Here you will find the answers to many questions that home buyers ask, as well as a wealth of information and resources that will guide you smoothly through the property buying experience. Whether it is your first home purchase, you need a creative financing solution, or you just would like to be notified when properties of interest to you come on the market, the Sue Kelly Group is here to work with you!
Select from the list of Buyer's Resources & Information below...
Buy for Little/No $$$ Down
5 Options for Buying A House With Little Or No Money Down
A Free Special Report, Compliments of the Sue Kelly Group
Many people never buy the home of their dreams simply because they don’t think they have enough money for the down payment. They’ve been told through the years that they need 10 or 20 percent of the purchase price in order to buy a home. Well, this simply isn’t true.
So why have so many real estate companies told them this?
Quite honestly, it’s because selling homes to people with 10 or 20 percent down is easier than selling homes to people who have little or no money for a down payment. Most real estate sales people would rather go after the "easy sale" than try to help people who have special needs.
As a By Referral Only Real Estate Consultant, my mission is clear: To Help People. That’s why we’ve created this special report and sent it to you with no obligation.
This report is specially designed for people with good credit and a good income, but who just don’t have much money for a down payment.
Option 1: FHA Loans
Although this isn’t a "No Money Down" option, the FHA loan is by far one of the best alternatives for people who want to buy a home and don’t have much money to put down. With an FHA loan, you could put down as little as 3%. Plus, FHA loans are easier to qualify for.
Now, 3% may seem like a lot to come up with, but many people find that when they put their minds to it, 3% is actually possible. While you can’t "borrow" the 3%, you can get a "gift" from a family member, borrow from your 401k, or sell some "stuff" you have lying around. At the end of this report, we’ve included a special section with great ideas for raising this small amount required for an FHA loan.
FHA loans do have requirements and restrictions. Not all townhomes and condos qualify, and there is a maximum loan amount you can get. But if you’ve been dreaming of a new home and think you might be able to "scrounge up" 3%, this is a great way to go.
Option 2: M.S.H.D.A. & M.C.C. Loans
The Michigan State Housing Development Authority and Mortgage Credit Certificate are a first-time homebuyers’ programs that offers below-market, fixed-rate, 15- or 30-year loans. There are restrictions as to maximum household income, as well as the price of the home you are buying.
The only disadvantage of this loan is that if you sell the house before the end of the loan term, you may have to "pay back" a portion of the subsidy used to get the lower interest rate. However, if you’re a first-time homebuyer, this may be an option to consider.
Option 3: Special Loan Programs
Special loan programs come and go quickly. There is one available right now that will allow the seller to provide the 3% down payment required for a home loan. That means no money out of your pocket if you know how to negotiate with the seller! There is another program right now that requires only 2% including closing costs! Wow! That’s practically the same as "no money down!!"
So, how do you find out what type of loan programs are available for you right now? The best way is to work with a great mortgage broker who keeps up to speed on these special programs. If you don’t know of one, we work with at least 3 such mortgage professionals and we would be happy to refer you to one of them, depending on your particular needs.
Option 4: Owner Financing
Owner financing means exactly that: the owner (or seller) finances a portion of your home purchase. For example, you might borrow 80% of the value of a home from a lending institution, and "borrow" the other 20% from the owner. In this situation, the owner "carries back" a second mortgage.
Owner financing can be advantageous, especially to investors who buy up properties and then rent them out. For the average homebuyer, however, owner financing is difficult to find and requires some tricky negotiating. Even after successfully negotiating a deal, it requires some detailed work by qualified attorneys in order to protect the interests of all parties involved.
While you shouldn’t rule out owner financing, keep in mind that by looking for someone who is willing to help finance your purchase, you severely limit your choices. There are a lot of houses for sale today, but not a lot where owner financing is an option.
Option 5: Lease-To-Own
With a lease-to-own, you essentially lease a home, but make larger payments in order to begin accumulating a down payment. For example, if a house would normally lease for $800, you might lease it for $1,000/month, with $200/month going into a special account. At the end of a specified period, you buy the home using the money in that special account as your down payment. However, if you decide somewhere along the line not to purchase the home, all of the money in the special account then goes to the seller.
Think of this option as renting with a forced savings account. If you can find someone willing to do this, it’s not a bad option. However, most people who are selling their homes need their money out of it in order to buy their next home, so finding someone who is willing to lease to you may prove more difficult.
Where To Begin
Now that you have 5 good options for buying a home for little or no money down, where is the best place to begin?
The first step is get pre-qualified. And the best way to get pre-qualified is to find a real estate professional who is dedicated to helping people like you get into the home of your dreams.
We’ll do more than help you get financed!
Financing is only the first step in the home-buying process. We are dedicated to helping you through the entire process, delivering world-class service all along the way. We can help you find the right home, negotiate the right terms, and then make sure that you actually get to the closing table. It’s all part of our Preferred Buyer’s Program, which you can join for FREE! That’s right, it won’t cost you a dime, because all of our fees are paid by the seller!
If you’d like to know more about your financing options and would like to be part of our Preferred Buyer’s Program, please contact us today.
Simple Ideas For Raising Money For A Down Payment…
Have a garage sale. You’ll be surprised how much money you can raise this way, especially if you’re willing to give up some of the junk you’ve been hoarding for years!
Raid your savings. Even if you’ve been trying to keep a little stashed away, this is important! If your kids have a savings account, ask them if you could borrow from theirs as well!
Borrow from your retirement fund. Many retirement funds (401k, IRA, etc.) have provisions for you to borrow from them for important reasons. This counts as an important reason! Check with your plan administrator or your financial advisor about this option! The nice part about this is that as you repay your loan, you pay the interest to yourself!
Ask your family. This is probably the hardest thing for some to do, but you might be surprised at how willing a family member would be to help you buy a house, even if they’ve said "no" to you before when you tried to borrow for other things! If you do this, you’ll need a form for your banker stating that this is a gift and not a loan. (Yes, you can still repay your family member. It just can’t be a formal loan!)
Sell something. If you look around your house, you might find items that have pretty good value, but that you haven’t used in a long time. An old coin collection; an old musical instrument that no one plays anymore; an extra freezer you don’t really need; a second (or third) car you could do without. Often, the cash from selling these items can add up quickly!
Win the lottery. Hey, somebody’s gonna win! Might as well be you!
Home Buyer's Wishlist
What Home Do You Want/Need?
When deciding on a house to buy, think about your lifestyle, your current and future housing needs and your budget.
When creating your wish list, take a look at your lifestyle. For example, if you love to cook, you'll want a well-equipped kitchen. If you love to garden, you'll want a yard. If you want to work at home, you may want a room for a separate library or home office. If you have several cars, you may require a garage or parking spaces.
Write down on paper all the things you and your co-purchaser, if there is one, would love to have in your home. You can let your imagination take over, but realize that you will have to cut the list back later.
As you think about your housing needs, it's important to consider how long you may live in your home. If you are newly married, you might not be concerned with a school district right now. But you could be in several years. Will you move then -- or is the house you are looking for now in a neighborhood where good schools are available? If you have aging parents, might they need to live with you in the near future? If so, you may want to look at homes that offer living arrangements for them as well as you.
So, when preparing your wish list, factor in both your current housing needs and what you may anticipate a few years from now.
Your home's location You need to think about the home's location just as carefully as you do about the house features. Identify what kind of city, community, and neighborhood are right for you.
Beyond commuting distance to work, you need to evaluate the availability of shopping, police and fire protection, medical facilities, school and day-care, traffic and parking, trash and garbage collection, recreational facilities, places of worship, and other community amenities.
Driving or walking around neighborhoods, looking at street maps of various neighborhoods, and talking with people you know who live in the neighborhood will help you better understand the pluses and minuses of communities you are considering.
Type of home you want You also need to figure out the type of housing you want. Do you want a condominium or a cooperative? A town house or a detached single-family home? In terms of construction materials, do you want brick, stone, stucco, wood, vinyl siding, or another building material? Do you prefer a new home or an older home?
If you have the time and money to invest in fixing up a home, you may want to buy an older home that needs some work. If you don't, you may wish to buy an older home in which all renovations are complete, or a new home that offers energy-efficient systems and modern materials.
Types of Mortgage Loans
A wide selection of mortgages are available, the challenge is to select the loan that is most favorable to your situation.
If, you anticipate living in your home for many years, the interest rate may be the main factor for you. If you expect to keep the house for only a short period of time, the closing costs may be more important to you. If you want to have ended any mortgage debt by the time you are facing your children's college bills or your own retirement, you may wish to consider a shorter term loan such as a 15-year fixed-rate mortgage. If your own retirement is years away, you may be less inclined toward a shorter-term loan, preferring to extend payments over a longer period of time through taking on a 30-year mortgage loan.
How important to you is the certainty of a fixed mortgage payment each month? If you want to make sure your mortgage payment remains the same each month, then you'll want to focus on various fixed-rate loans. If you are comfortable with periodic changes to your mortgage interest rate, then you may be inclined to consider adjustable-rate mortgages.
Fixed-rate mortgage loans -- A fixed-rate mortgage ensures that your interest rate (and your payments) will stay the same over the life of your loan - which may be an important consideration if you plan to stay in your home for several years. When you choose the length of your repayment (usually 15, 20 or 30 years), keep in mind that while shorter term loans may have higher monthly payments, they also let you pay less interest and build equity faster.
30-year fixed-rate mortgage loan -- The advantage of a 30-year fixed-rate mortgage loan is that it is the easiest to qualify for, and it gives you an excellent opportunity to keep your mortgage payments reasonable by making monthly payments over a long period of time. This mortgage loan may be ideal if you plan to remain in your home for years and wish to keep your housing expense low and use any extra cash for other purposes. This loan also provides maximum interest deduction for tax purposes.
20-year fixed-rate mortgage loan -- The 20-year mortgage often offers a lower interest rate compared to a 30-year loan. This mortgage amortizes principal and interest over a 20-year period, 10 years less than the traditional 30-year mortgage. This may save you a considerable amount of total interest paid over the life of the loan.
15-year fixed-rate mortgage loan -- The advantage of a 15-year mortgage is that its interest rate is lower than a 30-year or 20-year mortgage'such a shorter-term mortgage will save you a significant amount of interest over the life of the loan. By paying off the mortgage more quickly, you also build up equity in your home sooner. A 15-year mortgage can let you own your home clear of debt earlier, which may be important if you are approaching retirement or have other large expenses to cover such as financing your children's education. However, the monthly payments you make on a 15-year mortgage will cost you more than those you would make on a 30-year or a 20-year mortgage loan for the same total mortgage amount.
Adjustable-rate loans -- With an adjustable-rate mortgage (ARM), the interest rate you pay is adjusted from time to time to keep it in line with changing market rates. This means that when interest rates go up, your monthly mortgage payments may go up as well. On the other hand, when interest rates go down, your monthly mortgage payments may also go down. ARMs are attractive because they may initially offer a lower interest rate than fixed-rate mortgages'since the monthly payments on an ARM start out lower than those of a fixed-rate mortgage of the same amount, you can qualify for a larger loan. The chief drawback, of course, is that your monthly payments may increase when interest rates go up. The types of people who typically benefit from an ARM are those that are planning to move or refinance in the near future, people with a high likelihood of increasing their income in later years, and people who need lower initial interest rates on their mortgage to be able to buy a home. How much your payments can increase will depend on the terms of your mortgage.
Before applying for an ARM, be sure you know how high your monthly payments could go - the so-called "worst-case scenario." An ARM has two "caps" or limits on how large an interest rate increase is permitted: One cap sets the most that your interest rate can go up during each adjustment period and the other cap sets the maximum total amount of all interest adjustments over the life of the loan. The rates on an ARM usually change once or twice a year, and there is typically a lifetime rate cap (or limit) on both the amount of each individual rate adjustment and the total amount the rate can change over the whole term of the loan. For example, if your loan starts at 5 percent, has a 2 percent per-adjustment cap, and a lifetime adjustment cap of 4 percent, you know that your loan might go up to 7 percent the first time the rate changes. You also know that the rate can never go over 9 percent over the life of the loan (5 percent start plus 4 percent lifetime cap). Only you can determine if you would feel comfortable paying this interest rate sometime in the future.
Some ARMs offer a conversion feature, which allows you to convert from an adjustable-rate to a fixed-rate loan at only certain times during the life of your loan. Ask your lender about this feature when researching ARMs. One important thing to know when comparing ARMs is that the interest rate changes on an ARM are always tied to a financial index. A financial index is a published number or percentage, such as the average interest rate or yield on Treasury bills. The most common types of ARMs are listed below.
CD-indexed ARMs (certificate of deposit) -- These ARMs adjust to a Certificate of Deposit (CD) index. After an initial six-month period, the initial rate and payments adjust every six months. The standard form of these ARMs comes with a per-adjustment cap of 1 percent and a lifetime rate cap of 6 percent'some of these ARMs offer an option to convert to a fixed-rate mortgage at specified interest adjustment dates.
Treasury-indexed ARMs -- These ARMs are indexed to the weekly average yield of U.S. Treasury securities adjusted to a constant maturity of six months, one year, or three years. Depending on which three of these security index schedules you choose, the interest rate on your ARM will adjust once every six months, once each year, or once every three years. Per-adjustment caps and lifetime rate caps vary, depending on the type of Treasury-indexed ARM you choose'some of these ARMs offer an option to convert to a fixed-rate mortgage at specified interest adjustment dates.
Cost of funds-indexed ARMs -- Cost of Funds-indexed (COFi) ARMs are indexed to the actual costs that a particular group of institutions pays to borrow money. The most popular index of this type is the COFi for the 11th Federal Home Loan Bank District. COFi ARMs can adjust every month, every six months, or every year and the per-adjustment caps and lifetime rate caps vary, depending on the type of COFi ARM you choose'some of these ARMs offer an option to convert to a fixed-rate mortgage at specified interest adjustment dates.
LIBOR-based ARMs -- The London Interbank Offered Rate (LIBOR) is the interest rate at which international banks lend and borrow funds in the London interbank market. You may choose an ARM that adjusts to the LIBOR every six months. This six-month LIBOR ARM typically has a per-adjustment period cap of 1 percent and is offered with either a 5 percent or a 6 percent lifetime rate cap. It can offer the option to convert to a fixed-rate mortgage.
Initial fixed-period ARMs -- You may wish to look into a special type of ARM that doesn't adjust your interest rate until several years after you take out the loan. These loans offer you several years of fixed payments before there is an interest rate change. You can get a three-, five-, seven-, or ten-year fixed-period ARM. This means your interest rate would be the same for the first three, five, seven, or ten years and then, at the end of your chosen fixed-rate period, your interest rate would adjust every year. This type of ARM protects you against rapid interest rate increases in the early years of your loan.
Two-step mortgage® -- The Two-step is a special type of ARM because it adjusts only once - either at seven years or at five years. After that initial adjustment, the mortgage maintains a fixed rate for the remaining 23 or 25 years of a 30-year mortgage repayment term. For example, if your initial interest rate were 8 percent, you would pay that rate for the first seven (or five) years. Then, for the remaining 23 (or 25) years, you would pay an interest rate that is indexed to the value of the 10-year US Treasury security on the adjustment date. This new rate can never be more than 6 percentage points higher than your old rate. There are no limits on how much lower the adjusted interest rate can be. The Two-step, then, provides the benefit of initial low rates with the stability of longer term financing. If you continue living in your home beyond the loan adjustment date, the Two-step offers the assurance of a fixed rate for the remaining term of the loan. At the adjustment date, there is no additional refinancing cost, no forms to complete, and no re-qualification necessary.
Government loans -- The Federal Housing Administration (FHA), the US Department of Veterans Affairs (VA), and the Rural Housing Services (RHS) are three agencies that offer government-insured loans. To obtain these loans, you apply through a lender that is approved to handle them. All require that the properties being purchased meet certain minimum standards. Here is some more information about various government loan programs:
FHA loans With FHA insurance, you can purchase a home with a very low down payment (from 3 percent to 5 percent of the FHA appraisal value or the purchase price, whichever is lower). FHA mortgages have a maximum loan limit that varies depending on the average cost of housing in a given region.
VA loans The VA guarantee allows qualified veterans to buy a house costing up to $203,000 with no down payment. Moreover, the qualification guidelines for VA loans are more flexible than those for either FHA or conventional loans. If you are a qualified veteran, this can be an attractive mortgage program. To determine whether you are eligible, check with your nearest VA regional office.
RHS loans The Rural Housing Service, a branch of the US Department of Agriculture, offers low-interest-rate homeownership loans with no down payment requirements to low- and moderate-income persons who live in rural areas or small towns. Check with your local RHS office or a local lender for eligibility requirements. For the location of RHS State Offices and details on RHS loans, see the RHS home page.
State and local loan programs A number of states sponsor programs to help first-time home buyers qualify for mortgages. Local housing agencies also offer attractive loan terms to eligible home buyers in some areas. These programs typically offer very attractive loan terms (low down payment or low interest rate) to first-time home buyers who meet specified income guidelines'some state and local programs may also offer down payment and closing cost assistance. (Check with your state housing authority. The phone numbers usually can be found in the government "blue pages" of the phone book.)
Balloon loans -- These short-term loans (usually 5, 7 or 10 years) offer lower interest rates, but only a piece of what you borrow is paid off during the term of the loan. At the end of the term, you pay off the remaining balance in a lump sum or refinance it. If you think you will be selling or refinancing your home in 5 to 7 years, you may benefit from obtaining a balloon mortgage. The interest rate on a balloon mortgage is lower than that of a fully amortizing fixed-rate mortgage. You begin paying under a balloon mortgage an initial rate, 7 percent for example. You would continue paying that 7 percent rate for the first 5, 7 or 10 years, based on the term of your loan. At the end of your 5, 7 or 10 year term, all of your outstanding loan balance would be due.
Some lenders will permit you to extend your loan beyond the balloon date if you pay a fee and refinance your loan based on the then current interest rate. It is important to find out before you enter into a balloon mortgage whether your lender will allow you to refinance. Not all lenders will promise to extend your loan beyond the balloon date. This type of loan should not be pursued if you have concerns about meeting the refinance conditions or think the balloon term will be due before you are ready to move or refinance.
Affordable housing loans -- For households of modest means, the greatest barriers to homeownership are coming up with the down payment and closing costs and managing housing expenses that often are higher than those of the qualifying guidelines allowed in traditional mortgage lending. Many lenders, in cooperation with housing providers, offer low- and moderate-income households mortgage loan options that help overcome common barriers to homeownership. These mortgage loans offer flexible underwriting ratios, allowing you to use more of your monthly income toward housing costs than other mortgage loans allow. Also, these loans require less cash at closing and for a down payment, making it easier to get into a home sooner.
Inspections & Negotiations
Inspecting and Buying a Home
It is important to read the entire real estate purchase agreement befor you sign it.
There's a lot to consider before you sign a real estate purchase agreement. If the terms and conditions of the deal aren't acceptable, you might want to pause and think twice, even if the purchase price is more than satisfactory. After all, the price will be moot if the transaction never closes. The typical residential real estate purchase contract is complicated, densely written and packed with legal jargon, but don't use that fact as an excuse for not reading the entire contract. Take your time and read slowly. Ask questions about anything you don't understand. Be flexible and willing to negotiate.
The following five points are among the many items that merit attention:
1. What are the cutoff dates for inspections and approvals of the inspection reports? A typical contract provides an opportunity for the buyer to hire all manner of experts to check out the condition of the home. From the buyer's perspective, the more time that's allowed for these once-overs, the better. Sellers, on the other hand, usually want the inspections to be completed and signed off as soon as possible.
2. Who is responsible for making repairs, if any, as a result of the inspections? The fact that the buyer orders one of more inspections of the home for informational purposes doesn't obligate the seller to make repairs or modifications as a result of those inspections. In practice, however, inspection reports often are used to negotiate repairs of major problems or safety or environmental hazards that may be noted. The purchase contract should provide some guidance for these negotiations.
3. Is the seller making any representations or warranties regarding the condition of the property? In some contracts, the seller warrants that specified major components of the home (e.g., the roof or central heating or cooling system) are in good repair and working order at the close of escrow. Buyers should understand which components of the home are guaranteed and which are being sold "as-is."
4. Will a home warranty plan be purchased? A home warranty plan is a sort of limited insurance policy covering the basic major systems and appliances in the home. It may seem like a prize for the buyers, but it's equally important for the sellers and the real estate broker representing the sellers. In fact, these warranty plans are so popular among real estate agents that many of them will pick up the tab for the program in order to insulate themselves from irate buyers.
5. When is escrow scheduled to close? Pay attention to this date! If you're selling your home, you'll be expected to move out completely before the property changes hands. You'll want to make sure the closing date doesn't fall before you're able to move into your next residence. If you're buying a home, you'll be able to pick up the keys on the day escrow closes. You'll want to make sure you don't give up your prior residence too soon. Don't cut the dates too close. Many escrows end up closing a day or two later than the contract states--but that can happen only with the mutual agreement of the buyer and seller.
Hiring a Home Inspector
Finding the right person isn't as easy as it may seem
Years ago, home inspections were unheard of in residential real estate transactions. Instead, buyers simply relied on their own impressions of the home and the representations of the seller's real estate agent. Today, the process is dramatically different. Most real estate purchase contracts give the buyer fairly broad rights to order one or more professional inspections of the home before completing the purchase.
The right to have inspections comes with the challenge of hiring diligent and competent inspectors. Finding the right peerson isn't as easy as it may seem because in most states, just about anyone with an official-looking checklist and a flashlight can set up shop as a home inspector. The exception to this free-for-all is that special training is required to perform inspection or remediation work for such potentially hazardous materials as asbestos and lead-based paint.
A good real estate agent should be willing and able to recommend several well-qualified home inspectors. The tricky part is selecting the best candidates among the group. Here are six of the many factors to consider:
1. Qualifications. Ask open-ended questions about the inspector's training and experience as it relates to home inspections. The inspector should have some training in construction and building maintenance standards and a track-record of experience in the home inspection business. Depending on the location and age of the home, you may need to hire an inspector who's qualified to deal with asbestos, lead-based paint or other potentially hazardous substances. You may also need to hire a geologist or structural engineer.
2. Scope. Ask the inspector which components of the property are -- and are not -- included in his or her inspection. Will the inspector check out the roof? How about the swimming pool? The built-in appliances?
3. Sample report. Ask the inspector to provide a sample of his or her checklist or inspection report. Does the report include a narrative description or just check-off boxes? Is the information presented and explained clearly and completely? Does the report highlight any problems that could present a safety hazard?
4. References. Ask the inspector for the names and telephone numbers of several homeowners who have used his or her services. Call those people and ask them whether they were satisfied with the report and other services they received. Be sure to talk to some people who have owned their home for a few months or longer. Some problems overlooked by an inspection can take a while to surface.
5. Memberships. Many good inspectors don't belong to a national or state association of home inspectors. However, all else being equal, an association membership is often a plus. These groups provide their members with training and certification programs and up-to-date information about industry practices and inspection standards.
6. Errors and omissions. Even top-notch inspectors are only human and can make errors or overlook problems they probably should have noticed. Ask about the company's policy in such situations. Does the company have insurance for errors and omissions? Does the company or individual inspector stand behind the report? Many companies ask customers to sign a waiver limiting the company's liability to the cost of the inspection.
Closing & Possession
What happens at closing?
The closing meeting is where ownership of the home is officially transferred from the seller to you. Your closing agent coordinates all of the document signing and the collection and disbursement of funds. Your main role at the closing is to review and sign the numerous documents related to the mortgage loan and to pay the closing costs. The closing is a formal meeting typically attended by the buyer(s) and the seller(s) (and their attorneys if they have them), both real estate sales professionals, a representative of the lender and, of course, the closing agent. The meeting takes about one hour and usually is held at the closing agent's office. Or, you may live in an area where there is no formal closing meeting. Instead, an escrow agent processes all the paperwork, arranges for all documents to be signed and collects and disburses the required funds. The steps below explain what happens during and after the closing meeting:
First, the closing agent reviews the settlement sheet with you and the seller and answers any questions. Both you and the seller sign the settlement sheet.
The closing agent then asks you to sign the other loan documents, such as the mortgage note and Truth-in-Lending statement.
Evidence of required insurance and inspections is also presented (if it wasn. t previously given to the lender).
If everyone agrees that the papers are in order, you (and the seller) submit a certified or cashier's check to cover the closing costs and the balance of funds due (if applicable). And, the check from the lender covering the mortgage amount is submitted to the closing agent.
If the lender will be paying your annual property taxes and homeowner's insurance for you, a new escrow account (or reserve) is established at this point.
You receive the keys to your new home.
After the meeting, the closing agent officially records the mortgage and deed at your local government clerk. s office or registry of deeds. This legal transfer of the property may take a few days after closing. 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.
It is at the point of deed recordation that you become the official owner of the home.
You will receive a number of important documents at the closing meeting. Review this list of documents before you go to the closing table, so that you will be prepared for the documents that you will receive.
HUD-1 Settlement Sheet -- The settlement sheet itemizes the services provided and lists the charges to the buyer and the seller. It is filled out by your closing agent and must be signed by both you and the seller. You should have been allowed to review this form on the business day before your closing meeting so that you will be able to know your closing costs in advance.
Truth-in-Lending (TIL) Statement -- Within three business days of applying for a loan to purchase a home, your lender should have given you this document, which outlines the costs of your loan. You receive it at that time so that you may compare the loan costs with those of other lenders. The TIL statement also discloses the annual percentage rate (APR). The APR is the cost of your mortgage as a yearly rate. This rate may be higher than the interest rate stated in your mortgage because the APR includes any points, and certain other costs of credit. The TIL statement also discloses the other terms of the loan, including the finance charge, the amount financed, the payment amount, and the total payments required. It is possible that the APR calculated at your loan application will change at closing. That is why your lender is required to give you the final version of your TIL statement at or prior to the closing meeting.
The note -- The mortgage (or promissory) note is a legal . IOU.. The note represents your promise to pay the lender according to the agreed terms of the loan, including the dates on which your mortgage payments must be made and the location to which they must be sent. The note also details the penalties that will be assessed if you fail to make your monthly mortgage payments. And, it warns you that the lender can . call. the loan (require full repayment before the end of the loan term) if you violate the terms of your note or mortgage.
The mortgage -- The mortgage is the legal document that secures the note and gives the lender a legal claim against your house if you default on the note's terms. In effect, you have possession of the property, but the lender has an ownership interest (called an . encumbrance. ) until the loan has been fully repaid. The mortgage restates the basic information found in the note. It also states your responsibilities to pay principal and interest, taxes, and insurance on time; to maintain hazard insurance on the property; and to adequately maintain the property and not allow it to deteriorate. If you consistently fail to meet these requirements, the lender can demand full payment of the loan balance or foreclose on the property, sell it, and use the proceeds to pay off the outstanding loan and the foreclosure costs. In some states, a . deed of trust. is used instead of a mortgage. By signing a deed of trust, you receive title to the property but convey title to a neutral third party (called a trustee) until the loan balance is paid.
Affidavits -- You may be asked to sign numerous affidavits. For example, you may be required to sign an affidavit of occupancy, which states that you will use the property as a principal residence. Or you and the seller may need to sign an affidavit that states that all of the improvements to the property that were required in the sales contract were completed before closing. Ask your lender whether you'll be required to sign any affidavits at closing.
The deed -- Only the seller signs the deed at closing. It is the document that transfers ownership from the seller to you. Your name and the names of any other buyers appear on the deed. You'll receive a copy of the deed at the closing. The closing agent then records the deed (with you listed as the new property owner). The deed will be sent to you after it is recorded.