Q. What are closing costs?
A. Closing costs are the fees for services, taxes or special interest charges that surround the purchase of a home. They include upfront loan points, title insurance, escrow or closing day charges, document fees, prepaid interest and property taxes. Unless, these charges are rolled into the loan, they must be paid when the home is closed.
Q. Who pays the closing costs?
A. Closing costs are either paid by the home seller or home buyer. It often depends on local custom and what the buyer or seller negotiates.
Q. Why do I need a title report?
A. As much as you as a buyer may want to believe that the home you have found is perfect, a clear title report ensures there are no liens placed against the prior owners or any documents that will restrict your use of the property. A preliminary title report provides you with an opportunity to review any impediment that would prevent clear title from passing to you. When reading a preliminary report, it is important to check the extent of your ownership rights or interest. The most common form of interest is “fee simple” or “fee,” which is the highest type of interest an owner can have in land. Liens, restrictions and interests of others excluded from title coverage will be listed numerically as exceptions in the report. You also may have to consider interests of any third parties, such as easements granted by prior owners that limit use of the property. Some buyers attempt to clear these unwanted items prior to purchase. A list of standard exceptions and exclusions not covered by the title insurance policy may be attached. This section includes items the buyer may want to investigate further, such as any laws governing building and zoning.
Q. What is the best time to buy?
A. Because many buyers prefer to move in the spring or summer, the market starts to heat up as early as February. Families with children are anxious to buy so they can move during summer vacation, before the new school year begins. The market slows down in late summer before picking up again briefly in the fall. November and December have traditionally been slow months, although some astute buyers look for bargains during this period.
Q. Where do I get a copy of my credit report?
A. For a copy of your own credit report, call one of the three main national credit reporting agencies:
Equifax, (800) 685-1111;
Experian, (800) 392-1122
Trans Union, (312) 408-1050.
The bureaus also should provide instructions on how to read their report and dispute any inaccuracies it contains.
Q. What is the first step when looking for a home loan?
A. Most experts recommend that you should get pre-qualified for a loan first. By being pre-qualified, you will know exactly how much house you can afford. Almost all mortgage lenders now pre-qualify people, and many of them can even do it on the Internet. You also can do your own affordability calculations; most recent consumer books on home buying include steps to doing so, as do various real estate Internet sites.
Q. How do you qualify as a first-time buyer?
A. In general, lenders define a first-time home buyer as someone who has not owned any real estate – whether a personal residence, vacation home or investment property — during the past three years. Lenders verify an applicant’s status by examining their income tax returns, checking to see that the individual did not take any deductions for mortgage interest or property taxes.
Q. What is an impound account?
A. An impound account is a trust account established by the lender to hold money to pay for real estate taxes, and mortgage and homeowners insurance premiums as they are received each month.
Q. What’s a home inspection?
A. A home inspection is when a paid professional inspector — often a contractor or an engineer — inspects the home, searching for defects or other problems that might plague the owner later on. They usually represent the buyer and or paid by the buyer. The inspection usually takes place after a purchase contract between buyer and seller has been signed.
Q. Do I need a home inspection?
A. Yes. Buying a home “as is” is a risky proposition. Major repairs on homes can amount to thousands of dollars. Plumbing, electrical and roof problems represent significant and complex systems that are expensive to fix.