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A Home-Buying Guide

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A Home-Buying Guide MEHMET “MATT” HALICI Associate Broker Top 1% Nationwide Licensed in VA, MD & DC Cell: 202.431.1991 Office: 301.656.2500 Fax: 301.907.8572 www.mhalici.com E-mail: [email protected] “KNOWLEDGE IS POWER”
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Page 1: A Home-Buying Guide

A Home-Buying Guide

MehMet “Matt” haliciAssociate Brokertop 1% Nationwidelicensed in Va, MD & Dccell: 202.431.1991Office: 301.656.2500Fax: 301.907.8572www.mhalici.come-mail: [email protected]

“ K N O W L E D G E I S P O W E R ”

Page 2: A Home-Buying Guide

Matt halici l 202.431.1991 – 2 – www.mhrealtyplus.com

About Mehmet “Matt” HaliciAs certified Buyer Agents,I offer these advantages:

l Access to thousand of homes for sale Icansaveyoutimebylocatingtheonesthatsuitsyourneeds

l Correctly written contracts Iamskilledtechnicalwriterofrealestatecontracts.Apoorlywrittencontractwastes timeandisnotenforceable.

l Skilled negotiations on your behalf Iamtrainedandskillednegotiatorandwillapplymyexperienceonyourbehalftogetthe bestpossibletransactionbasedonyourneeds.

l Advice and counseling to protect your interests Price Deposits Financingterms,loancontingencies Personalproperty Conditionofpropertyinspections Titleinsurance Draftingcounteroffers

l Explain the seller’s counter offers Disclosureforagency,RESPA,FIRPTA Timeforacceptanceandmethodforacceptance Specialrequirements As-isclaims Possession Damages Surveys Homewarranties

l From sale to settlement Selectingthehomeinspector Theinspectionprocess Selectingtheattorney Selectingthelender Makingapplicationandfollowingup Alltheotherdetailsastheyarise Negotiatinganyproblems Goingtothesettlement!!! p

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Page 3: A Home-Buying Guide

Matt halici l 202.431.1991 – 3 – www.mhrealtyplus.com

A Warm Welcome from Jim Weichert

Formostpeoplethepurchaseofahomerepresentsmuchmorethanagoodfinancialinvestment.Buyingahomeistherealizationofadream-adreamtiedtoavisionofthefuturethatisfilledwithoptimismandjoy.

Fromthedayourfirstofficeopenedin1969,wehavebuiltourservicesaroundhelpingpeopleachievetheirvisionsofthefuturesmoothlyandwithaslittlestressaspossible.YouwillseethatreflectedinthemanygenuinelyhelpfulserviceswehavedevelopedandintheveryattentivewayWeichertSalesAssociateswillworkwithyou.Keepinmind,too,thatWeichert,Realtorsisatrue“fullservice”realestatecompany.ThatmeansyourWeichertSalesAssociatewillbetheretoguideyouthroughtheentireprocess,frommortgagepre-approvaltothedetailsofmovingin.

Sowelcometoweichert.com.It’syourconvenientportaltoourlistings,ourservices,andourpeople.Iwishyoueverysuccessinyourhomesearch--andajoyousfulfillmentofyourdreamsforthefuture.

Jim WeichertFounder and president

Page 4: A Home-Buying Guide

Matt halici l 202.431.1991 – 4 – www.mhrealtyplus.com

Since 1969, Weichert, Realtors has been perfecting a smarter approach to real estate focused on the needs, concerns, hopes and

dreams of our customers.

Weicherthasgrownfromasingleofficeintothenation’sleadingproviderofhomeownershipservices*byputtingcustomersfirst.Today,wecontinuetorefineourapproachinresponsetothechangingneedsandconcernsofpeoplelikeyou.

Tobeginwith,we’veturnedWeichertsalesofficesintotrue“one-stop”destinationsforthefullrangeofrealestateproductsandservices.Now,there’salwaysanexpertonhandtooffersolutionsandadviceonmortgages,insurance,andallthedetailsofmoving.Insteadofcallingan800number,youcanmeetfacetofacewithoneoftheseWeichertGoldServicesManagers.Inotherwords,wegobeyond“fullservice.”NoonecanmatchtheWeichertOpenHouseprogramorourpromiseofimmediateliveanswerstowebsiterequests.But,intheend,it’stheneighborhoodknowledgeandpersonalattentionfromourfriendlySalesAssociatesthatensureyourproblemswillberesolvedandyourdreamsrealized.

Weichert has more than 16,800 sales associates in over 360 company-owned and franchised sales offices in key markets throughout the U.S. A family of full-service real estate and financial services companies, Weichert helps customers buy and sell both residential and commercial real estate, and streamlines the delivery of mortgages and home and title insurance.

*Source:RealTrends2004surveyofleadingbrokers;includestotal2003volumeforrealestatesales,mortgage,insurance,andtitle.

Page 5: A Home-Buying Guide

Matt halici l 202.431.1991 – 5 – www.mhrealtyplus.com

The Home Buying Processl Home Buyer

l Select Agent

l Determine Purchasing Power: UnderstandBuyingProcess SelectAreas DetermineNeeds&Desires

l Preview Homes

l Make Offer

l Contingencies: HomeInspection Financing Othercontingencies

l Contract Acceptance

l Mortgage Application Credit&Appraisal

l Home Inspection

l Call Settlement Company

l Mortgage Approval

l Buyer Arranges Termite Inspection

l Contact Utility Companies

l Final Walk-through

l Settlement

l MOVE

Page 6: A Home-Buying Guide

Matt halici l 202.431.1991 – 6 – www.mhrealtyplus.com

What you should know about

Agency ?

Page 7: A Home-Buying Guide

Matt halici l 202.431.1991 – 7 – www.mhrealtyplus.com

Who Represents Whom?

OneofthemostcommonmisconceptionsthataresharedbyalargenumberofhomebuyersisthatwhenworkingwithaRealEstateAgent,heorshewill“automatically”representyouasabuyer.Aswewilldiscuss,unlessthisisspecificallydisclosedin

writing,inallprobabilitytheAgentwillberepresentingtheseller.

ThetraditionalrelationshiphasbeenthataRealEstateAgent’sprimaryloyaltywastotheselleroftheproperty.ThisrelationshipwasineffectwhethertheAgentwasthelistingagentorworkingwithabuyer.Thissituationcausedmanyhomebuyerstobeconfused:theyassumedthattheAgentthathadbeendrivingthemaroundshowingthemhousesforthelast3weekswasrepresentingthem.Inreality,theAgentwasrepresentingtheownersofthehousestheysaw,andwasboundtorevealtothoseownersanyinformationheorsheknewaboutthebuyers.

Buyer’sAgency,whichisalmostuniversallyavailablenow,changedallthat.Thebuyernowhasachoiceinrepresentation:theAgentwithwhomtheyareworkingcancontinuetorepresentthesellerinthetransaction,ortheAgentcouldrepresentthemasbuyers.Thebuyerisnowabletocompeteonamorelevelplayingfield.

Althoughtherearestatetostatevariations(pleaseverifythesituationinyourparticularlocality),thefollowingisabasicsummaryofthetypesofAgency,andwhotheAgentrepresents.

SELLER AGENCY: The“default”situation.Unlessdisclosedtothecontrary,allAgentsinvolvedinaRealEstatetransaction(andtheirBrokers--withwhomalistingagreementisactuallywith)represent,andowetheirallegiance,totheseller.

BUYER AGENCY: WhenanAgentrepresentsthebuyer,thatAgent“rejects”theimplicitselleragencyandthusowesloyaltytothebuyer.

DUAL AGENCY: Thisoccurswhen2Agents--orthesameAgent--workingforthesameBrokereachrepresentabuyerandasellerinatransaction.Thissituationmustbedisclosedtoboththebuyerandtheseller.Privilegedinformation(e.g.thepricethatabuyerwillpayorasellerwillsellat)cannotbedisclosedtotheotherpartywithouttheexpresspermissionofthatparty.

Page 8: A Home-Buying Guide

Matt halici l 202.431.1991 – 8 – www.mhrealtyplus.com

What it means to you…

Ifyouleavetheagencyquestion“as-is”,yourAgentwillautomaticallyrepresentthesellerinthetransaction(althoughitisverylikelythattheywillsuggestBuyerAgency.)IftheAgentdoesnotrepresenttheseller,thenyoucanoptforBuyerAgency.Ifthehouseinwhich

youareinterestedislistedbythesameBrokerasyourAgent,thenyouhaveanautomaticDualAgencysituation.Tosumitup,ifyouwantfullrepresentation,insistonBuyerAgency.

Real estate is the most important investment. Don’t trust just anyone.

When you work with me you get:

l A much wider choice of properties--every home that is listed with any Real Estate Agency in MRIS.com which is only for realtors

l I have over twenty years of experience in real estate and real estate negotiations.

l Access to thousand of homes for sale

l Advice and counseling to protect your interests

l Skilled negotiations on your behalf

l Correctly written contracts

l Explain the seller’s counter offers

l From sale to settlement

Page 9: A Home-Buying Guide

Matt halici l 202.431.1991 – 9 – www.mhrealtyplus.com

Why should you have a Buyer’s Agent?

IfyouarecurrentlyworkingwithaRealEstateAgentwhohasnotexplainedtoyouhowBuyersAgencyworks,askyourself“whynot?”ABuyer’sAgentisrequired,bylaw,tohelpyoupurchaseahouseatapricethatisrightforyouandthenrepresentyourinterestsin

everystepofthehomebuyingprocess.ASeller’sAgentisrequired,bylaw,togetsomeonetobuythehouseforasmuchmoneyaspossibleasquicklyaspossibleandthenensurethesellers’interestsarerepresentedthroughouttheprocess.IfyouragenthasnotenteredintoaBuyersAgencyagreementwithyou,she/heisnotonlyallowed,butOBLIGATEDtoworkfortheSeller!

YourBuyer’sAgentisaprofessionalRealEstateAgent.AsRealEstateAgents,theyaretrainedandlicensedinrealestatelaw.Theyhavetrainingandexperienceinbuyingandsellingrealestategainedfromthecompanytheyworkwith.Theyknowthetricks-of-the-trade,marketingtechniquesandcommonsalesmethods.Inshort,Buyer’sAgentsareconsideredexpertsintheirfield.TheSellershaveexpertsworkingforthemandpaythemhandsomelytodoso.GoingtobuyahousewithouthavingaBuyer’sAgentonyoursideislikebeingincourtwithoutalawyerandrepresentingyourselfwhilethepersonsuingyouhasanentirelawfirmworkingforthem!Youareatadisadvantage.

Page 10: A Home-Buying Guide

Matt halici l 202.431.1991 – 10 – www.mhrealtyplus.com

Why use a Real Estate Agent?

Youcouldfixyourcaronyourown.Surelymanypeopleknowhowtochangetheoil.Buthowmanypeopleknowhowtofixatransmissiontimingbeltorreplaceacarburetor?Andevenifyoudidknowhowtodothosethings,doyouhavethetoolstodothejob?

Andmostimportantly,doyouhavethetime?Theanswertothesequestionsisusuallyno.Thevastmajorityofuswouldprefertopayanexperttodothejob,doesitright,andinamuchshorteramountoftimethanifwedidthejobourselves.

Intermsofbuyingorsellingahome,manypeopleattempttogoitalone.Thethoughtisthattheywillsavemoneybynotpayinganagent.

InregardstoBuyer’sAgents,wealreadydiscussedthathavingaBuyer’sAgentcoststhebuyernothing.IfthereisnoBuyer’sAgent,theSeller’sAgentandhis/hercompanygettokeeptheentirecommission.YourBuyer’sAgentisatrained,licensed,experiencedRealEstateAgentwhoknowsthetricks-of-the-trade,thecommonsalesmethods,andthenot-so-commonmarket-ingtechniquesusedbySeller’sAgentstosellhouses.Havingaprofessionallikethatwhois,bydefinition,legallyobligatedtorepresentyouandyourbestinterestsisinvaluable.Anditcostsyounothing.

Seller’showever,havetomakethesamedecisionasinthecarexampleabove.Mostpeoplewhotrytoselltheirhomeontheirownas“ForSalebyOwner”,a.k.a.FSBO(commonlypronounced“fiz-boe”),findthattheysimplydon’thavethetimenormoneytoadvertise,tostayhomeontheweekendstoholdopenhouses,orgethomeearlierintheeveningeverysinglenighttoanswerthephoneandshowthehousetoanyonewhowantstoseeitwhenevertheywanttoseeit.

ThevastmajorityofFSBO’s,about72%,accordingtotheNationalAssociationofRealtors,enduplistingtheirhousewithaSeller’sAgent.Theyfigurethatasoldhomeminusthecommissionismoremoneythannotsellingthehomeatall.Plus,thefactisthataqualifiedandaggressiveSeller’sAgentcanusuallysellthehouseformoremoney,evenminusthecommissionthey’repaid,thanaFSBOwouldsavesellingitontheirown!AggressiveSeller’sAgentswhoaretryingtogetsomeonetobuythathomeforasmuchmoneyaspossibleasquicklyaspossiblearedoingtheirjob.Theyareworkingintheseller’sbestinterests.Remember,thenameyouseeonthe“ForSale”sign,nexttoapictureofahouseonline,orunderanadinthepaperormagazineisalmostalwaystheSeller’sAgentandislegallyobligatedtoansweryourquestionsassuch.

Page 11: A Home-Buying Guide

Matt halici l 202.431.1991 – 11 – www.mhrealtyplus.com

What to look for in an Agent?

Anunderstandingofyourneeds.

Awillingnesstoworkwithyouuntilyourneedsarefulfilled.

Asenseofprofessionalism.

Someonewhoisdedicatedtotheirprofession.

Afamiliaritywiththeareainwhichyouhaveaninterest.

Afamiliaritywiththepricerangeinwhichyouhaveaninterest.

Professionaldesignations:forexample,GRI--GraduateoftheREALTORS®Institute,orCRS--

CertifiedResidentialSpecialist.

Strongreferencesfrompreviousbuyers.

Questions to ask a prospective Agent

HowlonghaveyoubeeninRealEstate?

Areyouafulltimeagent?

Areyoufamiliarwiththeareainwhichwewanttolook?

Howmanyhomesalesdidyouparticipateinlastyear?

Whatistheaveragesoldpriceofthehomesyousoldlastyear?

Doyounormallyworkwithsellersorbuyers?

Howmanybuyersareyoupresentlyworkingwith?Howmanysellers?

Wheredoyoufeelyourstrengthslie?

What3buyersthatyouhaveworkedwithcanyougivemeasreferences?

Page 12: A Home-Buying Guide

Matt halici l 202.431.1991 – 12 – www.mhrealtyplus.com

What you should know about

Home Buying?

Page 13: A Home-Buying Guide

Matt halici l 202.431.1991 – 13 – www.mhrealtyplus.com

What kind of home do you really want?

Shoppingforahomecanbeoneofthemostenjoyable,exhilarating,andhappyexperiencesinlife.Itcanbethemostdifficultoneattimes.IwillbeguidingandcoachingyouaregularbasiswheneverIfindahomethatfitsyourcriteria.Icanshowyouanyhomeon

themarketanytime,anywhere.

Iwillhaveongoingdiscussionswithyoutodetermineexactlythekindofhomeyouareseeking.Herearesomequestionstoponderasyoubegintodefinethekindofhomeyoureallywant:

1.Whatismoreimportanttoyou,thequalityandsizeofthehomeorthelocationandattributesoftheproperty?

2.Whatstyleortypeofhomeinterestsyoumore,contemporaryorhistoric,ranchorcolonial?

3.Howmanybedroomsandbathsdoyouabsolutelyneed?

4.Wouldyouconsiderbuyingahomethatisinneedofsomerenovationorexpansion?

5.Whatcanyoucomfortablyafford?

Takenotesonwhatyoulikemostaboutthehomesyousaw:

HOME:___________________________________________PRICE:________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

HOME:___________________________________________PRICE:________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

HOME:___________________________________________PRICE:________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Page 14: A Home-Buying Guide

Matt halici l 202.431.1991 – 14 – www.mhrealtyplus.com

10 biggest home-buying mistakes

Basedon25yearsofhome-buildingexperiencefor30,000people,Weeklyoffersthese10biggestmistakesinhomebuying:

Not doing your homework.Knowledgeispower.TremendousinformationisavailableontheInternet.Thereisnoexcuseforenteringthemarketunprepared.

Trying to make a shrewd investment.Peopleneedtobuybasedonwhatfitstheirfamily.Don’ttrytoguesswhatwillhappentothemarket.

Choosing a poor location.Evenwithinaneighborhood,locationmatters.Isitonthebusieststreet?Isthereashoppingcenteroutthebackwindow?

Overlooking an inferior floor plan for an attractive exterior. Itmayhavegorgeouscurbap-peal,butyoudon’tliveonthelawn.Nomatterhowattractivetheexterior,youneedalivablehome.

Overlooking how the house will function for your family. Howdoyoureallylive?Doyoure-allyneedaformaldiningroomandlivingroom?Wouldyoubehappierwithaneat-inkitchenandagreatroomandadentouseasahomeoffice?Thehouseonlyneedstofitonefamily--yours.

Not having the home properly inspected in a resale. Thisisnotthetimeforsurprises.Getaninspectionfromaqualified,respectedprofessional.

Not checking out the builder’s reputation on a new home.Talktothreeorfourpeoplewholiveinthebuilder’shomesandseewhattheyhavetosay.Ifonebuilderdidallthehousesinaneighborhood,talktotheresidentsandgettheirinput.(It’salsoagreatwaytoseewhatyourneighborswouldbelike.)

Not getting what you want because you’re impatient.Thisisabigdecision.Youneedtime.Impatientdecisionscanleadtomistakes.Waitingforabettermarketandinterestrates.Ifyoucanaffordahomeandyoudon’tmakethatpurchase,you’lllosethebenefitoftaxdeductions,buildinghomeequityandtheappreciationinvalue.

Page 15: A Home-Buying Guide

Matt halici l 202.431.1991 – 15 – www.mhrealtyplus.com

What is involved in making an offer?

Onceyouhavelookedatanumberofhousesandhavefoundthehousethatmeetsyourneedsanddreams,youwillprobablyfindyourselfgettingemotionallyinvolved.Youmayimaginemovingyourfurniturein,plantingflowersandhostingyourfirstbig

holidayparty.Buttrynottogetattachedprematurely.Therearenumberofstepsyoumusttakebeforeyouareholdingthekeysinyourhand,andyouneedtothinkclearlyandobjectivelyatthispointsothattheofferyoumakeisarealisticone.

WhatshouldIoffer?Thisisthequestion.Therearenumberoffactorsthatwillaffecttheof-feryoumake.Supplyanddemand,theconditionofthehome,howlongthehousehasbeenonthemarket,andyourpersonalcircumstanceswithregardtohowsoonyouneedtocloseonahomeallcomeintoplaywhenmakinganoffer.Inanactivemarket,youarelikelytoloseoutbymakingalowbid.Ifmultiplebidsareanticipated,itiswisetogowithyour“bestoffer”.YourAgentwillpresentyourofferinwriting.Toshowthatyourintentionsareserious,itiscustom-arytosubmittheofferwithadeposit.Ifyourofferisaccepted,yourdepositisplacedinatrustaccount.Ifnot,depositwillberetunedtoyou.Ifthesellercounteroffers,youmayagreetothatpriceandterms,ormakeyourowncounteroffer.Onceyouandtheselleragree,bothsidesini-tialthefinalpriceandtermsshownontheagreementofsale.

Thefinalcontractwillspecifytheitemsinthehomeincludedorexcludedinthesale,aswellasanyadditionalprovisionseithersidewantstohaveaspartofthecontract.Datesforcontingen-ciessuchasobtainingfinancing,arealsofilledinbeforethecontractissigned.

Aspartofyoursalescontract,youwillagreetoobtainfinancingwithinaspecifiedperiod.Ifyouareunabletosecurefinancing,thecontractbecomesnullandvoid.

Itisstandardforthebuyertopayforacomprehensivehomeinspection.Accompanyingthehomeinspectorisrecommendedforlearningallaboutthehouse,includingsuchbasicsasthelocationofthemainwatershut-offandelectricaldistributionboxes.

Mortgagelenderstypicallyrequiretermiteinspection.Theresponsibilityforanyrepairsbasedininspectionissubjecttonegotiationsbetweenbuyerandseller.

Page 16: A Home-Buying Guide

Matt halici l 202.431.1991 – 16 – www.mhrealtyplus.com

What you should know about

Mortgage?

Page 17: A Home-Buying Guide

Matt halici l 202.431.1991 – 17 – www.mhrealtyplus.com

What is a mortgage?

Amortgageisalong-termloanthataborrowerobtainsfromabank,thrift,independentmortgagebroker,onlinelenderoreventhepropertyseller.Thehouseandthelanditsitsonserveascollateralfortheloan.Theborrowersignsdocumentsatclosingtime

givingthelenderalienagainsttheproperty.Ifthatborrowerdoesn’tmakepaymentsasagreed,thelendercantakethehomethroughforeclosure.

PAY OUT OvER TimEBecausemortgagesaresuchlargeloans,consumerspaythemoffoverlongperiods–usually15to30years.Theirmonthlypaymentsgraduallywhittleawaytheprincipalbalance.

Amonthlymortgagepaymentissometimescalleda PiTi payment.That’sbecauseeachonecoversaportionofthefollowingfourcosts:

Principal–theloanbalanceinterest–interestowedonthatbalanceReal estate taxes–taxesassessedbydifferentgovernmentagenciestopayforschoolconstruction,firedepartmentservice,etc.Property insurance–insurancecoverageagainsttheft,fire,hurricanesandotherdisasters

Borrowerscanchoosetopaytheirrealestatetaxesandinsuranceinlumpsumswhentheycomedue,ratherthaninmonthlyinstallmentstotheirescrowaccounts.Dependingonthekindofmortgageaborrowerhas,themonthlypaymentmayalsoincludeaseparatelevyforprivatemortgageinsurance(PMI)orgovernment-backedmortgageinsurancepremiums.

Thebreakdownofeachpayment(theamountthatgoestowardprincipal,interest,etc.)changesovertimebecausemortgagesarebasedonarepaymentformulacalledamortization.That’safancytermmeaningthelenderspreadstheinterestyouoweonthemortgageoverhundredsofpaymentssothattheoverallloanisasaffordableaspossible.

Page 18: A Home-Buying Guide

Matt halici l 202.431.1991 – 18 – www.mhrealtyplus.com

Howdoesamortizationwork?Here’showtheprincipalandinterestchangeoverthelifeofaloan:

Here’s how the principal and interest change over the life of a loan (30-year, 6.0% fixed-rate mortgage of $500,000)

Payment Principal Payment Interest Principal New number balance amount paid applied balance

1 $500,000.00 $2,997.75 $2,500.00 $497.75 $499,501.25 60 $465,271.78 $2,997.75 $2,326.36 $671.39 $464,600.39 120 $418,428.62 $2,997.75 $2,092.14 $905.61 $417,523.02 240 $270,017.93 $2,997.75 $1,350.09 $1,647.66 $268,370.27 359 $5,950.84 $2,997.75 $44.52 $2,953.23 $2,982.84

Source:Bankrate.comonJanuary25,2008

Mortgageescrowaccountsexisttohelpborrowersaccumulatemoneyforpropertytaxesandhomeowners’policypremiumsalittleatatime.Escrowcanhelpavoidfinancialsurprisessuchasmissedpaymentstothegovernment,butfoul-upscanhappenandborrowersneedtokeepacloseeyeonwhatmoneyisgoingwhere.

Astaxesandinsurancepolicybillschange,sowillescrowpayments.Mostlendersrunananaly-sisprogrameachyeartoseewhethertheamountaborrowercontributedoverthecourseofthepast12monthswasenoughtocoverallthetaxandinsurancebillsdueduringthatperiod.Customersreceiveatranscriptoftheresultsshowingwhatwaspaidoutandwhatwascollected.

Page 19: A Home-Buying Guide

Matt halici l 202.431.1991 – 19 – www.mhrealtyplus.com

Which mortgage option is better for you: adjustable or fixed?

Thereareseveraldifferenttypesofmortgages.ThemostcommonaretheFixedRateMortgage(FRM)andtheAdjustableRateMortgage(ARM).ThemostcommonmortgagesoughtbyfirsttimehomebuyersisaFixedRate,30yearmortgage.Tohelp

youunderstandeachtypeofmortgage,we’vegivenabriefexplanationforcomparisonbelow.

FIxEd RATE - 30 YEARSThisisthemostcommonlyusedmortgageplan.Yourmonthlypaymentsarelowerthantheywouldbeonashorter(15yearFRM)termloan.Theinterestrateislockedinwhenyousecurethemortgageanddoesnotchangeoverthelifeoftheloan.

Advantages: Fixedmonthlypaymentsoverthelifeofthemortgage.Longerlife,lowerpayments.Fixedinterestrateoverthelifeofthemortgage.Canrefinanceifratesgodown

Disadvantages: Interestratehigherthan15yearFRMandVRM.Interestratedoesnotchangeifratesgodown.Totalinterestpaidoverthelifeoftheloanismuchhigherthanashortertermmortgage.

FIxEd RATE - 15 YEARSAlsobecomingverycommon,the15yearmortgageresultsinhighermonthlypayments,butalowerinterestrate.

Advantages:Fixedmonthlypaymentsoverthelifeofthemortgage.Fixedinterestrateoverthelifeofthemortgage.Totalinterestpaidoverthelifeofthemortgageismuchlowerthanthatofa30yearFRM.

Disadvantages:Shorterlife,higherpayments.Interestratedoesnotchangeifratesgodown.Smallertaxdeductionbecauselessinterestispaid.

Page 20: A Home-Buying Guide

Matt halici l 202.431.1991 – 20 – www.mhrealtyplus.com

AdJuSTABlE RATE MoRTgAgE (ARM)Anadjustableratemortgagehasafixedinterestrateatthetimethemortgageissecured.Atthestartoftheloan,thepaymentisalsofixed.Neithertheinterestrate,northepaymentarefixedforthelifeofthemortgage,however.Aftertheinitialfixedperiod,boththeinterestrateandthemonthlypaymentsareadjustedtoreflectthethencurrentmarketinterestrates.Thecalculationstodeterminetheadjustmentisatthediscretionofthelender,eachusingtheirownformulaandindex.

Advantages:Lowermonthlypaymentatthebeginningoftheloan.Ratesandpaymentsmaygodownifratesgodown.Aborrowermayqualifyforalargerloan.

Disadvantages:Higherrisk.Paymentsmayriseasratesrise.

Adjustable-ratemortgagescanbeverytemptingtohomebuyers,yettheycarryagreatdealofuncertainty.Fixed-ratemortgagesofferrateandpaymentsecurity,buttheycanbemoreexpen-sive.HerearesomeprosandconsofARMsandfixed-ratemortgages:

All of these things should factor into your decision between a fixed-rate mortgage and an adjustable one. But there are other important questions to answer when deciding which loan is better for you:

1. How long do you plan on staying in the home?Ifyou’reonlygoingtobelivinginthehouseafewyears,itwouldmakesensetotakethelower-rateARM,especiallyifyoucangetareasonablypriced3/1or5/1ARM.Yourpaymentandratewillbelowandyoucanbuildupmoresavingsforabiggerhomedowntheroad.Plus,you’llneverbeexposedtohugerateadjustmentsbecauseyou’llbemovingoutbeforetheadjustablerateperiodbegins.

2. How frequently does the ARm adjust, and when is the adjustment made?Aftertheinitialfixedperiod,mostARMsadjusteveryyearontheanniversaryofthemortgage.Thenewrateisactuallysetabout45daysbeforetheanniversary,basedontheindexatthattime.Butsomeadjustasfrequentlyaseverymonth.Ifthat’stoomuchvolatilityforyou,gowithafixed-ratemortgage.

Page 21: A Home-Buying Guide

Matt halici l 202.431.1991 – 21 – www.mhrealtyplus.com

3. What’s the interest rate environment like?Whenratesarerelativelyhigh,ARMsmakesensebecausetheirlowerinitialratesallowbor-rowerstostillreapthebenefitsofhomeownership.Thechancesarefairlygoodthatrateswillfalldowntheroadtoo,meaningborrowerswillhaveadecentchanceofgettinglowerpaymentseveniftheydon’trefinance.Whenratesarerelativelylow,however,fixed-ratemortgagesmakemoresense.Afterall,7percentisagreatratetoborrowmoneyatfor30years!

4. Could you still afford your monthly payment if interest rates rise significantly?Ona$100,000,1-yearadjustable-ratemortgagewith2/6caps,your5.75percentARMcouldendupat11.75percent.

Page 22: A Home-Buying Guide

Matt halici l 202.431.1991 – 22 – www.mhrealtyplus.com

Arranging the financing…

THE MoRTgAgE PRocESS Theprocessofobtainingamortgagecanbebrokendowninto5distinctsteps.Thissectionpro-videsaverybriefoverviewofthosesteps.

1. Deciding Which Loan Type is Right For You:Therearenearlyasmanyloantypesastherearetypesofbuyers.Wewillonlycovertheverybasictypeshere.

Fixed Rate: Interestratedoesnotchangeoverthelifeoftheloan.

Adjustable Rate: Interestratechangeswiththegeneralinterestrates.

Government Guaranteed: Theseusuallyprovideaslightlylowerinterestrateandareguaran-teedbyagovernmentagencysuchastheFHAandtheVA.Rememberwhenchoosingamortgagetype,totakeintoconsiderationthatwhilesomeloansmaycarryverylowinterestratesatthebeginning,butmaynotbethebestchoiceoverthetermoftheloan.Choosecarefullyandtalktoyourlender.

2. Apply For A Loan:Applyingforaloancaneitherbedonebeforeyouhavefoundyourhome,orafteryou’vesub-mittedapurchaseoffer.Pre-approvalgivesyoutheaddedbenefitofknowingexactlyhowmuchyoucanspendandcanhelpyouavoidthecommonpitfalloflookingathomesthatarebeyondyourmeans.Thereisalsotheaddedadvantageofincreasingtheseller’sconfidencethatyourloanwillinfactbeapprovedifyouhavepre-approval.Thismaymakethepresentownerofyourdreamhomesomewhatmorewillingtoacceptyourpurchaseofferandmayspeeduptheentireloanprocess.

3. Loan Processing:Uponcompletingandsubmittingyourpaperwork,severalthingshappenalmostimmediately.Anappraisalofthepropertytoensurethatthebuyingpriceiswithinrangeoftheproperty’svalue.Withinthreedays,youwillreceiveapacketofmortgagedocuments.Thispacketwillcontainitemsthatwillrequireyourcarefulattentionandunderstanding.Ifyouneedhelpwithanyofthesepapers,contactyourlender,yourrealestateagent,oryourattorney.It’simportanttofullyunderstandeverythingpertainingtoyourmortgage.Assoonasyouhaveappliedforthemortgage,youshouldfindalicensedsettlementagent,possiblyyourattorney,torepresentyouattheclosingofyourloan.

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4. Loan Approval:Ifyouhaven’talreadybeenpre-approved,anunderwriterwillanalyzeyourinformation,lookatyourincomeandexpenses,yoursavings,yourcreditrating,andthepropertyitself.Thedecisionwillbemadetoeitherapproveordenyyourapplication,generallywithinjustafewdays.Iftheloanisapproved,aclosingorsettlementdatewillbeset.

5. Closing or Settlement:Thisisthemomentyou’vebeenwaitingfor.Ontheappointeddate,you,anyco-applicants,andyoursettlementagent,willsitdownwiththelendinginstitutionsrepresentatives.Loandocu-mentswillbeexplainedandyouwillreadandsignthem.Yoursettlementagentcanassistyoubyansweringanyquestionsyoumighthaveaboutthedocumentsyouaresigning.Theloanamountwillthenbesenttoanescrowaccountorsenttoaclosingagent.Thisvariesfromstatetostate.Atthispointyournewhomeawaitsyousostartpackingandplanning.

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What is a credit score and what is it designed to do?

AcreditscorenumberisoftencalledaFICOscore,forFair,IsaacandCo.,theCaliforniaCom-panythatdevelopedthesystemuponwhichitisbased.

Thescoreissupposedtodistillalltheinformationinyourcreditreport,usingaformulatocal-culateasinglenumberthatindicatesyourcreditworthiness.

It’sdesignedtogivelendersafast,accuratepredictionoftheriskinvolvedingivingyoualoan.Lendershaveattestedtothescore’svalueinstreamliningtheunderwritingprocessandcreatingmoreopportunitiesforconsumerstogetmortgages.

Scoresrangefromthe300stoabout900,withthevastmajorityoffolksfallinginthe600sand700s.Thehigherthescore,thebetter.

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Items Needed for a loan Application

iNCOmEEmploymentinformationfortwofullyearsGrossmonthlyincomeW-2’s(ifavailable)Proofofpensions,retirement,disability,orSocialSecurityProofofincomefromrentals,investments,etcProofofchildsupportoralimonypaid/receivedYear-to-datepaystubIfself-employedprovide1040taxReturnsforfulltwoyears

CREDiTORSEachcreditor’sname,address,andtypeofaccountAccountnumbersMonthlypaymentsandapproximatebalancesAmountofchildcareexpenses

BANKiNGNameandaddressesofsavingsinstitutionsAccountnumbersofallaccountsTypesofaccountsandpresentbalances

OTHER DOCUmENTS NEEDEDListofassetsinstocks,bonds,landandetcLifeinsurancecashvalueCopyofsalescontractifapplicantissellingapropertySocialSecuritynumbersofallapplicantsVeteransCertificateofEligibility&DD14Cashorcheckforapplicationfee

FROm REAL ESTATE AGENTCopyofthesalescontractCopyoflistingprintoutforpropertytobepurchasedInstructionsforappraisertogetintotheproperty

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Ready to buy…

10 QuESTIoNS To ASk WHEN APPlYINg FoR A MoRTgAgE

Knowingwhattoaskyourlenderwhenyou’rereadytoapplyforamortgagewillsaveyoulotsofmoney,stressandheartache.Getanswersforeachofthesequestionsbeforesigningyourmortgageapplication.

1. What is the interest rate on this mortgage?Toknowexactlywhatyou’llbepayingininterestoverthelifeoftheloan,youneedtoknowtherate.Thisisthemostimportantfiguretoobtain.

2. How many discount and origination points will i have to pay to get this rate and loan?Lenderscanchargepointsthatloweryourinterestrateandpointsthatprovidenobenefitwhatsoevertoyou.Findouthowmanyyou’llbeexpectedtopayfortheloanandwhichkindofpointsthey’llbe.

3. What closing costs will be charged on this loan, and will you provide the “good faith esti-mate” of those costs up front?Mortgagescomewithfeesforvariousservicesthatlendersandotherpartiesinvolvedinthetransactionprovide.Youneedtofindoutwhatyou’llbechargedasearlyaspossible.Manyexpertssaythatyoushouldn’tusealenderorbrokerunlessthatpersonwillprovideagoodfaithestimateupfront.

4. When can i lock in the interest rate and what will it cost me to do so?Theinterestrateofthemortgageyou’reapplyingformaygoupordownbetweenthetimeyouapplyandthetimeyouclose.That’swhyyoumaywanttolockintherateforaspecifiedperiod,ratherthanlettheratefloatuntiltheclosing.Besuretoaskthelenderifthereisanyfeeforlockingintherateandwhetheryoucanalsolockinpoints.

5. is there a prepayment penalty on this loan?Theprepaymentquestionismostimportantforloanshopperswithless-than-perfectcreditbe-causepenaltiesaboundinthesubprimelendingworld.Butevenconventionalborrowersshouldaskaboutanyprepaymentpenaltiesthatmayapply.Insomecases,theycangetlowerratesbyacceptingpenaltiesontheirloans.

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Findoutthedurationofanypenaltyperiodandhowthefeewouldbecalculated.Somepenal-tiesare1percentoftheloanamount;othersareequaltosixmonthsworthofinterest.Someapplyonlywhenyourefinanceorreducetheprincipalbalanceoftheloanbymorethan20percent;othersalsowillkickinifyousellthehouse.

6. What is the minimum down payment required for this loan?Dependingontheamountofyourdownpaymentanditsrelationtothepriceofyourhome,youmightbechargeddifferentinterestratesorquoteddifferentloanterms.Loansmadeathighloan-to-valueratioscancostmorethanloanswithlargerdownpayments.Still,customerswithgoodcreditwhoarewillingandabletopayprivatemortgageinsurance(PMI)cangetconven-tionalloanswithdownpaymentsthataremuchsmallerthan20percent.

7. What are the qualifying guidelines for this particular loan?Thequalifyingguidelinescanrelatetoyourincome,employment,assets,liabilitiesandcredithistory.Somefirst-timehomebuyerprogramsandgovernment-sponsoredloanshaveeasierqualifyingguidelines.

8. What documents do i have to provide?Youwillneedtoprovideproofofincomeandassetstogetamortgageloan.Findoutwhatdocu-mentswillberequiredinyourparticularsituationbyaskingyourlender.

9. How long will it take to process my application?Thisvariesfromlendertolender.Itoftendependsonhowmuchbusinessyourparticularlenderisdoingandhowmuchbusinessthemarketisseeingasawhole.Whenborrowersareknockingdowndoorsallovertown,underwritingdepartmentsbackup,appraisalstakelongertoobtainandotherbottlenecksdevelop.Getarealisticestimate,andusethattofigureouthowlongaratelockyou’llneed.

10. What might delay the approval of my loan?Ifyouprovidethelenderwithcomplete,accurateinformation,everythingshouldgosmoothly.However,therecouldbeadelayifthelenderdiscoverscreditproblems,whichiswhyitiscriti-caltogetyourcreditinorder.

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Your mortgage broker “to-do” list

• Getadescriptioninwritingoftheexactprogrambeingoffered.Becausemanypeoplewhogotobrokersaregettingspecializedmortgagesthatmaynotbeasstraightforwardas30-yearfixed-rateloans,it’sespeciallyimportanttoknowwhatyouwantandknowifthat’swhatyou’rebeingoffered.Thatway,youcancomparerates,feesandpointsonanapples-to-applesbasis.

• Makesureyougetadetailedgood-faithestimateandcheckthatagainstyourfinalbillbeforeclosing.Brokersaresometimespaidbyboththelenderswhounderwritethemortgagesandtheconsumerswhogetthem,andit’simportanttolookatthedocumentstomakesurethebrokerisn’tgettingpaidtoomuchordouble-chargingyou.

• Ratelocksfromabrokercanbeabigtrip-upifyou’renotcareful.Getproofintheformofasigneddocumentthatthelockhasbeenexecutedifthat’swhatyouwanttodo.Keepinmindthisusuallyhastotakeplaceduringbusinesshoursforthelocktobeeffectivethatday.Missedfaxesorothersnafuscandelaythetransactionandleaveyouwithahigherrateifyou’renotontopofthings.

• Thinkreferral,referral,andreferralwhenit’stimetofindabroker.It’sgoodtohaveabrokerwho’snice;it’sbettertogetratesandcoststhatarereasonable.

• Considercheckingtoseeifyourbrokerormortgagebrokeragehasfacedstateregulatorysanctionsinthepast.Moststatesmaintainsomekindoflistofpeopleandcompanieswhohavebeenfinedorhadtheirlicensesrevoked.

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Tax Benefits of Home ownership

Purchasingahomecanbringwithitincometaxbenefitsthatareworthyofconsiderationwhendecidingwhethertobuyahome.Yes,buyingahomeisaratherlargeexpense,butwhenyouthinkaboutthefactthatthemoneyyoupayouteachyearintaxesbringslittle

tangiblereturn,whilemoneyspentonyourhomebringsthepleasuresofownershipplusequitybuilt,youmightwanttocheckintothetaxbenefitsofbuying.Followingisalistandexplanationofthetypicaldeductions.

MoRTgAgE INTERESTPerhapsthelargestdeductionforanewhomeowneristheinterestpaidonthemortgageloan.Rememberthatinthefirstyearsofanymortgage,mostofthemoneypaideachmonth(orbi-weekly)appliestowardinterest.Interestisgenerallyfullydeductible.

EXAMPLE:You’vetakenoutamortgageof$500,000at6.0%onyournewhome.You’vemadepaymentstowardtheprincipalandinterestforthefullyear.Thosepaymentstotaledalmost$36,000.00.Ofthe$36,000.00,approximately$30,000.00wenttowardinterest,andalmost$6,000wenttowardtheprincipal.The$30,000.00istaxdeductible. (Source:Bankrate.com)

Toclaimthemortgageinterestdeduction,youmustfilloutaSchedulea,“ItemizedDeductions”.Youshouldreceiveaform1098fromyourlenderinJanuaryforthetaxyearprior.Theform1098containsinformationneededtotaketheinterestdeduction.

PoINTS PAIdPointspaidatclosingonyournewhomearedeductibleiftheyareconsideredpre-paidinterest.Therearecertainrestrictionsinvolvedinthedeductionofpoints.Allofthefollowingrequire-mentsmustbemet:Themortgageloanmustbesecuredbyyourmainhome.Payingpointsmustbethenormforyourarea.Thepointspaidmustnotbemorethanwhatisconsiderednormalinthearea.Youmustusethecashmethodofaccounting.Themortgageloanmusthavebeenusedtobuy,improveorbuildyourhome.Thepointsmustbecalculatedasapercentageoftheloanprincipal.Thepointsmustbeclearlysetapartonyoursettlementstatement.Youmusthaveusedyourowncash(downpayment)towardyourhomepurchaseinanamountatleastequaltothepointsyouwerecharged.

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PRoPERTY TAxESYourpropertytaxesarefullydeductibleonyourincometaxreturn.Moneyheldinescrowtowardthepaymentofyourtaxesisnotdeductible,buttheactualpaymentsfromtheescrowaccounttowardthepropertytaxesare.

Settlement

Settlementiswherethemoneyanddeedchangehands:youpaythesellerandthesellergivesyouthekeysanddeedsthepropertytoyou.

Before Settlement…Whenyoursettlementattorneyreceivesyourcontractfromyouragent,theywill:• Ordertitleabstractandsurvey• Reviewtitleabstractandsurveytodeterminemarketabilityandinsurability• Contactyourlendertoschedulesettlementandprepareanyrequireddocuments• ContacttheSeller’slendertoobtainpayoffinformationontheexistingloan• Preparetitleinsurancecommitmentpursuanttoyourlendersrequirements• Contactthelocaltaxingauthoritytoverifytheamountofpropertytaxes,determinethe

prorationsbetweenBuyerandSeller• ContacttheHomeowner’sAssociationtoverifytheamountofduesanddeterminethepro-

rationsbetweenBuyerandSeller• Obtainthelender’sloandocumentsandproceedscheck• Preparesthesettlementsheetandanyotherrequireddocuments.

Who Attends Settlement?Representativesfromthesettlementcompany,therealestateagentsinvolvedinthetransactionyouandthesellerswillbetheretoexecutethedocuments.Itissettlementattorney’sjobtocol-lectthefunds,havethepaperssignedandfiledatthecourthouse,disbursethefunds,issuethetitlepolicyandresolvewhateverissuesariseatoraftersettlement.

How Long Will Settlement Take?Ifallgoeswell,settlementwillbecompletedinabout45minutes.

What do you do at Settlement?First,makesurethatyouhavebroughtcertifiedfundsorabankcheckforthebalanceofyourdownpaymentandclosingcosts.Youalsoarerequiredtobringacopyofahomeowner’sinsur-ancepolicy(forfire,theftandothercontingencies)andapaidreceiptshowingoneyear’scover-age.Insomecases,thelenderwillrequiredeliveryofthisandthetermiteinspectiondocumen-

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tationpriortothesettlement.Althoughthelenderwillhaveprovidedyou,thepurchaser,withaGoodFaithEstimateofClosingaspartoftheloanapplicationprocess,yoursettlementattorneywillalsocalculateforyouapproximatelywhatyouowe.Thesettlementattorneywillthengothroughallthesettlementdocumentswithyou,explainingtheirpurpose.Youwillsignallthedocuments,giveusourcheck,andreceivethekeystoyournewhome.

The following checklist includes some of the items in the closing costs:

Loanoriginationfee

Loandiscountsorpoints

Appraisalfee

Creditreportfee

Underwritinganddocumentpreparationfees

Mortgageinsurancefee

Assumptionfee

Settlementorclosingfee

Abstractortitlefee

Titleexamination

Titleinsurancebinder

Surveyfee

Termiteinspectionfee

Taxservicefee

Transfertax

Recordationtax

Escrowfortaxesandinsurance

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What to Expect after SettlementInordertocompletetheprocessofsettlement,thesettlementattorneywill:• Recordthedeed,deedoftrust,orassumptiondocumentsinthelandrecordsatthecounty

courthouse• Auditthedisbursementsheet• Disburseallproceeds• Issuethetitleinsurancepolicy• Sendthelenderthesignedpacketofallsigneddocuments• PayofftheSeller’slender(s),ifany,andobtainandrecordareleaseoftheSeller’sdeed(s)of

trust• Disburseanyfundsrequiredtobeescrowedatclosing.• Withintenweeksyouwillreceiveyouroriginalrecordeddeedandowner’stitleinsurance

policyfromthesettlementcompany.Keepyoursettlementstatementinasafeplace.

What is Title?

Whenapropertyissoldorrefinanced,thelenderand/orbuyerneedapreliminarytitlereporttoseeexactlywhatisagainstthesubjectproperty.Itemsonapreliminarytitlereportwillshow:

1.Taxesonthesubjectproperty,amountowed,amountpaidandassessorsparcelnumber2.Easementsofrecord,ifany3.Restrictionsonsubjectproperty,ifany4.Liensand/orjudgementsofrecord,ifany5.Exactvestingofownerofrecord.

Whenthesaleorloanofthesubjectpropertyisfinal,andthetitlecompanyhasrecordedthenecessarydocumentsinordertocloseescrow,theythenissueapolicyoftitleinsurancetothenewlenderand/orbuyershowingcleartitletothesubjectproperty.

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What is Title Insurance?

“Title”istheownershipinrealproperty.Itmeansthatyouhavethelegalrighttopossess,oc-cupy,peacefullyenjoy,andsellyourpropertywithoutinterferencefromotherssubjectonlytorestrictionsimposedbygovernmentalauthoritiesorpreviousowners.Inmostcases,titleistransferredbydeedwhichisrecordedinthelandrecordsofthecountyinwhichthepropertyislocated.Generally,whenpropertyissold,anattorneyfortheBuyerortitleexaminergoestotherecordroomandsearchesthelandrecordsforanytitledefects.Atitledefectisanythingintheentirehistoryofownershipofrealestatewhichmayencumbertheowner’srightsunderthetitle.Atitledefectmaycausetheownerofrealpropertytoloseallorpartofhislandtoasupe-riorownershipinterestorclaimofanother.ThisisthetypeoflossagainstwhichTitleinsuranceprotects.Inshort,ifyouownatitleinsurancepolicy,thetitleinsurancecompanywilldefendyouwithoutcost,againstanattackorclaimuponyourownershipinterestinyourpropertyasinsuredandyouwillbeprotectedagainstfinanciallosscausedbyatitledefect.Thetitleinsur-ancepremiumispaidonetimeatclosingandcoverageextendstoyouforyourprotectionaslongasyouownthepropertyandeventhereafterinsomecases.

important Reasons Why You Should Have Title insurance:• Forgery• Fraudinconnectionwithexecutionofdocuments• Undueinfluenceonagrantororexecuter• Falsepersonationbythosepurportingtobeownersoftheproperty• Incorrectrepresentationofmaritalstatusofgrantors• Undisclosedormissingheirs• Willsnotproperlyprobated• Mistakeninterpretationofgrantors• Conveyancebyaminor• Birthofheirssubsequenttodateofwill• Inadequatesurveys• Incorrectlegaldescriptions• Non-deliveryofdeed• Unsatisfiedclaimsnotshownonrecord• Deedsexecutedunderexpiredorfalsepowersofattorney• Confusionduetosimilaroridenticalnames• Dowerorcourtesyrightsofex-spousesofformerowners• Clericalerrorsinrecordinglegaldocuments• Deliveryofdeedsafterdeathofgrantor

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What is a Home Inspection?

A home inspection is a thorough visual examination of the home and property.Theprocessusuallytakestwotothreehours,duringwhichtimethehouseisexaminedfromthegroundup.Theinspectionincludesobservationand,whenappropriate,operationoftheplumb-ing,heating,airconditioning,electrical,andappliancesystems,aswellasstructuralcompo-nents:roof,foundation,basement,exteriorandinteriorwalls,chimney,doors,andwindows.

When conducted by a professional, a home inspection covers about 1,000 checkpoints in ap-proximately 400 items around the home. Findingsshouldbeprovidedtoyouintheformofacomprehensivereport.Itisvitalthatsuchareportincludeanobjectiveevaluationoftheconditionthehome,clearlyrelatingexistingdefectsandindicatingpotentialproblems.

WHAT A HoME INSPEcTIoN IS NoT...

A home inspection is not an appraisal and vice versa. Anappraisalistheformalprocessofestimatingaproperty’svalueasitrelatestoamortgageloanormortgageinsurance.Itdoesnotitemizedefectsorreflectpotentialproblemsinthehome.EvenanFHAappraisalcurrentlydoesnotattesttotheconditionofahome.Infact,theU.S.DepartmentofHousingandUrbanDevelopmentencourageshomebuyerstouseprivateinspectionservices,andauthorizesthatclosingcostsmayincludeinspectionfeesofupto$200.

A home inspection report is not a warranty. Becauseahomeinspectionisavisualexaminationofthehomeandoperatingsystems,itisnottechnicallyexhaustive.Thereisnoassurance,expressedorimplied,thatequipmentwillnotbreakdownatsomefuturedate.However,suchprotectionisavailablewhenahomeinspectioniscomplementedbyahomewarranty.Whentheservicesareusedinconjunctionwithonean-other,ahomewarrantycoverstheitemsthatwereserviceableatthetimeoftheinspectionandsubsequentlyfailduetonormalwearandtear(consultyourrealestateagentabouttheavailabil-ityofahomewarranty).

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A home inspection does not detect every conceivable flaw. Itisaninspectionofthoseareasanditemsthatcanbeseen.Homeinspectorscannotseethroughfoundations,floorsorwalls,andcannotinspectareasoritemsthatareinaccessible.

Buyingahomeislargelyanemotionalexperience.Sometimesit’sloveatfirstsight.Butoftenloveisblind,andmanybuyerslearntoolateofsuchunseenconditionsascrackedfoundations,deterioratedplumbing,wornoutheatingsystems,ordangerouswiring.

A professional home inspection is your best defense against pitfalls and their consequences, such as: Costlyrepairs.Inconvenience.Animosity.Disappointment

Youmayhavesomeknowledgeofconstruction,orafriendorrelativemayhaveabackgroundinplumbingorcarpentry,butthereisnosubstitutefortheobjectiveeyeofaskilledhomein-spectorwhoknowswheretolook,whattolookfor,andhowtoevaluatehundredsofkeypointsthroughouttheproperty.Unlikethehomebuyerwhoseobservationsarelikelytobepartial,thehomeinspectorperformshis/herrolewithanunbiasedattitude.Keepinmind,ahomepurchaseisoneofthelargestlong-terminvestmentsofyourlife.Asaresult,youneedtoknowasmuchaspossibleaboutyourprospectivepurchase.Byidentifyingexistingorpotentialareasofconcern,theinspectionreportwillhelpsecureyourinvestment,avoidpost-closingsurprises,andprovideyouwithpeaceofmind.Aninsightfulreportisfunda-mentaltomakingtherightbuyingdecision.

WHEN To ARRANgE A HoME INSPEcTIoN Assoonasyoubecomeseriousaboutthepurchaseofahome,youshouldconsideraprofession-alinspection.Whenyoucometoadecisiontopurchaseaparticularhouse,haveaprotectiveclauseintothepurchaseagreementwhichprovidesyouwiththerighttohaveahomeinspectionconductacompletegeneralhomeinspection.

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PlAN To BE THERE

Itisimportantthatyou,asthehomebuyer,bepresentduringthetwotothreehourinspection.Byaccompanyingtheinspectoryouwillgainadditionalinsight.• Seefirsthandtheconditionofeachkeycomponentthroughoutthehouseandpropertyso

youwillhaveabetterunderstandingofyourhouseandoftheinspectionreport.• Alleviateconcernsaboutfindingswhich,onpaper,mayseemdistressingbutinfactmaybe

superficial.Forexample,theinspectormightexplainthatanalarmingnoisecomingfromanappliancecanbequietedbysomelubricant;thatanunsightlycolumnneedsonlyacoatofpaint,orthattheproblemthatcausedawaterspothaspreviouslybeencorrected.

• Learnabouttheoperationofyournewhome;howtheheatingsystemworks,howtocontrolpilotlights,howtoturnonvariousappliancesandcomponents,whereshutoffsaretosavetimeandavoidfrustration.Theinspectorcanpointoutmaintenanceneedsandproceduresandexplainhowandwhentocheckitemsneedingperiodicmonitoring.

• Haveallofyourquestionsandconcernsaddressedimmediatelyastheyarise.

Priortotheinspection,preparealistofquestionsorconcernsabouttheproperty.Relatethesetotheinspectioncompanyinadvancetoensurethatsuchmatterswillbeproperlyaddressedandthatanyspecialarrangementscanbemadeifnecessary.Bringyourlisttotheinspection.

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BEYoNd HoME INSPEcTIoNExtensiveasitis,ahomeinspectionisnotallinclusive.Dependingonyourlevelofconcernandthelocationofthehouse,youmaywanttoconsiderthefollowingoptionalserviceswhichgenerallycanbeperformedinconjunctionwiththehomeinspection:Radon Testing AccordingtotheU.S.EnvironmentalProtectionAgency(EPA),radongasisthesecondleadingcauseoflungcancerintheUnitedStates.Theradioactivegas,commonlyfoundinthesoil,hasbecomeamajorhealthconcernforhomebuyers.MakesuretheinspectorisfamiliarwithEPAprotocolsandusesonlyapprovedequipment.Water Analysis Some84%ofAmericanssurveyedinaHarrispollbelievetheirwatersupplyathomeispol-lutedand,accordingtotheEPA,nearly70%areconcernedspecificallyaboutthequalityoftheirdrinkingwater.Somehomeinspectioncompaniesnowprovidewaterqualityanalysis,butitisimportantthattheyutilizeonlylaboratoriescertifiedbytheEPAortheHealthDepartment.Itisadvisabletotestforlead,bacteria(suchascryptosporidium),andinsomeruralareas,nitratesandcoliforms.Carbon monoxide Testing This“silentkiller”maybeanissueinhomesusingfossilfuels(oilandnaturalgas).Carbonmonoxidecanbedetectedonlywithananalyzer.Aclearandworkingventilationsystemmini-mizestheeffectsofthegas,sohaveyourinspectorcheckit.Foradditionalprotection,installacarbonmonoxidedetector.Energy Assessment Onevaluableandmoneysavingserviceofferedbyleadinghomeinspectioncompaniesisanenergyassessment.Itdeterminesmajorareasofenergyuseandwastewhilesuggestingstepsthatcouldsaveyouhundredsofdollarsannuallyinutilitybills.Italsohelpsprotecttheenviron-ment.Termite inspectionAlthoughapestinspectionisnoguaranteethattermiteswillnotinfestyourhomeinthefuture,willprovidea“wood-destroyingpestanddryrot”reportonanyexistingthreat.Bewareofter-miteinspectorswhoarealsoexterminatorsand/orproviderepairs.Lead Paint Testing UnderTitleXlegislationhomebuyersareentitledtotestforthepresenceofhighlevelsofleadpaintinhomesbuiltpriorto1978.Leadpaintcancausehealthanddevelopmentalproblemsforsmallchildrenifthepaintisdeterioratedorifitispresentindust.Askyourhomeinspectorwhatoptionstheymayofferfortestingforleadinpaint.

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What exactly is the appraisal and how is it done?

Youneedtoviewtheappraisalthroughtheeyesofthebank.Simplyput,thebankwantstoknowhowmuchthehomewillsellforinafairandopenmarketinatimelymanner.Why?Ifyoudonotmakeyourmortgagepayments,thebankmayforecloseonyou

andtakeownershipofthehouse.Banksarenotinthebusinessofowninghouses,sotheywillturnaroundandsellthehouseforfairmarketvalue.Thebankwantstomakesurethemoneyitwouldgetfromthesaleofthehouseisatleasttheamountofmoneytheylendtoyou-therebyprotectingthemfromlosinganymoneyatall.

Differentappraisalcompaniescanusedifferentmethodstoappraiseahome.Usually,anap-praiserwilluseacombinationofmethods.ThemostcommonmethodistodoaCMA-Com-parableMarketAnalysis.ACMAliststhegeneralattributesofthehouseinquestionsuchasnumberofbedrooms,squarefootage,etc.,andcomparesthehousetootherhouseswithsimilarattributesinthesameneighborhoodorgeneralarea.Theappraiserthenlooksathowmuchthosesimilarhouseshavesoldforrecently.Basedonthataverage,anestimatecanbemadeastohowmuchyourhousewillsellforinafairandopenmarketinatimelymanner.

Theothermostcommonmethodfordeterminingahome’svalueisanitemizationofinventorywithinthehome.Theappraiserwillgothroughaveryextensivechecklistofattributesinclud-ingfireplace,tilefloors,appliances,hottubs,etc.Eachitemhasapre-determinedvaluedeter-minedbythelicensedappraiser.Addalltheitemsup,andyouhavethevalueofthehome.

Alicensedappraiserwillalsotakeintoaccountthegeneralrealestatemarketinagivenarea.Ifthemarketisslow,thevalueofthehomemaybelower-andviceversa.

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What can I expect at the final walk-through & closing?

Thefinal“walk-through”istypicallyscheduledwithin24hoursoftheclose/settlement.Itgivesyouonelastopportunitytomakesurethatthehomeyouarepurchasingisintheconditionthatyouandthesellermutuallyagreedtointhesalescontract.

Shouldaproblemariseduringthewalk-through,youragentwillcontacttheseller’srepresen-tativetolethimorherknowwhatthedeficiencyis.Iftheselleracceptsresponsibility,moneyfortherepairscanbeallocatedtoyouattheclosing/settlement.Ifthesellerdoesnotagreetorepairs,youragentwillactasthego-betweentohelpyouandthesellerreachasatisfactorycom-promisesothattheclosingisnotdelayed.

Attheclosing/settlement,themortgageandmanyotherdocumentsaresigned,adjustmentsaremadeforsuchitemsaspropertytaxes,thesellerispaid,andyouarebestowedwiththetitleordeedandthekeystoyournewhome.Bepreparedtosignyournameoverandoveragain.

Fromtheinitialmeetingtodeterminethekindofhomeyouareseekingtothefinalclosing,youragentwillhelpyoutostepconfidentlyforwardbyconductingthoroughsearches,network-ing,employingoldfashionedtenacity,andbycoachingandguidingyouthroughtheentirejourney.

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Additional Information You Should

Know

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glossary of Real Estate Terms

Annual Percentage Rate (APR):theactualfinancechargeforaloan,includingpointsandloanfeesinadditiontothestatedinterestrate.

Appraisal: anexpertjudgementofavalueorworthofaproperty.

Associate Broker: sameasbroker,exceptthatheisnotdesignatedasthebrokerofrecordandmustbeaffiliatedwithandunderthesupervisionofabroker.

Assumption of mortgage:theBuyerassumesliabilityforanexistingmortgagenoteheldbytheSeller.ThisissubjecttoapprovalbythelenderwhomustbewillingtoapprovetheBuyerandreleasetheSeller.

Assessed value:thevalueplacedonapropertybyamunicipalityforthepurposeoflevyingtaxes.Itmaydifferwidelyfromtheappraisedormarketvalue.

Balloon Payment:alargeprincipalpaymentdueallatonceattheendofthesomeloanterms.

Broker:arealestateprofessionalwhohasahigherleveloftrainingthananagent.Abrokerislicensedbyajurisdictiontodorealestatebusiness,anddesignatedasthebrokerofrecordforafirm.Abrokermayactasanytypeofrealestateagent.

Certificate of Title:thedocument,TitletolandsetsouttheCrowndescriptionoftheland,theregisteredproprietors,registeredmortgages,charges,easementsandencumbrances.

Commission: thefeepayabletoaRealEstateAgentbythevendorforsellingthehouse.Usuallyapercentageofthesaleprice.

Condominium (Condo): typeofrealestateownershipwheretheownerhastitletoaspecificunitandsharedinterestincommonareas.

Contingency: aconditioninacontractthatmustbemetforthecontracttobebinding.

Contract of Sale:anagreementinwritingsettingoutthetermsandconditionsofthesaleoftheproperty.

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Conveyancing:thelegalprocesstransferringownershipandtitletoaproperty.

Deed:legaldocumentthatformallyconveysownershipofpropertyfromSellertoBuyer.

Deposit: anamountofmoneyplacedintrustasevidenceofcommitmenttobuy.Ifthepurchaseiscompleted,itwillbeappliedtowardsthepurchaseprice.

Down payment: percentageofathepurchasepricethattheBuyermustpayincashandmaynotborrowfromthelender.

Earnest money Deposit: alargedepositpaidwhenthesalescontractissignedbeforeclosing.

Equity:thevalueorpropertyactuallyownedthehomeowner,purchasepriceplusappreciation,plusimprovements,lessmortgageandliens.

Escrow: adocumentisinescrowifithasbeendeliveredtoandisheldbyathirdparty(thees-crowagent)andonlytotakeeffectwhencertainconditionshavebeenmet,suchasthedeliveryofasimilardocumentbyanotherpartytothecontract.

Finance Charges:thetotalcost,includingallfees,pointsandinterestpaymentsaborrowerpaystoobtaincredit.

Fixed Rate mortgage:interestratesonthistypeofmortgageremainsthesameoverthelifeoftheloan.

Fixtures and Fittings:itemswhichareaffixedtothepropertyandwhichgenerallycan’tberemovedwithoutcausingdamage.Theycan’tberemovedwhenapropertyissoldunlessthecontractpermitsitandthesellermustgenerallymakegoodanydamagecausedtothepremisesbytheremoval.

Hazard insurance:protectionagainstapossibleeventwhichmayormaynotoccur,suchasafirewhichdestroysaproperty.

interest: achargeformoneyadvancedorlentbyabankorotherlender.

Lien:asecurityclaimonapropertyuntiladebtissatisfied.

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mortgage:securityclaimbyalenderagainstapropertyuntilthedebtispaid.

mortgage Term: thelengthofaloaninyearsormonths.

mortgagee:aformofsecurityforonewholendsthemoney.

mortgagor:oneborrowingthemoney.

multiple Listing Service (mLS) or metropolitan Regional information Service (mRiS):asystemthatprovidestoitsmembersdetailedinformationaboutpropertiesforsale.

PiTi:principal,interest,taxes,andinsurance,formingthebasisformonthlymortgagepay-ments.

Point: onepercentoftheloanprincipal.Chargedinadditiontointerestandfees.

Prepayment Penalty: afeepaidbyaborrowerwhopaysofftheloanbeforeitsduedate.

Principal: Theamountthatyouborrowfromthelender.Itisthe‘capital’amountuponwhichinterestispayable.

REALTOR: designationgivetorealestateagentwhoisamemberofarealestateassociationaf-filiatedwiththeNationalAssociationofREALTORS.

RESPA statement:RealEstateSettlementProceduresAct,aprecisebreakdownofclosingcostsforbothBuyersandSellers(AlsoknownasHUD-1SettlementStatement).

Settlement:Meetingsofrepresentativesofallthepartiestothetransactiontocompletethesale,moniesaretenderedinexchangeforrelevantdocumentskeysetcandthepurchasercanthenlegallytakepossession.

Title: documentthatindicatesownershipofaspecificproperty.

Title insurance:protectsagainstlossresultingfromlegaldefectsinthetitle.

Title Search: asearchcarriedoutfromtherecordsoftheLandTitlesOfficetodetermineregis-tereddetailssuchasownership,mortgages,caveats,easementsetc.

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MehMet “Matt” haliciAssociate Brokertop 1% Nationwidelicensed in Va, MD & Dccell: 202.431.1991Office: 301.656.2500Fax: 301.907.8572www.mhalici.come-mail: [email protected]


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