Buying a home is a major stepping stone in life that you should take seriously. It can bring you great joy and provide the place where you will create a family. To properly enjoy this momentous occasion, you should be aware of particular issues involved in the purchase of a home. This article will discuss how to properly organize your finances and save for a down payment, check your credit report, how to save for a down payment, the mechanics of mortgage payments, how to pick up property, the terms to include in your sales contract, and how to deal with the good faith deposit.
People typically buy property for one of two reasons: either you want to make this house into a home for your family, or you are going to use it as an investment property. Owning a property can involve many expenses some of which are not planned. Whether you need to plan a garden, refurbish the kitchen, redo the roof, or pave the driveway, you want to know what type of work is required before buying the house. Therefore, it is wise to get an inspection done by a reputable home inspector to see what issues the home has before you buy it. There is always the chance that the property will decrease in value after you purchase it; this is one of the painful lessons that we learned after the 2008 Financial Crisis.
Resolution to Mortgage Real Estate
A document used to formally acknowledge that the corporation will grant a mortgage on a certain real estate.
Organizing Your Finances
Saving for a Down Payment
Many lenders these days require some form of down payment. While some lenders may allow you to purchase a home for little to no money down, it may be wise for you to make a down payment to reduce your monthly mortgage payment. Your lender there may require anywhere from 5% to 20% down payment to purchase your property. Therefore, if you are looking to buy a property, you should start saving a little each paycheck to put towards your new home in an interest bearing account.
One thing you can do to help reduce your monthly payments is to look for government assistance programs. There are also some cities that will provide assistance for down payments on houses. They do so to incentivize homeownership and economic development in their city. If your city offers this, make sure to take advantage of it to save yourself some serious cash.
Check Your Credit Report
Before you apply for a mortgage, you need to check your credit. There are a few reasons that you want to do this. If your credit is good, then you're going to receive a reduced mortgage rate. However, if your credit is bad, then you may have to pay a higher rate of interest. A lot of people do not like checking their credit because they are afraid of what they're going to see. The truth of the matter is that checking your credit may provide you the opportunity to dispute charges against you that are not true and hurting your credit. Items can typically stay on your credit history for seven years, and you can improve your credit by making timely payments.
After you have checked your credit and dealt with any potential issues, you want to apply to become prequalified with your lender of choice. Many real estate agents want to see your pre-qualification letter before they will show you houses. They do this so that they know you're a legitimate client and they know your price range. However, just because you are qualified for a particular amount of money does not necessarily mean that you should take out a mortgage for that full amount. In fact, it is advisable to make your monthly mortgage payments between 15% and 20% of your gross monthly income.
Mechanics of Mortgage Payments
After you make your down payment, you will be making payments every single month for the life of your loan. Each mortgage payment consists of the principal balance which is the amount of money you borrow, interest payments, taxes, and insurance. Most consumer mortgage is either fixed rate or adjustable rate. If you have a fixed-rate mortgage it means that your interest rate will not change for the life of the loan. If you have an adjustable rate then it means that the interest that you will pay can change depending on things like LIBOR which is set by the Bank of London.
There are also other types of mortgages called pledged asset mortgages where you have to give up collateral to the lender that he may take an exchange for failing to make payments. Some properties also have homeowners associations which may require you to make a separate payment to them in return for community services that they provide. If you fail to make your mortgage payments, the mortgage contract will entitle the bank to take your property in a foreclosure proceeding. The homeowners association can also foreclose on you if you fail to make your payments. You can check the taxes charged on the property you want by checking the property appraiser’s website in the county where your property is located.
Your mortgage payments will likely be made to a mortgage servicer which is an entity hired by your lender to engage in collection efforts. Most mortgages also contain provisions that say your mortgage can be sold to other parties in which case the entity that you make payments to might change over the course of the loan.
Home Comparison Worksheet
A document used to compare houses including the must have features, the features they hope to have and the no ways.
Picking a Property
Picking the right property in the right location is a crucial part of the home-buying process. First, you should consider whether or not you want to buy an apartment or a home. That may largely be determined by whether or not you have a large family. If you were single, then an apartment would probably be fine. However, if you have a wife and children, then you will likely need to look into a single-family home. Real estate is all about location, location, location. You want to look at crime statistics to make sure the neighborhood is safe, especially if you have or are planning to have children.
The location of your house should take into consideration where you and your spouse work because if you have a long commute you are losing both time and the expense of gasoline. If you have children, the location of good schools is also something to look into. Properties are more expensive in cities and get cheaper as you move to more rural areas. Some people like the city life whereas others simply want to live on a farm so they can have chicken and cows. You want to pick a property that matches your lifestyle.
Most mortgages have a 30-year term, so you need to love where you live. Make sure to ask your home inspector how old your roof is because they need to be changed around every 30 years. You should also compare the home values in proximity to the one that you want because the value of a property is usually tied to the properties around it. If you have kids, consider living in a community-based home that has a gate for security.
Terms to Include in Your Sales Contract
When you buy a piece of property, you will enter into a sales contract. The sales contract is different from the note and mortgage that you will sign. The sales contract will specify that the buyer agrees to buy and the seller agrees to sell particular pieces of real estate. The agreement will give a closing date and provide the opportunity for inspections. Unless you are buying a new property, your sales contract may be “as is” meaning the seller is not guaranteeing that the property is in any particular condition.
This document will also tell you the financing mechanism: whether the buyer is paying cash or with a mortgage. It may also contain restrictions, easements, or limitations by the seller but that is not as common. A sales contract is considered an executory contract because it is an agreement to make an agreement. You also want to check for contingencies in the contract such as it being contingent on the buyer obtaining financing or the property passing an inspection. If either the buyer or the seller does not live up to their end of the agreement, either party can sue the other for breach of contract. That is why it is important to have a comprehensive sales contract that includes the right language so that your interests are protected.
The contract for sale will also contain a provision regarding a good faith deposit. The deposit is an amount of money given to the seller to prevent the buyer from making bids on multiple houses at once. Some contracts specify that if the buyer does not go through with the sale that the seller may keep the good faith deposit.
Property Purchase Agreement
This Agreement is made between the Vendor and the Purchaser. The Vendor agrees to sell, assign and make over with legal warranty an immoveable property to the Purchaser.