Part 4 - Don’t Buy The Brooklyn Bridge.

Things To Know About Attorneys, Appraisers, Mortgages, & Insurance - More Tips From
The Home Inspection Pros

The Good Sense Of Having
A Real Estate Attorney On Your Team

There are advantages associated with having an attorney on your team. In some States, real estate agents prepare the sales contract, in some communities, this is not permitted; investigate to determine what is permissible in your community.

A good attorney can be an invaluable assistant to help you with your negotiations with the seller, the attorney can review the sales contract and suggest changes that may be needed to protect you. The attorney is also adept at helping you with the legal aspects associated with your transactions with your mortgage lender. The attorney can also represent you at the closing and review all of the legal documents before you sign.

Retaining the services of an attorney has worthwhile advantages; ask persons who have had a satisfactory experience with their attorney for a recommendation. Names of attorneys who specialize in real property transactions can also be obtained from the community Bar association. If you obtain names from sources such as the Bar association, you may want to obtain more than one name so you can compare the services of each. Select an attorney before you begin your house hunt, your attorney is also a good source of referrals for home inspection engineers, etc.

Types Of Mortgages

The negotiations are complete, unless you can afford an all cash deal, you will need a mortgage lender to finance your purchase; if you were pre-approved for a mortgage, you have a head start.

Various types of mortgages are available, one size does not fit all and smart home buyers research all of the options before beginning their house hunt in order to be prepared to make the right choice.

Although there are mortgage options to consider, the most popular include fixed rate mortgages and adjustable rate mortgages (ARM);  these mortgages can be arranged for in various terms, most often 15, 25, or 30 years.

Fixed Rate Mortgage

Typically, lower rates can be expected when the borrower pays points up front (a point is one percent of the total mortgage), the rates are also lower for shorter terms, say fifteen years instead of thirty years. Of course, payments on shorter term loans are higher because the entire loan must be paid back in less time. Fixed rate mortgages provide the security of knowing that your mortgage payment cannot be changed and this is a desirable benefit if you intend to own your home for a long time.

Adjustable Rate Mortgage

Adjustable rate mortgages have many variations, since these mortgages are adjustable, the rate may change every adjustment period and this period can be one, three, five, etc. years. At the adjustment period, the mortgage rate is adjusted in accordance with indexes and caps (how much a rate can change at an adjustment period and how much the rate can change over the life of the loan). Some ARM’s also permit conversion to a fixed rate mortgage under certain conditions. Adjustable rate mortgages typically offer lower initial rates but are subject to change, up or down, and are based upon national indexes such Treasury Notes, etc. ARM rates will reflect future changes in interest rates and could be a rude awakening for a borrower if interest rates rise. Typically, persons who intend to own their home for a shorter period of time may want to consider an ARM.

Visit our Library for glossaries of financial terms and web resources of references for mortgage information.

The Lender’s Appraiser

Now that you’ve been approved for your loan, your mortgage lender will want to be sure that they are not lending you too much money when compared to their appraiser’s opinion of the market value of the home. The lender wants to be sure that, if they have to sell the home due to your default on the loan, they will be able to recover the outstanding balance on the loan. That is why it is important to make your sales contract contingent upon mortgage approval for a specified loan amount; you want a way out of the contract if the lender will not approve, based upon the appraiser’s opinion, the amount of the mortgage you need to proceed with the purchase.

Insurance, Etc.

The real estate agent, or attorney, will order a title report, you don’t want to buy the Brooklyn Bridge. In other words, you want to be sure that the seller(s) of the home actually own the home, and you want to know what mortgages and other loans are secured by the home, and whether there are any liens on the property that will have to be satisfied at the closing by the seller.

Lender’s title insurance covers contingencies regarding who owns the home and possible outstanding liens on the home; your real estate agent, or attorney, will advise you what is required. Don’t forget, for a one time fee, there’s also title insurance for owners to protect against challenges to the title.

Your mortgage lender will typically require that you carry home owner’s insurance to be sure that the value of the home is preserved should a disaster occur.

Flood insurance may be required in certain cases where the home is located in an area prone to flooding. Earthquake insurance may also be required in areas prone to these occurrences.

If your down payment is a small percentage of the loan (often less than 20%), your lender may require Private Mortgage Insurance.

To be sure that there are no lot line disputes, or zoning non-compliance issues, the mortgage lender may also require a survey on the property, if a current survey does not exist.

Congratulations

Congratulations, you’ve done it. Buying a house is a job in itself, there are many assistants you will need to rely upon to help you through the process. As you have read above, there are costs above and beyond the cost of the home including those mentioned above, bank closing costs, and the pre-payment of certain real estate taxes, etc.