Brian K. Judy

Buying Process

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Step by Step time line

Day 0 – Offer Accepted – This is when you’ve finally got a deal! The Buyers and Sellers have both agreed to the terms of an offer.

Day 1 – Escrow Opened – The earnest deposit is sent to the title company along with a copy of the fully signed contract. This should be done within 1 business day.

Days 1 – 10 – Due Diligence & Inspections – The due diligence period begins the day AFTER the contract has been signed by all parties. It lasts 10 days OR until the Buyer Inspection Notice & Seller’s Response form has been submitted. This Due Diligence Period is the time for home inspections, termite inspections, reviewing HOA CCR’s, commitment for title insurance, and learning anything else of interest regarding the suitability of the property.

For a traditional sale, the Buyers may request that certain repairs be made. This request for repairs must be submitted before the end of the 10 day Due Diligence Period. The Sellers then have up to 5 days to respond – either to agree, decline, or propose another solution.

Appraisal – The contract includes a built-in safeguard that the property must appraise for at least the offer price or the Buyer has 5 days to cancel the contract. It is good practice to have the appraisal completed during the inspection period so all key contingencies can be satisfied as soon as possible.

Days 10 – 25 – Loan Processing – The final body of work is usually the completion of loan processing, underwriting, and then preparing the loan documents for signatures. Loan docs are to be at the title company AND signed 3 full days prior to closing (ie – loan docs need to be completed on Monday if the closing is scheduled for Friday).

Day 25 – Signing at Title Company – Buyers are to sign loan documents 3 full days prior to the scheduled closing date. This is also the time for Buyer down payment funds to be brought in either by cashier’s check or wire transfer. Cash buyers may wait until later. When buyers are getting a loan, the sellers sign first and may sign as soon as the final settlement statement has been prepared.

Final walk through – It’s wise to do a pre-closing walk through to make sure the repairs have been completed as agreed and no new damage has occurred.  The home is supposed to be in substantially the same condition as when the offer was made.

Day 30 – Recording – This is the finish line! After all documents have been signed and all funds received, the title company records the sale with the appropriate county and it is officially done! Possession and keys are delivered following the recording of the sale.

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Buyer Closing Costs

The whole list is spelled out below… Your loan officer is the best person to ask for specific details on what the closing costs will be since most of the variables are with the loan.

Loan Costs

Loan Origination Fee – This is the main fee for the lender you choose, and it’s generally 1% of the loan amount. Most lenders will waive the origination fee in exchange for a higher interest rate if you choose.

Lender “Junk Fees” – This affectionate name is actually for some important things: loan processing, underwriting, and document prep fees. They generally total around $1200. Any lender “Application fee” is – in my opinion – nothing but a true junk fee. Ask for it to be waived – most will agree to waive it. (no such hassles with my preferred lending partners)

Appraisal Fee – This fee goes to have a licensed appraiser complete an appraisal of the property to verify that the contract value is in line with market value.

Mortgage Insurance Premium – This fee is only for loans with greater than 80% loan to value. FHA, VA, and USDA are government backed loan programs that each charge a mortgage insurance premium.

Title Fees

Escrow Fee – This is the title company’s fee for handling the sale. This fee is split 50/50 by Buyer and Seller.

ALTA Policy – This additional title policy is required by lenders to insure good, clear title for them. It includes some protections not covered by the normal Owner’s Policy provided by the Seller, and it may be a good investment for a cash buyer, too.

Pre-Paid Items

Interest Through Closing – Loan payments are made in arrears (meaning the payment you make February 1st pays for owning the home in January). If you close on January 18th, the title company will collect the interest for the last 13 days of January (what would have been the Feb. 1st payment). Your first payment after closing wouldn’t be due until March 1st.

Taxes Through Closing – Property taxes are only paid twice a year (April and October). The title company will collect a pro-rated amount for property taxes through closing.

Homeowner’s Insurance – You pay for a full year insurance policy at closing plus 2 months to get your impound account going.

HOA Fees – HOA fees can be paid by either party as negotiated. My experience is that HOA transfer fees are most often paid for by the Seller and prepayment of HOA dues is by Buyer. One noteworthy exception: buyers pay the HOA transfer fees in a short sale.

In addition to normal HOA dues, there are three HOA fees commonly collected at closing. All three are appropriately called “transfer fees.” The first is a Disclosure/Documentation fee for sending the CCR’s to the title company. The second is a transfer fee payable to the HOA itself. The third is a transfer fee payable to the HOA management company (ie – the attorney’s office that runs the HOA).

HOA fees vary widely. Two examples: Cortina HOA has all three transfer fees named above, and they total $650 ($250,$225, and $175 in the order above as of 2014). Montelena HOA charges $275 Disclosure, $2500 for the HOA, $225 for the HOA management company, plus $151 Reserve contribution to bolster HOA funds – totaling $3151 in HOA fees for a sale!

Buyer Assistance – Many Buyers ask for (and need) Seller help to pay their closing costs. Depending on the type of loan they’re using, Buyer closing costs can easily add up to 5% of the purchase price. Most Buyers who need the help ask for 3% to help them, and most Sellers find that it makes sense to cooperate, particularly if the Buyers offer close to the full asking price.

Home Warranty – This fee is also negotiable, but Buyers often ask the Sellers to pay for it. Basic home warranty coverage starts around $350 with optional coverage for pools, appliances and premium coverage at additional cost.

Miscellaneous – There are a number of other little fees such as Recording Fee to the county, Reconveyance/Tracking Fee to ensure that the bank releases your note, courier fees, etc. They’re typically under $250 all together…

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Getting A Loan

Loan Officer – Your loan officer is the person you’ll work with to line up your loan and get it done! They are one of the key members on your home-buying team, so work with the BEST! I work with three outstanding loan officers at different companies and would be glad to connect you with them.

Paperwork – Any lender will ask for a pile of paperwork to process and approve your loan. You can plan to provide: W-2’s for last two years and most recent pay stubs (or two years of tax returns if self employed), bank statements for the last three months, stock and mutual fund account statements, and the most recent statement for IRA/401(k) accounts.

Credit Check – Obviously getting a loan includes a credit check. What score you’ll need – and what interest rate you get – will vary with different loan programs.

Conventional Loans – Conventional loans are not government-backed loans (not FHA, VA, or USDA). They generally have stricter credit requirements and more favorable terms for you as the borrower. Commonly used for Buyers with good credit and at least 5% down payment.

FHA & VA Loans – These loans are insured by the federal government and are intended to make it easier for first time homebuyers and veterans to qualify. FHA loans require as little as 3.5% down payment while VA can finance the whole 100%. Both programs charge both an up-front mortgage insurance premium and a monthly insurance premium.  Special grant programs may even make your down payment for you – such as Home in Five and Home Plus.

USDA Loans – This one usually falls beneath the radar, but it’s a great program for those who qualify. USDA loans are 100% loans with an upfront mortgage insurance premium but no monthly MI fees. There are income limits that vary by household size, so not everyone will qualify. The home must also be in a USDA eligible area (east of Power Road is eligible).

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