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Buying a Home
BancMac - Your Community Bank Mortgage Partner
Buying A Home

There is no greater feeling than finding the home you've always dreamed of owning. Once you've determined that the home meets all of your housing needs and is within your budget, you must begin to think about taking a number of steps. The information outlined in the following sections will help you to do this.

Making an Offer

There are several points that you need to address in your offer:
  • your preferred selling price (your offer)
  • financing and home inspection contingencies (for example, subject to acceptable interest rates and inspection report)
  • conditions of deposit
If the seller accepts your offer, consult your lender for a mortgage loan. If the seller makes a counteroffer, take time to review it, paying particular attention to whether it suits your needs. If your offer is rejected, ask your lender about alternate financing options that may increase your buying leverage and allow you to make a more attractive offer.

Purchase and Sales Agreement

When you make an offer to purchase a home, you and your real estate sales professional prepare a purchase and sale agreement. Your real estate sales professional then gives it to the seller.

There are several elements that should be included in your purchase and sale agreement. These include:

  • the price you are willing to pay
  • a legal description of the property
  • your down payment
  • your mortgage amount with the maximum interest rate you will pay
  • the amount of earnest money
  • a closing date
  • an occupancy date
  • the date the offer expires
You may also want to include special contingencies in your offer. A contingency requires a certain act to be performed in order for the contract to take effect. Some of the more common contingencies are home inspection, clear title, financing, repairs, environmental concerns, and appraisals. There are many other contingencies you may want to consider. Ask your lender or real estate professional to help you decide the contingencies you should select.

Closing Preparations

Once you have your mortgage financing in place, you'll proceed to the closing. This is referred to as the "settlement" in some parts of the country. The closing is a meeting that focuses on - among other things - finalizing your loan, issuing your mortgage, and getting the keys to your home.

There is plenty of activity before the closing, and several important steps need to be taken in the final weeks before closing, including having a title search conducted and getting title insurance. A survey of the property may also occur.

Additionally, you must arrange for a termite inspection and go on a final walk-through inspection before the closing meeting.

You should have your lender select a closing (or settlement) agent to coordinate closing-related activities such as preparing and recording the closing documents and disbursing funds. The types of services provided will depend on the closing agent you choose and where you live. That's because closings are conducted differently across the country. Some are conducted by insurance companies or escrow companies, others by real estate brokers, lending institutions, or attorneys for both the buyer and the seller.

You may want to hire a real estate attorney to represent you in the upcoming legal transaction. Your attorney will review the sales contract before you sign it and represent you at closing. The fees you pay your personal attorney are not part of your closing costs, so you will need to set aside money to pay for them separately. Not everyone finds it necessary to hire an attorney; it depends on how comfortable you feel with the transaction and how much money you have available for attorney's fees.

Look to your real estate agent to help you with your closing. The closing process is discussed in more detail in the next section.

Final Stages

Once you've done a final walk-through, ensuring that the seller has made any repairs mentioned in the purchase contract and has satisfied any other contingencies involving the home's condition, you're ready to close the deal. This is called your closing, or the 'settlement.'

On closing day, the seller officially signs the house over to you. By working with a Lender through BancMac, the amount of time it takes to close on a home is shaved significantly. Review the following sections for a more detailed description of the steps and considerations involved in your closing.

Closing Date

An estimated closing date is usually specified in your sales contract , and a final date will be chosen after your mortgage loan application is approved and you sign the commitment letter.

Typically, your real estate sales professional, your lender, and your closing agent coordinate the setting of this date. Make sure the closing occurs before the commitment letter expires and while your interest rate lock-in remains valid.

You should ask your closing agent for a statement that lists the date, place, time, and items you need to bring to the closing meeting.

One business day before the closing meeting, your closing agent will have you review a copy of the HUD-1 Settlement Statement. This document itemizes the funds the buyer and the seller will pay at closing.

Important Closing Facts

At the closing meeting, you'll be asked to sign a number of papers, as well as pay closing costs. Each situation is different, so the closing costs may be part of your mortgage or they may be paid by the seller or the builder of the home.

Remember, the closing process varies from state to state, and even within the same county or city. Certain activities are standard, and it is to yours, the sellers, and the lenders benefit that you understand all of the activities.

Your primary role at the closing meeting is to review and sign documents related to the mortgage loan and to pay the closing costs.

Many of the people involved with the purchase of your home will be at the closing. The meeting takes about one hour and is usually held at the closing agent's office. If you live in an area of the country where there is no formal closing meeting, an escrow agent processes the paperwork, arranges for the documents to be signed, and collects and disburses the required funds.

Closing Costs

One way to review the costs associated with your closing is to define them as seller versus buyer costs, mortgage-related closing costs, and government-imposed closing costs.

Make sure that any agreement regarding "seller versus buyer costs" is specified in the sales contract. Mortgage-related closing costs can vary, but the following are typically paid at or by closing:

  • loan origination fee
  • loan discount points
  • appraisal fee
  • credit report fee
  • tax service fee
  • prepaid interest
  • escrow accounts
  • recording fees
Closing Steps

Here are some of the steps taken during and after the closing meeting:
  1. The closing agent reviews the HUD-1 Settlement Statement with you and the seller and answers any questions. Both you and the seller sign the settlement sheet.
  2. The closing agent asks you to sign the other loan documents, such as the note and Truth-in-Lending Statement. Evidence of required insurance and inspections is also presented - if it wasn't previously given to the lender.
  3. If everyone agrees the papers are in order, you and the seller submit a certified check or cashiers check to cover the closing costs and the balance of funds due. The check from the lender covering the mortgage amount is then submitted to the closing agent. If the lender will be paying your annual property taxes and homeowners insurance for you, a new escrow account is established at this point.
  4. You receive the keys to your home.
  5. After the meeting, the closing agent officially records the mortgage and deed at your local government clerks office or registry of deeds. This legal transfer of the property may take a few days. The closing agent usually will not disburse the funds to everyone who is owed money from the sale (including the seller, real estate professionals, and the lender) until the transaction has been recorded. After the deed has been officially recorded, you formally become the owner of the home.
Closing Documents

At the closing, you should receive copies of the following:
  • HUD-1 Settlement Statement
  • Truth-in-Lending Statement
  • Note
  • Mortgage
  • Deed
  • Notice of Assignment, Sale or Transfer of Servicing Rights
After the Closing

When your closing is completed, you will need to store any paperwork you received at the closing in a safe place. Remember to keep a copy of every document you signed.

When you file your taxes, it may be useful to have a copy of the settlement form because it lists the real estate taxes and loan discount points you paid at the closing - they may be tax deductible. Also make sure you keep all homeowners insurance and title insurance records.

Questions and Answers About Home Buying

Here are several important questions you can ask yourself before beginning the process of looking at homes and reviewing your financing options with your lender.

Question: Does my job history play a role in getting a mortgage?
Answer: Yes. A lender considers you to have steady employment if you have been working consistently for at least the past two years. If you have been working continuously, you won't necessarily automatically qualify for a mortgage. Likewise, not working continuously for the past two years does not mean you wont get a mortgage.

The important consideration is whether you can reasonably explain any gaps in your employment history. For example, did you just recently finish school, were you temporarily laid off, did you suffer an illness that prevented you from working, or were you discharged from the military?

Question: Can I realistically afford a home?
Answer: Lenders typically want home buyers to contribute a portion of their own funds toward the closing of the deal. These funds are often referred to as the down payment.

There are many options available to home buyers to help with down payments. Some conventional mortgage financing requires as little as 3 percent from the borrowers own funds.

As an example of the potential down payment you will need, consider a family wanting to purchase a $150,000 home with a required down payment of 5 percent. The down payment would total $7,500 in this scenario. There are other costs you'll have to pay such as closing costs.

Question: How does my existing debt affect my getting a mortgage?
Answer: Lenders want to see a history of debts being duly repaid. Your lender will order a credit report from a credit bureau to verify your amount of debt, your monthly payments, and how many months or years you have left to pay off your debts.

Having a good credit record means you have a history of paying your rent and other bills on time and will be able to prove it through a credit report or via a nontraditional credit history. Lender credit standards vary but being late on a payment or having gone over your credit limit once or twice doesn't necessarily mean you don't have good credit. But if you have a pattern of not paying accounts, it will affect your credit history.

A good credit history tells the lender that you pay your obligations on time and use credit wisely.

If you have an unfavorable credit profile, it may mean you do not pay your bills on time or you currently have more credit obligations than you have been able to handle.

If your accurate credit report shows you do not have a good credit history, now may not be the best time to apply for a mortgage loan. Instead, you should try to improve your credit profile by bringing your payments up to date, paying off some of your debts, and working on paying your bills on time. You can still build a profile over time that shows you are a good candidate for a loan even if you have had serious credit problems in the past.

Question: Can I afford the monthly mortgage payments on the house I want?
Answer: From a lender's point of view, your monthly mortgage payment is generally limited to 28 percent of your gross monthly income. The amount of your total monthly debt is limited to 36 percent of your gross monthly income.

Finding a home that stays within these lender guidelines will give you a certain range of monthly mortgage payments you can afford. The amount of these payments will depend on current interest rates.