortgage. Make sure you have supplied you lender with all necessary documents and that your financing is in place for closing day. Get Ready to Move. Moving may be the biggest job you face in buying a home. Review Step 9 to get a jump on these preparations. Attend a Final Walk-through. A pre-closing walk-through is a final check to ensure that the home is in the same condition it was during the inspection, and to make sure all contracted items, such as appliances, are still in the home. The timing of the final walkthrough will very, depending on practices in your market. Prepare to Pay Closing Costs. When you applied for your mortgage, you received a good-faith estimate of closing costs. As closing approaches, determine exactly how much money you will be expected to bring to closing and what forms of payment are acceptable. Bendrealestateworks@gmail.com to request a list of licensed and recommended Home Inspectors.

37 8 Close Escrow WHAT IS A REAL ESTATE CLOSING? A closing is where you will meet at the escrow company for the purposes of signing the final escrow instructions, any loan documents, estimate of funds needed to close escrow, as well as your approval in writing of all of the inspections, etc. that I will already have reviewed and explained to you in detail during the escrow period. There should be no surprises for you because before this meeting I will have received and reviewed, on your behalf, every document prior to your signing. If everything was not in order, I would not have scheduled this appointment and closing for you. If financing the property, your lender will require you to sign a document, usually a promissory note, as evidence that you are personally responsible for repaying the loan. You will also sign a mortgage or deed of trust on the property as security to the lender for the loan. The mortgage or deed of trust gives the lender the right to sell the property if you fail to make the payments. At closing, you will be required to pay all fees and closing costs in the form of guaranteed funds, such as a Cashier s Check. Your agent or escrow officer will notify you of the exact amount at closing. IN SOME CASES THE LENDER MAY REQUIRE AN IMPOUND ACCOUNT Depending on the amount of your down payment, the lender will sometimes be required to set up an impound account, which is a separate account you pay into when making your mortgage payment. They will accumulate, on your behalf, the funds necessary to pay your property taxes, insurance and, in some cases, other expenses related to the property. If this is a requirement by your lender, we will already be aware of all of the details long before we prepare to close escrow.

38 What to Expect During Closing Earnest Money At the time you make a written offer, you should be prepared to make an earnest money deposit (the deposit that secures a buyer s offer). It will be made payable to the Title Company. Escrow and Initial Title Check Upon acceptance of the offer signed by both parties, an escrow will be opened with a Local Title Company. They will begin handling many of the details outlined in the Purchase Agreement. Plus, a preliminary title report will be generated, which confirms that the seller is the legal owner of record of the property, including all real estate taxes and special assessments. Disclosures, Inspections, and Contingencies The seller must disclose any material facts about the property. Disclosure of material facts can include any property defects or any lawsuits regarding claim to ownership on the property. We will work with you to arrange and order all of the necessary inspections. We will review and explain all inspections on the home. We will work to remove each contingency only when you fully understand what each of them means to you. Homeowner s Insurance It s your responsibility to obtain homeowner s insurance. Lenders always require the buyer to have proof of homeowner s insurance secured before they approve your loan. Insurance policies vary widely, so shop around. Our insurance partners can provide you with a free, no-obligation quote.

39 What to Expect During Closing Cont. Appraisal of Property The lender will arrange for the property to be appraised. The appraiser s report will describe the physical characteristics of the property, and comparable property values will be used to determine the value of the property. There will probably be a thorough interior and exterior inspection. Loan Approval Once all of the necessary steps are completed and your loan has been approved, the lender will notify the title company that they ve approved your loan request, and will send the loan documents to the title company so that the documents can be signed at the closing appointment. Cashier s Check In preparation for the closing appointment, you ll need to obtain a cashier s check or wire transfer for the amount of money due upon closing. The Title Company will provide you with the exact amount. Pre Closing Appointment Prior to closing the escrow, we will meet at the title company where you will sign all of the necessary title and loan papers in preparation to close escrow. Final Steps Once you sign-off, the transaction needs to be recorded by the county and the formal change of possession must take place. We will arrange for the transfer of the property keys and accessories. The For Sale sign and property lockbox will also be removed by the seller s agent.

40 WHILE YOU RE WAITING HERE IS WHAT IS GOING ON JUST FOR YOU The following is an overview of what is happening behind the scenes from the time you contract to buy your property until the day it closes. All of these activities need to coordinated with the right people and make sure the lines of communication are open and working smoothly. Earnest Money - Typically, the listing agent will deposit your earnest money in an escrow (neutral) account. The disposition of your deposit will be the agreed upon terms and conditions we outline in the Deposits paragraph of your Residential Real Estate Purchase Agreement and Receipt for Deposit. Document Review It is important to review all relevant documents and information, such as the Preliminary Title Report, Inspections, Deed Restriction, Grant Deed and many more reports and documents. We will advise you of our findings and make sure you understand each document and, in some cases, suggest you ask your attorney to review them on your behalf as well. We will essentially make sure the I s are dotted and T s are crossed to avoid any last minute challenges.

41 WHILE YOU RE WAITING CONT. Mortgage Approval - There are two components of this process that will require facilitation by the participating agents. The first is the appraisal. Your lender will hire an approved appraiser who they consider to be a neutral third party. This appraiser will visit the property and prepare a detailed report determining its fair market value. The listing agent will provide access to the property, yet has no input or influence into the final outcome. In the case of a condominium, there is often a questionnaire to be completed by the Management Company or a trustee of the condominium association. I will track this process so that there are no delays in obtaining a timely mortgage approval. Your attorney will be mindful of the mortgage commitment date as per the Purchase Agreement. Title Exam - The Title Company will have their title examiner check to ensure that the seller will be able to convey a clear and marketable title to the property as stipulated in the Offer to Purchase. This becomes the basis by which the Title Company is able to certify title, thereby making it possible for title insurance to be purchased. Your lender will require that you purchase title insurance, which will be arranged for you and appear as a closing cost on your settlement sheet (HUD1 Statement).

42 9 Move You found your new home. The contract has been signed and the closing date set. Now, it s time to move. You should, however, begin planning for moving day well in advance. Costs, Insurance, Packing, and Income Tax First-time and even repeat buyers are often surprised by the variety of expenses associated with moving, including everything from packing materials and utility connections to insurance for your valuables and the actual cost of the movers, or truck rental. You can eliminate or at least reduce many of the surprises and hassles of moving by investigating moving companies, estimating moving costs, and making a moving checklist. Start Packing Early Over time, many of us accumulate many things. So you might begin with the general assessment of your possessions, disposing of clothes, furniture, and other things that you no longer want or need. Simply put, the less you move, the less it costs. To reduce some of the costs of moving, consider holding a garage sale or donating items to charity. Bendrealestateworks@gmail.com to request you FREE Moving Checklist.

43 10 Celebrate Congratulations! You have worked hard to achieve the dream of homeownership. On behalf of the Bend Real Estate Works Team at Exit Realty Bend, We believe every family should feel confident when buying a home! If you would like more information or help with any of the topics discussed in this homebuyers guide or would like to request any of the FREE resources offered, Please send your request to: Bendrealestateworks@gmail.com This tool kit is not meant for solicitation to home buyers currently working with or under contract with another agent. These materials are not intended as legal, accounting, tax, financial, or other professional advice. The reader should seek professional advice with respect to specific situations.

44 FROM THE BEND REAL ESTATE WORKS TEAM OF EXIT REALTY BEND WE HOPE YOU FOUND THIS INFORMATION HELPFUL! Marshal Brown Realtor Cell: (541) Fax: (866) Text: Mbrown to Web: Exitrealtybend.com Cierra Johnson Realtor Cell: (541) Fax: (866) Text: Cierra to Web: Exitrealtybend.com PLEASE CONTACT US TO REQUEST ASSISTANCE OR MORE INFORMATIUON ON ANY OF THE INFORMATION PROVIDED IN THIS HOME BUYER TOOL KIT.