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What Home Buyers Should Know (10)

Understanding the type of loan you have will dictate the type of home you will be eligible to purchase. FHA and VA loans have additional inspection rigor vs. a Conventional Loan a. VA loans are mortgages guaranteed by the U.S. Department of Veterans Affairs. They’re for people who have served in the military. VA loans’ claim to fame is that they allow qualified home buyers to put zero percent down and get 100% financing. Borrowers pay a funding fee in lieu of mortgage insurance. b. USDA loans can be used to buy homes in areas that are designated rural by the U.S. Department of Agriculture. Qualified borrowers can put zero percent down and get 100% financing. You pay a guarantee fee and an annual fee in lieu of mortgage insurance. c. FHA loans allow for down payments as small as 3.5%. What’s more, the Federal Housing Administration can be forgiving of imperfect credit. When you get an FHA loan, you pay mortgage insurance for the life of the mortgage, even after you have more than 20% equity. d. Conventional loans is a traditional mortgage from a private lender. It is typically fixed in its terms and rate

The term “AS-IS” in real estate indicates that the home is being sold in it’s existing condition. The homeowner will not be making repairs nor offer credits for problems the property may have. The sellers still need to disclose what they know are issues with the home according to the “Residential Real Property Disclosure Report”.

The buyer has the responsibility of doing their own due diligence in any purchase. As long as the buyer receives the disclosures and does appropriate inspections the buyer should have a good handle on the condition of the property.

In some cases the seller will grant the buyer a Closing Credit which can be applied to closing costs, however please note that the Closing Credit is negotiated alongside the purchase price and terms. Closing Costs are often between 3%-5% and Sellers do not pay for the buyers costs as they have their own costs to pay, however Closing Cost credits can be negotiated within the purchase price.

Closing costs are the fees and expenses associated with the closing transaction of the home. Closing costs for homebuyers typically ranging from 3% to 5% of the purchase price.
As a buyer, your closing costs may include, but are not limited to:
– Attorney fees – real estate closings usually involve an attorney for the buyer
– Credit report fees – to qualify for a mortgage, your lender will check your credit and may pass this expense on to you
– Loan origination fees – this is a fee your lender charges for processing your loan’s
– Home Inspection – is a limited, non-invasive examination of the condition of a home. Home inspections are usually conducted by a home inspector who has the training and certifications to perform such inspections.
– Appraisal fees – an appraisal is required to verify that the sale price of the property
is justified
– Lender’s title insurance – sellers pay the majority of title insurance costs, but the policy that protects the lender is typically the buyer’s responsibility.
– Title search fees – a background check on the title is run to search for unpaid liens
on the property
– Escrow deposits — your lender will probably require you to pre-pay a few months of taxes and insurance to form a “cushion” in your loan’s escrow account
– Recording fees — these are paid to your city or county for recording your purchase.
– Underwriting fees — these are the cost of evaluating your loan application

a. Principle – is the amount of money you borrowed
b. Interest – is the fee the bank/lender charges for the use of their money/loan
c. Taxes – apply to the property itself and are based on the rates the city/county in which the property is in has determined. Taxes are a big part of owning a property, as they can cost the homeowner thousands of dollars per year. Taxes can be built into the mortgage via an escrow account however if not included in escrow you are responsible for timely payment on your own.
d. Insurance – lenders require that the property from which you are seeking a mortgage
are covered by homeowners insurance. In almost all cases, the price of this insurance is included into the monthly mortgage payments.

Understand where your property is located and whether or not it’s on a flood zone/plain. Homes in flood zones will require flood insurance which is an additional monthly expense outside of your regular home insurance.

If you have been pre-approved or you have applied for a home loan DO NOT make any major purchases (such as a car, appliances, furniture) during the home buying process as it may change your debt-to-income ratios which can disqualify you from purchasing a home.

Tax exemptions allow the homeowner a certain dollar amount or percentage of the home value from property taxes. Types of exceptions include:
– Homestead/Homeowner – apply to primary residences, not rental properties or
investment properties.
– Senior Citizen – provides tax relief by reducing the equalized assessed valuation of an eligible residence. This savings is in the form of a deduction on the second- installment real estate tax bill. The home must be the primary residence and the homeowner must be at least 65 years of age (other criteria may apply)
– Senior Freeze – allows qualified senior citizens to apply for a freeze of the equalized assessed value (EAV) of their properties for the year preceding the year in which they first apply and qualify for this exemption
– Disabled Veterans Homeowner – Veterans with a service-connected disability as certified by the U.S. Department of Veterans Affairs are eligible for this annual
exemption. It reduces by certain amounts the Equalized Assessed Value (EAV) on a disabled veteran’s primary residence, very likely lowering the tax bill.
– Disabled Person – this exemption provides disabled persons with an annual $2,000 reduction in the equalized assessed value (EAV) of the property.

Make sure to fully understand the tax history of the property as well as what you will be expected to pay once purchasing the home. The home you are looking to purchase may have tax exemptions that you may not qualify for therefore increasing the taxes you are expected to pay.

In most cases the buyer does not pay their realtor a commission, the realtor gets paid by the seller at the time the home closes. The seller in essence is paying a buyers realtor to bring them a buyer that will purchase their home. Buyers should keep in mind that a listing agent and/or the sellers agent doesn’t protect their interests that is what it’s very important for a buyer to have their own realtor who works for them and guides them through the home-buying process from beginning to end.

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