When it comes to buying your new home, everything is negotiable. A partial list of what is negotiable when purchasing your new home may include:
Price
Financing
Closing Costs
Occupancy
Painting
Repairs
Yard Work
Fixtures
Wall Coverings
Furniture
Prepaid Taxes and Insurance
Oil in the Tank
Every residential real estate transaction in Pennsylvania must be accompanied by a Seller’s Property Disclosure Statement. This Disclosure Statement is required by law and Home Sale Services, Inc. will provide this document and review it with either the purchaser or the seller.
HOW MUCH SHOULD I PUT DOWN? (THE BUYER)
HOW MUCH SHOULD I ASK UP FRONT? (THE SELLER)
The deposit is an important item of every Agreement of Sale. It assures the seller that the buyer is serious about purchasing the home. It provides commitment to the transaction. In addition, an Agreement of Sale must have consideration. No Agreement of Sale of Real Estate is valid without a deposit. Twenty years ago, it was commonplace to demand a 20% deposit. Today, 2%-5% of the sale price is a normal deposit. Since large deposits do impress sellers, the buyer may find that by making a large deposit she can convince the seller to accept a lower offer. On many occasions the deposit is made in two increments: one-half upon the signing of the Agreement of Sale and the second half at the conclusion of the inspection period. The inspection period usually lasts 15 days from the date of the Agreement of Sale.
The deposit is an important item of every Agreement of Sale. It assures the seller that the buyer is serious about purchasing the home. It provides commitment to the transaction. In addition, an Agreement of Sale must have consideration. No Agreement of Sale of Real Estate is valid without a deposit. Twenty years ago, it was commonplace to demand a 20% deposit. Today, 2%-5% of the sale price is a normal deposit. Since large deposits do impress sellers, the buyer may find that by making a large deposit she can convince the seller to accept a lower offer. On many occasions the deposit is made in two increments: one-half upon the signing of the Agreement of Sale and the second half at the conclusion of the inspection period. The inspection period usually lasts 15 days from the date of the Agreement of Sale.
Buyers need inspectors. Inspections may cover the following areas:
Structural (roof, foundation, walls, etc.)
Heating and electrical systems.
Sewer
Water
Radon
Termite
Every lender is different and it is important to choose the one that will work with you and your circumstances. Shop for the best deal. Check with several mortgage companies. Begin the search at your own bank or savings and loan or through any of the following sources:
Independent Mortgage Companies. These make over half of all home mortgages, including VA guaranteed and FHA insured loans.
Savings Institutions. Savings and loan associations and savings banks originate close to a quarter of home mortgages. Most are conventional loans, not guaranteed by the VA or FHA.
Commercial Banks. These are active in residential lending. Banks are a major supplier of loans for buyers.
Mortgage Brokers. These are intermediaries. A broker keeps tabs on the mortgage market through its ties to local, regional and national lenders. Brokers don’t lend money and can’t approve loans.
Credit Unions. These organizations make many first mortgage loans, but you must be a member.
Public Agency. State and local finance agencies make below market rate financing available to eligible low and moderate income first time buyers. These loans take time to negotiate.
Fixed Rate Mortgage (FRM). This is the standard mortgage model. It is the oldest and most easily understood type of mortgage. Its’ primary attraction is that the interest rate and the amount of payment remain fixed for the life of the loan, typically either 15 or 30 years.
Adjustable Rate Mortgage (ARM). With this kind of mortgage, the interest rate you pay rises and falls along with other rates charged throughout the economy. The borrower assumes the risk of rising rates, but stands to benefit should rates fall. The purchaser should be familiar with how the rates can be raised before executing any Adjustable Rate Mortgage. Most have limits known as Acaps.
Convertible Option. FRM and ARM represent the primary options available to home buyers today. A Convertible Mortgage represents something of a compromise between the two. It is designed for those who like the advantages of the ARM, but also want to limit the risk of rising rates. Under this arrangement, the Buyer starts out with ARM, but has the option of converting to an FRM at specified points during the loan term.
Growing-Equity Mortgage (GEM). This option is designed for borrowers who want to pay off their mortgage as soon as possible. Therefore, the interest rate remains fixed, but the amount of the monthly payment increases according to a pre-arranged schedule. This mortgage can be appealing to someone who is expecting regular income growth and wants to build equity quickly.
Fifteen Year Mortgage. Like the GEM, the Fifteen Year Mortgage enables borrowers to repay their loan more quickly, which means they build equity faster and pay less interest over the life of the mortgage.
Bi-Weekly Mortgage. Another option for people who want to repay their loan sooner is the Bi-Weekly Mortgage. Instead of making a single mortgage payment each month, borrowers who choose this option make two equal payments monthly.
FHA Loan. In 1937, under an Act of Congress, the Federal Housing Administration was established to provide American families with an opportunity to become homeowners. Formerly, a homeowner’s options were limited only to short term loans ranging from one to five years in term. FHA revolutionized the mortgage industry at the time by offering 30 year mortgages and made the possibility of home ownership available to Americans nationwide. There are now several FHA Homeland programs available.
Veterans Administration Guaranteed Loans (VA). VA loans have most of the advantages of FHA loans and then some, but they also have eligibility restrictions. They are available only to Veterans of the Armed Services, those currently in the service and their spouses. VA loans are typically half a percent or more below the market rates and they can be obtained with no money down.
Either the buyer or the seller prepare the Agreement of Sale. It is this document that Home Sale Services, Inc. provides. Each settlement is unique and every Agreement of Sale is different.
When you purchase or sell a property you must sign an Agreement of Sale. In Pennsylvania the contract for the sale or purchase of property MUST be in writing. All other contracts in Pennsylvania can be made with the wave of a hand or a wink of an eye, but the sale of property must be in writing. When the writings are complete and the inspections are over and the appraisals and documentation have been concluded, you are ready to go to settlement (closing). Settlement is the time when the buyers and the sellers sit down, exchange a deed for money and transfer the property. It is the time when the sellers hand the buyers the keys.
A settlement should be handled by an experienced real estate attorney and an experienced title company. What happens at settlement is all governed by what is in the Agreement of Sale. At settlement, the money changes hands, the taxes are apportioned, the judgments, liens and encumbrances on the property are paid off, the new mortgage is executed and filed at the courthouse in the county in which the home is located.
Generally, no terms or conditions survive settlement. Following the settlement, the seller is free to take his money, unencumbered by any conditions and the buyer has accepted the house in its present condition.
In Pennsylvania, the Buyer traditionally pays for Deed preparation. The real estate attorney generally prepares the Deed for the Buyer. On many occasions, the title company will oversee the preparation of the Deed.
A normal charge in the suburban Philadelphia area for the preparation of a Deed is approximately $200.00 plus notary and recording fees.
Title insurance insures that the real estate that you are buying is free from any claims effecting your ownership. It insures that there are no mortgages, liens, judgments or encumbrances against your property. That the prior owners owned it and that no one’s divorce or estate can ever claim a part of it. Mortgage companies and banks will not loan you money without title insurance.
Title insurance may also provide protection against mechanic’s liens, documents misplaced in courthouses, boundary line disputes, unpaid taxes and concealed problems like forgery or other frauds. The title insurance company does an exhaustive search of the title to insure your peaceful enjoyment of your property.
The rates for title insurance in Pennsylvania are established and set by law. To obtain a price quote for title insurance, contact Freeland Abstract, Ltd., 610-489-3656, or KHolshouserl@Freeland-Abstract.com.
The Seller should bring paid and unpaid tax bills and copies of mortgage documents. In addition, two forms of identification.
The Buyer should bring two forms of identification, and sufficient funds to complete the transaction.
Both parties should bring their copies of the Agreement of Sale and the Disclosure Statement to settlement.