Home Buying Resources!
Please find answers to many Home Buyer Questions below ~ Sometimes you have questions about the real estate process and just want an answer……
Not sure if you should rent or buy?
Skeptical of the sales pitches? This is so neat we have to share it.
The Office of Housing and Urban Development (HUD) has an online worksheet that will tell you if you should rent or buy. All you do is fill in the numbers that apply to you and it will analyze if you will save more money renting or if you should buy a house. Then the next questions is if you think you will be staying in the area? No more guessing. No nonsense. No sales pitch. Just straight facts. www.hud.com
Five things to do with your finances.
Calculate your debt to income ratio. Calculate the amount of rent you pay vs. a mortgage including taxes and the tax deduction you may take when you own a home/condo.
- Make copies of the last 3 pay stubs,
- Make copies of your taxes for the last 3 years
- Calculate your debt ti income ratio
- Check your credit score
- Get pre-qualified by a lender
Check your credit rating!
Your bank, mortgage broker or any lender that you apply to for a mortgage will check it your credit rating so do it ahead of time!
Credit bureaus are required to help you straighten things out in a reasonable time. It will probably take more than 30 days to find you new home!
- Experian — www.experian.com — 1-888-EXPERIAN
- Trans Union — www.transunion.com — 1-800-888-4213
- Equifax — www.equifax.com — 1-800-685-1111
- The web is one of the best ways to search for homes today. Search the MLS for homes, condos, land, and multi family properties.
- Get the property address and drive by. Let’s face it – You will be living in this neighborhood.
- Check with the local town hall. Public officials are tremendous sources of information. There are great maps available for public viewing too!
- Looking for more tips? Take a look at the Department of Housing and Urban Development to give you great tips on the home buying process and know your rights!
The value of a Wish List
Making sure you end up with the right home involves figuring out exactly what home features you need, want and do not want. Before starting your search, make a wish list to decide which features are essential, which are nice extras if you happen to find them, and which are completely undesirable.
What features do you want in a town? Here is a great website run by the state that gives all types of statistics. MassStats it is neat because all the statistics are mapped.
Here is a tip that will save you lots of time and let you know if you really want to buy a particular house. Always ask for the Sellers Statement of Property Condition most commonly referred to as the Sellers Disclosures. It is important to review this document Prior to making an offer on the property. Why? Because that document will tell you the condition of the house. Houses need to be maintained and there, of course, are costs associated with that maintenance. You need to find out how much ‘functionality’ or ‘life’ is left in the house prior to spending money on a home inspector.
What is the home buying process?
- You make an offer on a property. Along with the offer, you give a deposit check for $500/$1000 and a pre-approval letter from the lender.
- The buyer and seller agree and the offer is ‘accepted’.
- All aspects of the property are investigated. You typically have 10 days to complete a home inspection, ‘due diligence’ checklist.
- You sign a Purchase and Sale Contract, write a check for (typically) 5% of the Purchase Price.
- A loan application is submitted to your lender and the property is appraised.
- A Mortgage Commitment letter is issued = the bank has agreed to fund your mortgage and you can buy the house.
- You buy the property at the ‘Closing’ and get the keys to your home!
The difference between pre-qualified and pre-approved
Believe it or not You can ‘pre-qualify’ yourself for a mortgage. According the Office of Housing and Urban Development (HUD) typically no more than 30% of your income should be used for housing.
- To figure out your debt to income ratio add up all your debt and divide it by your gross annual income. What does this give you? A price range.
- Obtaining a ‘pre-approval’ means a bank looks at your income, debt and credit rating to evaluate your ability pay back the requested loan
- Upon favorable review, the lender gives you a letter. Having a pre-approval letter makes you a strong buyer welcomed by sellers. The down side is that you may have to pay a non-refundable application fee to cover the cost of bank paperwork. If you later decide not to use that particular lender, you will start all over again elsewhere – typically with no rebate.
What is Title V?
Every home has a method of disposing of the wastewater and sewage generated from toilets, dishwashers, showers etc. If a home is not hooked-up to ‘Town Sewer’ the home probably has some type of private sewage disposal system. Title V refers to the law and associated criteria and requirements for private sewage systems/ septic systems. Under Massachusetts law when a property changes hands those properties that have a septic system must pass the regulations set forth in the Title V code.
Home Inspections ~ Are they necessary?
You have found your new dream home. It is in your price range and all in all you are willing to take anything on? Well, houses need to be maintained. Even if you have decided to buy the house no matter what …think of a home inspection as a list of things to do. Look for licensed inspectors at Licensed State Inspectors If the inspector finds problems with the property, you may want to negotiate with the seller to lower the price, or to pay for certain repairs. Finished with the home inspection ..ready for the next step.. Purchase and Sale? Not so fast, Town Hall is your next step.
Town Hall Tips
You have made an offer on a house and now you have 10 days to investigate the property.
Go to the Town Hall where the property is located there is an entire group of government officials that will help you while investigating this property.
- First stop – the Building Department. Ask for the file that contains the building, plumbing, electrical, roofing permits for the house. Compare those permits with the existing structure.
- Go to the Planning Department and determine the zone of the property. Ask the planner what the long term community plan calls for with this property. Ask about any major projects the city/town is considering ie. A new park, housing, open space etc.
- Check with the Public Works Department or the Board of Health to find out how the sewage from the house will be disposed. Get copies or a history of the water bills. Stop by the office of Town Clerk office to get the voting precinct, how to register to vote etc.
- Do not miss the Assessor Office! Property tax information is available there.
And what about the roof?
When you have found the home you think you might want to buy it is a good idea to see how much ‘life’ is left in the roof. The local town hall can tell you when the last permit was pulled and how many layers are on the existing roof.
Another option, when you have the home inspection done call a roofing contractor or two to come out and inspect the roof. They will usually give you a bid for free!
Need Information on Lead Paint?
Under Massachusetts and federal law the Childhood Lead Poisoning Preventions Program (CLPPP) Property Transfer Lead Paint Notification package must be given to buyer and tenants with an option to buy homes built before 1978. This law exists because lead poisoning is a dangerous disease and it is important for consumers to understand the risks associated with this issue in the built environment.
For a copy of the law and different strategies to abate lead poisoning contact Massachusetts Department of Public Health Childhood Lead Poisoning Prevention Program (CLPPP) or at www.state.ma.us/dph/clppp
Should I get a Radon Test?
We would advise to get a radon test but in the end it is your personal decision. The only way to know if your house has radon is to test it. Here is an excerpt* from the State of Massachusetts Public Health Fact Sheet on Radon.
Radon is a naturally occurring radioactive gas that occurs during the normal decay of uranium and radium in soil and rocks. As it decays, radon produces new radioactive elements called radon daughters which cannot be detected by human senses because they are colorless, odorless, and tasteless. Radon daughters are solids, not gases, and stick to surfaces such as dust particles in the air. If contaminated dust is inhaled, these particles can adhere to the airways of the lung. As these radioactive dust particles break down further, they release small bursts of energy which can damage lung tissue and therefore increase the risk of developing lung cancer. In general, the risk increases as the level of radon and the length of exposure increases. Radon itself, on the other hand, is almost chemically inactive and an inhaled radon atom is very likely to be exhaled before it decays. Thus, the main health risk from radon is exposure to its decay products. As with any gas, radon diffuses as it flows along the path of least resistance to the surface of the ground before entering the atmosphere. Since it is a gas, radon can also move into any air space, such as basements, crawl spaces, or caves. As these radioactive dust particles break down further, they release small bursts of energy which can damage lung tissue and therefore increase the risk of developing lung cancer. In general, the risk increases as the level of radon and the length of exposure increases.
* (For more information please visit the website www.mass.gov. and please read the entire fact sheet available to make a decision this excerpt does not replace the fact sheet or any tests done on any property. In addition, it is wise to speak with a radon expert)
What is the Purchase and Sale?
The ‘Purchase and Sale’ document, also called the ‘P and S’, is the real estate contract between a buyer and seller. This document identifies the real estate transaction process and who will complete specific action items. If you want something completed that is not part of a state law you must have it written into the document. There are too many scenarios to list here but one example could be: When the home inspection was completed, the inspector noticed all the window screens were missing. Upon discussion with the seller, they agreed to buy all new screens for the house. In this scenario, the ‘P and S’ document would state the above agreement. Also, normally, you, the buyer, secure the ‘P and S’ by putting additional monies down. Under ‘traditional’ financing this anywhere from 0-20% of the purchase price. Your deposit (made at the time of the offer) and the ‘P and S’ monies are all applied to the purchase of the home. The ‘P and S’ also binds the seller to sell the home to you. If you want an attorney to review the ‘P and S’ that review should take place prior to execution! Once the ‘P and S’ has been signed by the buyer and seller the home is put in a classification as ‘Under Agreement’ in the Multiple Listing Service (MLS) system.
Mortgage Contingency and why it is SO important!
The Mortgage contingency is a clause that is contained in your ‘Offer’ to purchase real estate and in your ‘Purchase and Sale’ documents. The standard language discusses that a buyer will apply for a mortgage by a certain date and secure funding (a mortgage) by another date. The mortgage contingency allows you (the buyer) to ‘back out’ of the home purchase if you do not receive the mortgage. While it is standard language, it is very important to have the language in both documents. The bank will issue a letter indicating they have approved your loan. This letter is shared with your agent and the sellers. If you are unable to find financing for your home purchase notify your real estate agent immediately so he/she can get all the appropriate paperwork to the sellers and your deposit can be refunded. If you do not let your agent know and the date pass with no notification you risk losing all the monies you have put down to buy the home. Home Buying Tip, Never let the mortgage contingency be waived!
Title Insurance ~ What is an ‘Owner Policy’?
An ‘Owner Policy’ insures you against title defects that are not covered by the lender ‘Loan Policy’. Just like any insurance, title companies are in the business of protecting your interests in an event something goes wrong. Assuming you buy a home utilizing a mortgage, the bank requires the property has clear ‘title’. The bank hires a title insurance company that pulls all the ownership records (deeds), liens, tax information etc. associated with the property. Before that bank lends you money to buy the house, they require all previous issues, if any, be resolved. Sometimes there are problems or ‘defects’ These will need to be resolved prior to you purchasing the house. Even though the bank has its insurance policy on your property it only protects the bank. In order for you to be protected you must purchase an ‘Owner Policy’. An ‘Owner Policy’ is not ‘required’ by all banks but the bank strongly encourages you to take a policy out as well because the policy will fix a problem. Simply put, if you buy an ‘Owner Policy’ you have paid for fixing potential problems up front.
Lenders require that you carry home insurance to protect both your interests and theirs. Why? Because if your home is damaged or destroyed you want this investment covered. So what do your really need? You need ‘replacement value’. You want the insurance to cover re-building your home. However, just as you shopped for your home, be sure to shop around for insurance that fits your needs. Sometimes you can get better rates if you have your auto and home insurance policies with the same company. Now back to your house price. When considering how much you can afford include property taxes and the annual insurance premiums.
What is the Homestead Act?
The Homestead Act is a type of protection for a personal residence, in the form of a document called a ‘Declaration of Estate of Homestead’. The form is filed at the Registry of Deeds in the county where the property is located, referencing the title/deed to the property. It allows homeowners in Massachusetts to protect their property up to $500,000 of the value per residence, per family*. The real property or manufactured home which serves as a principal residence upon filing a declaration of Homestead, shall be protected against subsequent attachment, levy on execution or sale to satisfy debts to the extent of $500,000 per residence, per family. Is there anything I will not be protected from? The following are exempt from the Homestead Law: federal, state and local taxes, assessments, claims, and liens; mortgages used to purchase the residence, and in the case of the elderly homestead, first and second mortgages held by financial institutions or others; an execution issued from the Probate Court to enforce its judgment that a spouse pay for the support of a spouse or minor children; where buildings on land not owned by the owner of a Homestead estate are attached, levied upon or sold for the ground rent of the lot whereon they stand; upon an execution issued from a court of competent jurisdiction to enforce its judgment based upon fraud, mistake, duress, undue influence or lack of capacity; debts contracted prior to the acquisition of the homestead. Where do I file my Homestead? All Homesteads must be filed in the county in which the residence is located. To acquire a claim of Homestead for a mobile home, you must file at the city or ‘town clerk’ office in the city or town in which the mobile home is located. Be sure the form is filled out completely and has been properly notarized, and remember to enclose a check for the proper recording fee with the Homestead form. Homestead forms may be obtained at most Registries of Deeds. They are also available at legal stationery stores or from your local attorney. For the complete law, various exemption scenarios, and more information go to www.CambridgeDeeds.com.
A ‘Final Walk through’
So you found your house, got through negotiating the offer, had the Home Inspection, negotiated the Purchase and Sale
The bank has funded your mortgage, the attorney set the closing date and gave you the final number
Your agent calls and says ready for the ‘Walk-through’? YOU PANIC. What is that? Well,the sellers have moved out of ‘your’ almost new home and typically you meet your agent, just before the closing or the night before, at your new house and walk through the house to make sure the house has been left in the condition you expect. It is that simple.
What do you need for the closing?
You have found your home, the mortgage is set, and you are ready to ‘close’ Plan to take the day off work. Even though closings are ‘time certain’, sometimes there are delays. You need a cashiers check (The day before the closing, the closing attorney will call you (or you should call them) and tell you how much money you will need at the closing. You will need to get a cashiers check from the bank. You need a government issued identification (typically your driver license). You need a pen (You will be signing many documents). What will you get, the keys to your new home.
Security of your new home
- Change the locks, the reality is you just do not know who has a key
- Check the Smoke Detectors annually. A good time of year to remember to change the batteries is when the time changes.
- Have your furnace cleaned annually. You want your furnace to operate efficiently so your heating bills are as low as possible
- Check your Carbon Monoxide Detectors (have one on every floor of living area) however, on levels with sleeping areas the alarms must be placed within 10 feet of the bedrooms
Homeownership means ‘Tax Savings’ too
Here are some tips when April 15th comes around Get organized with your home papers and keep them in a safe place. At some point in time you will need information on the amount of mortgage interest, property taxes and moving expenses! Keep a list and receipts of all the home improvements you complete because when you sell the property it will be deducted against the profit you make on the home sale. Make sure you check with your local Town Hall regarding any permits you need for home improvements.
Do I need an attorney?
Hottel Real Estate recommends you have an attorney represent you and your interests during a real property transaction. While buying a piece of property has an emotional and exciting aspect to it, it is a large purchase and contracts are signed. It is in your best interest to have a professional represent you. It is just that simple.