A GUIDE TO BUYING YOUR HOME

Transcription

1 A GUIDE TO BUYING YOUR HOME A GUIDE TO BUYING YOUR HOME

2 OUR MISSION Everything Usaj Realty does challenges the status quo of real estate. We believe in thinking and acting differently. We don t just want to help you buy or sell a property, we want to be your local real estate experts. We strive to help you with every real estate need or question you may have over the years aiming to create a client for life, not just for one transaction. Usaj Realty believes real estate investments are some of the most significant financial decisions in a person s portfolio. Growing financial returns, connecting with clients, and giving you peace of mind when it comes to your investment will always be our primary focus. While the market may be uncertain, we will be in business to help you maneuver the market with certainty. We are driven to significantly contribute to your wealth growth. PAGE 2

3 A LETTER TO YOU HELLO, As your property-buying advocates and market experts, the Usaj Realty team is thrilled to serve you as we find your perfect home together. With more than 20 years of practicing real estate, we specialize within the industry by offering only experiences of exceptional quality and professionalism. Our team knows buying a home is much more than a simple business transaction. There are dreams, aspirations, and needs involved that make this journey very meaningful, personal, and individualized. Creating this extraordinary experience makes Usaj Realty a truly unique brokerage. What sets us apart from other agencies? The Usaj Realty culture is grounded in our brokers in who we are, how we behave, and what we believe. Our personalized service includes attention to detail, high-quality guidance, and providing a sense of satisfaction. With Usaj Realty, you will receive a superior level of expertise and service. Because satisfying our clients depends on the united efforts of many, we work together cooperatively to effectively deliver your purchase. We love what we do, and are excited to get to work learning about your lifestyle and investment dreams. We are available 7 days a week to answer all your questions and make sure your needs are met. The following pages offer important information for home-buyers, including an overview of the entire purchasing process and answers to frequently asked questions. Thank you for choosing Usaj Realty and I am delighted to help you with this future investment! Sincerely, AND THE USAJ REALTY TEAM PAGE 3

4 OVERVIEW OF THE HOME BUYING PROCESS BEFORE YOU ARE UNDER CONTRACT OBTAIN FINANCIAL PRE-APPROVAL Getting pre-approved will save you from looking at homes that are outside of your budget and help prepare you to make a serious offer when you find the perfect property. Pre-approval comes from a lender and is based on your actual income, debt, and credit history. ANALYZE YOUR NEEDS IN A BUYER CONSULTATION A meeting with your Usaj Realty broker will help you define your search criteria and narrow down your dream home s most important features. Here you will learn how to choose homes you want to see in person. SELECT PROPERTIES Using various databases and online resources, you will receive daily alerts about new listings and price reductions on properties that meet your requirements. With our assistance, you will be able to narrow down the options and define a perfect property and save you hours of research. VIEW PROPERTIES After you have found properties that you like, your Usaj Realty broker will take you on tours. Your needs always come first, and we always make more than enough time for our clients. This is the fun part and we make sure the experience is as informative as it is enjoyable! WRITE AN OFFER TO PURCHASE The offer includes three parts: earnest money, contract, and a lender letter. The offer price will work with your budget and also give you the best possible chance of becoming the new owner. All paperwork will be managed by your broker including more than 50 phone calls, 100 documents, and 43 signatures. NEGOTIATE TERMS Your Usaj Realty broker will negotiate with the seller s agent on your behalf to get you the best terms and price possible. When a counteroffer is presented, your broker will work with you to review each specific area of the counter, making sure that your goals are always the priority. ACCEPT THE CONTRACT After all terms have been negotiated, your offer will be accepted. This is called getting under contract. From this point forward, no other offers will be reviewed by the seller. PAGE 4

5 AFTER YOU ARE UNDER CONTRACT YOUR INSPECTOR WILL Create a report on any safety or mechanical issues that arise Be paid at the time of the appointment. This expense is in addition to your down payment Give you and your broker the report. Your broker will work with you and the seller s agent to resolve any concerns. YOUR MORTGAGE LENDER WILL Help you obtain mortgage financing Perform your credit check, underwriting of the loan, appraisal of the property, and mortgage insurance (the cost of the appraisal is paid prior to the appointment) Help you obtain homeowner s insurance. YOUR TITLE COMPANY WILL Conduct title search and remove any encumbrances. This ensures that the seller is the current deed holder and all bills are paid on the residence Provide title insurance. This one-time payment, made at closing, protects you from any claims made against the previous homeowner Help schedule a convenient closing appointment. This is the day you own your new home. PAGE 5

6 MAKE THE LIST Before you start property shopping, you should make a list of what you want in your new residence. As you start to take tours, these preferences may change. When faced with tough choices, this list of priorities will help guide us through the process. AGE Do you have a preference for when the property was built? OUTDOOR AREA Do you want a porch or deck? TYPE What type of home are you looking for (e.g., single-family, condo, town house, etc.)? CAR & STORAGE What are you looking for in terms of a garage (e.g., attached, carport, etc.)? CONDITION Do you want a residence in movein condition or are you willing to do some work on it? BEDS/BATHS How many bedrooms and bathrooms do you need? STORIES How many stories do you imagine your perfect home to have? POOL Do you want to have a swimming pool or hot tub? LOT SIZE What size lot would you like? ROOMS What size rooms do you have in mind? What will you be using each room for? SQUARE FOOTAGE Approximately what size home are you looking for? FIREPLACE Do you want a fireplace? EXTERIOR What type of exterior siding will you consider? STYLE What architectural styles do you prefer? PAGE 6

7 LIFESTYLE PREFERENCES Areas you would enjoy Things to Consider School districts you prefer Specific streets you like Recreational facilities you like Your favorite shops and conveniences AFTER MAPPING OUT THE WISH LIST, NOW IT IS TIME TO BREAK IT DOWN TO A FEW TOP ITEMS. THESE WILL BE ON THE MUST HAVE LIST AND WE WILL LOOK AT PROPERTIES THAT HAVE THESE FEATURES. ASK YOURSELF: What are the top five things my home MUST have? SOME EXAMPLES ARE: Stainless steel appliances Attached garage En suite master bath Hardwood floors Tile floors Granite counter tops Outdoor living spaces like a porch, deck, or patio Central air conditioning Open floor plan Plenty of storage options 2-car garage Updated kitchen Fenced-in backyard Quiet street Energy-efficient fixtures One or more fireplaces Eat-in kitchen Walk-in closet PAGE 7

8 HOW TO FUND YOUR PURCHASE 1. FINANCIAL PRE-QUALIFICATION OR PRE-APPROVAL While making the wish list for your new home, it is important to keep a budget in mind. Start working with a lender to determine a mortgage loan amount. This process does require a bit of paperwork. Have your tax returns and W-2s from the last two years, and your last two paystubs on hand! The lender will help you complete this process. 2. UNDERWRITING Once all of your paperwork is turned in, the loan package is submitted to an underwriter for approval. This person goes over all your financial documents with a magnifying glass and ensures the paperwork is processed properly. 3. LOAN APPROVAL Once the documents are approved, the parties are notified and the loan documents are sent to the title company. 4. FUNDING The lender reviews the loan package with you, and the funds are transferred by wire to the title company to close the property transaction. 5. TITLE COMPANY The title company performs the title exam and insures the title. Once completed, they will prepare all documentation for the purchase of your home. The closing appointment will be at the title company s office. All parties attend the meeting for final signatures. PAGE 8

9 THE OFFER When we find the property you want, we will write a purchase agreement. While much of the agreement is standard, there are a few areas that we can negotiate to get the best outcome for you: THE PRICE An offer depends on factors like the home s condition, length of time on the market, buyer activity, urgency of the seller, and current market conditions. WHAT S INCLUDED? Which items stay or go is often a matter of negotiation. Some inclusions to consider in your offer are window coverings, custom furniture, and major appliances. THE MOVE-IN DATE If you can be flexible about the possession date, the seller could be more apt to choose your offer over others if the home is currently occupied. THE SELLER The seller will then respond with one of the following: ACCEPTS THE OFFER REJECTS THE OFFER COUNTERS THE OFFER By far the most common is the counteroffer. In these cases, your broker s experience and negotiating skills are a powerful resource in representing your best interests. When a counteroffer is presented, you and your broker will work together to review each specific item. Your broker will make sure to negotiate the best possible price and terms on your behalf. PAGE 9

10 CLOSING DAY Closing day marks the end of your home-buying process and the beginning of homeownership. To make sure your closing goes smoothly, you should take note of the following: ON CLOSING DAY BE SURE TO BRING: A certified check for the total amount of your closing costs and down payment Two photo IDs (e.g., driver s license, employment badge, passport)) DETAILS OF THE DAY: The appointment lasts about an hour and a half There are two sets of documents you will be reading and signing off on at the closing: mortgage/loan documents and real estate documents Each document you sign will be fully explained by the title representative and you will receive a copy At the closing appointment, the seller, the seller s agent, your lender, your broker, and your title company representative are invited to be present The seller will give you the keys to your new home After the appointment, the title company will immediately record the Warranty Deed, the Deed of Trust, and other pertinent documents with the County Clerk s Office The title policy is generally issued within 30 days of the closing. This is an important document for you to file with your other legal documents once you receive it PAGE 10

11 Congratulations on becoming a homeowner! PAGE 11

12 FREQUENTLY ASKED QUESTIONS Need some home-buying advice? Buying a home can be extremely exciting and holds the possibility for unexpected challenges. Usaj Realty will assist you with every step of the process. What if I do not know what I want to own (e.g., single-family home, town home, or a condo)? If you have not narrowed down the scope of your search yet, your broker can help with this process. Think about where you see your life in the next 5-7 years. Does it include lots of work, travel, or family time? Where do you see yourself relaxing? Do you enjoy yard work? Want a dog? After touring some properties, you will most likely be able to narrow down what feels right for you and your lifestyle. How much can I really afford? I know how much rent I pay, but is that the same as a mortgage payment? While your rent payment is a good gauge for your budget, you will need to speak with a lender to determine what the bank will lend you. First step is to get pre-qualified for a mortgage from your lender. This process will tell you what kind of loan you are qualified for, what you need to save for a down payment, and how much your mortgage payment will be once you own the residence. Next, you will get preapproved for your mortgage, and this step is extremely important. Getting pre-approved will save you from looking at homes that are outside of your budget and help prepare you to make a serious offer when you do find the perfect property. Pre-qualification is based on a cursory review of your finances. Pre-approval comes from a lender and is based on your actual income, debt, and credit history. Be ready to provide lots of documents for this step. When do I get to start seeing homes? Once you have your list of priorities and your budget set, the fun begins! Your broker will provide you with a list of available properties to review. Upon choosing the ones you like and deciding when you are available, you and your broker will go on showings. When going to your showings, you may want to take photos and notes. Make sure to take notes and photos of unusual features, things you like, and design elements so you can use these when choosing your favorite. How much money will I have to come up with to buy a home? How much cash you will need to purchase a house is dependent on the loan program, purchase price range, and the market in the area. A conventional loan s down payment ranges between 5-20% (varies on maximum loan size in your area). An FHA loan usually requires a down payment of 3.5%. If you are an investor, your down payment will be in the ballpark of 25% or more. Contact your mortgage broker for exact numbers relating to your financing and price point. A handful of other fees will also have to be covered such as the appraisal and inspection. These fees will be explained to you by your broker. PAGE 12

13 I am excited to own a home, but do not know anything about how a property works. Will someone be able to help me understand the mechanics? As part of the process, you can hire a home inspector. This cost is based on the size of a home and can vary in price based upon the square footage. This person will walk through every inch of the residence with you. From the mechanical system, to the electrical and roof, they will cover it all in a report for you to keep. The main purpose of inspection is to point out safety concerns and determine the overall condition of the home. The inspector will inform you of potential issues that could require expensive repairs down the road. This unbiased, third-party opinion will help you to decide whether you want to move forward with the purchase. What is an appraisal and do I have to have one? An appraisal is an opinion of value that is completed by a professional appraiser who visits and inspects the size, condition, function, and quality of the property. There are a few steps in this process. First, a licensed appraiser comes to the property and inspects the home. Next, the appraiser will research similar homes in the area and compare recent sales to determine a fair market value. The appraiser will then give a final appraisal report with all the data and research to issue a final opinion of value. This report is given to the lender and then passed on to the buyer for review. If you are taking a mortgage loan out to purchase the home, this step is mandatory. If you are paying in cash, this step is up to you. What is title insurance? Title insurance is a unique form of insurance because it protects you against ownership claims against your property. Unlike other types of insurance, it is a one-time premium paid at closing. It provides protection to you and your heirs for as long as you own your home. Also, unlike other types of insurance, title insurance protects you from events that happened in the past: a forgery, forgotten heir, or other claims by people or entities who may truly (but unbeknownst to you) have a right to your property. Many people think that since it s protecting against events in the past, title insurance is something they can choose to forgo. After all, the title company did a search of the property already. Why not just review the commitment and forgo the policy? It s a common misconception that a title search will uncover every possible defect in title. Title searches only discover events and documents of public record, so anything done illegally or without proper documentation may not be known until some time in the future. Lenders do not consider title insurance optional. What is a homeowners association (HOA)? Homeowners associations (HOAs) are common in some single-family housing developments, as well as condominium and townhouse complexes. An HOA is the governing body of the development or complex. When you buy a property governed by a homeowners association, you automatically become a member of the association. You don t have the choice of not joining. The purchase of your home becomes a contract with the HOA. You agree that you ll obey all the HOA rules and pay any fees. PAGE 13

14 FREQUENTLY ASKED QUESTIONS What expenses do I need to account for besides the mortgage payment? When budgeting for the home, remember there are expenses associated with principal, interest, taxes, and insurance. Furthermore, it is easy to forget commuting costs, utilities, and all the upgrades you want and need to get settled. Utility companies that service the home will give you an estimate of what the average costs were with the last homeowner. Keep in mind that these are just averages. Your mortgage lender can provide an estimate of all costs involved in purchasing a home, including HOA payments, title insurance, and more. What is a Home Warranty? A home warranty is not the same thing as homeowners insurance, nor is it a replacement for homeowners insurance. Homeowners insurance covers major perils such as fires, hail, property crimes, and certain types of water damage that could affect the entire structure and/or the homeowner s personal possessions. A home warranty does not cover these perils. Rather, it covers specific components of the home. A home warranty is a contract between a homeowner and a home warranty company that provides for discounted repair and replacement service on a home s major components, such as the furnace, air conditioning, plumbing, and electrical system. A home warranty may also cover major appliances such as washers and dryers, refrigerators, and swimming pools. Most plans have a basic component that provides all homeowners who purchase a policy with certain coverages. Homeowners can also purchase one or more optional components that provide additional coverage at additional cost. PAGE 14

15 Should I use a real estate broker? How will my broker get paid? Using a real estate broker is a very good idea. All the details involved in the home buying process can be overwhelming to first-time home buyer. A Usaj Realty broker will guide you through the entire process and make the experience much easier. They are neighborhood experts and can help you understand details that can t be learned elsewhere; traffic volume, quality of schools, walkability of the area, and more. He or she will guide you when it comes to determining your price range and finding homes to view that are only found on multiple listing services. You will find out the moment homes come onto the market through their services. When you decide to make an offer, your broker will structure and negotiate the deal precisely to save you money. Your broker will go through the pros and cons of different types of mortgages, help you wade through the paperwork, and be there at closing to answer all of your questions.the payment for your broker comes from the home seller, not from the buyer. So you don t have to pay your broker anything. What will my mortgage payment cover? Most loans have four parts: Principal: the repayment of the amount you actually borrowed Interest: payment to the lender for the money you ve borrowed Mortgage insurance: If you have less than 20 percent equity in your home And property taxes: the annual city/county taxes assessed on your property, divided by the number of mortgage payments you make in a year. The average loan is for 30 years, although, 15 year loans are also available. During the duration of the loan, you ll pay far more in interest than you will in principal - sometimes two or three times more. Because of the way loans are structured, in the first years you ll be paying mostly interest in your monthly payments. In the final years, you ll pay mostly principal. What are the tax benefits of owning a home? First you will get a mortgage deduction. The tax code allows homeowners to deduct the mortgage interest from their taxes. For a lot of people this is a major deduction, since interest payments can be the largest component of your mortgage payment in the first several years of owning a home. There are also cost deductions: The first year you buy your home, you are able to claim the points on your loan, (i.e. a percentage of the loan amount), depending on the size of your down payment. And because these fees are usually 1 percent or more, the savings here can be substantial. You get to deduct the points even if you convinced the seller to pay them for you as part of the deal. The deductible amount should be shown on your 1098 form. Property tax is deductible: Real estate property taxes paid on your primary residence and a vacation home are fully deductible for income tax purposes. Tax deductions on home equity lines: You can deduct the interest you pay on a home equity loan or line of credit. This allows you to shift your credit card debts to your home equity loan, pay a lower interest rate than the high credit card interest rates, and also get a deduction on the interest. PAGE 15

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