Buying a home is a huge decision. It is the most expensive, single item that most people buy in their lifetime.
Even if you’ve bought a home in Maryland before, you might not remember all that it entails. To help you out, here is your complete guide to buying a home – from getting approved for the loan and choosing the home, to inspections and finally closing on the home. If you have any questions about the home buying process, or need a First Time Home Buying tips, please give us a call 443-692-8800.
🏠Determine How Much Home You Can Afford
Buying a home is difficult enough, but determining how much is affordable is even harder. Some homebuyers will rely on what the bank is willing to lend. If you’re approved for a $400,000 house it doesn’t mean that you’re required to only look at homes in that price range.
The only way for you to determine what YOU can afford, is to add up your monthly bills and expenses. It would be best to try to get an estimate on the monthly utilities based on the size of the home you plan to purchase. Even small expenses like groceries, gas and other necessities. It is a good idea to plan for savings right from the start – not rely on possible promotions within your career.
Click on the price features of the Real Estate you would like to see. You’ll be redirected to a MLS search page of the feature you requested. When you see something you like, give us a call at 443-692-8800.
💲Determine How Much Your Down Payment Should Be
Make sure you set aside enough money for inspections, appraisals, moving expenses and the closing costs. Saving enough money to put 20 percent down on a home will make you more attractive to lenders.
However, if you’re unable to save enough money for a 20 percent down payment, don’t be discouraged. There are plenty of options to buying a home with little to no money down. Though, your interest rates may be a little higher and you will have to pay private mortgage insurance.
🤷What is Private Mortgage Insurance?
Make sure you talk with as many lenders as possible to determine possible PMI rates. Also, make sure to ask how long you will have to pay PMI. Some loans, such as those backed by the Federal Housing Administration (FHA), will require you to pay PMI for the life of the loan. Other products will allow you to cancel PMI after you have paid enough towards the principal balance.
✅Get Pre-Approved for a Loan
One of the most important steps of buying a home is getting pre-approved. Why? Well here’s a big one: Getting pre-approved will help you know, in advance, how much you can afford before you start looking for a home. This keeps you from looking at homes that are beyond your means. When you’re ready to find a home, the last thing you want to do is limit your possibilities. Dream big, right? But you’d be totally bummed if you found a perfect pad, only to learn you don’t qualify for the home of your dreams.
Importance of working with pre-approved buyers
Getting pre-approved for a mortgage also enables you to move quickly when you find the perfect place. When you make an offer, it won’t be contingent on obtaining financing, which can save you valuable time. In a competitive market, this lets the seller know that your offer is serious – and could prevent you from losing the home to another potential buyer who already has financing arranged.
How can a Real Estate agent help?
Once you are pre-approved, your real estate agent can connect the right buyers and sellers together. Your agent can put together a budget and show you properties that fall into your pre-approved price range. The great thing about the pre-approval process is that knowing which price range to look in, ahead of time, in saves money, time and frustration. It is just as frustrating for an agent, as it is for a buyer, to learn that the buyer doesn’t qualify.
😟Why You Might Be Denied a Loan
The most important step in buying a home is getting both pre-qualified and pre-approved BEFORE looking at homes. The primary reason to get pre-approved for a mortgage before looking for homes is to ensure you’re looking at homes that are within the price range that you can afford.
However, just because you were pre-approved for a mortgage doesn’t mean it can’t get denied. The reasons for loan denial after approval are fairly common. The following are the most common reasons a mortgage loan can be denied after pre-approved.
Change of Employment
One of the most common reasons a loan is denied is because of a change of jobs. Depending on the type of financing a buyer is obtaining, each have certain requirements on the length of consistent employment. For example, a buyer obtaining an FHA mortgage has to have a sold employment history for two years. If there are gaps in employment, it is required that a written explanation is provided and is subject to the approval of a mortgage underwriter.
It’s important that, if you’re pre-approved, you ask your mortgage consultant about a possible employment change before making the change. In most cases, a top mortgage consultant will be able to predict whether there will be an issue with ultimately obtaining the financing or not.
Additional Debt or Debts are Incurred
Another very common reason a loan is denied after a pre-approval is because a buyer takes on additional debt. It’s important that when buying a home and you’ve been pre-approved that you don’t add any additional debts or credit lines. This can have a huge impact on debt to income ratios and ultimately can lead to a mortgage that is denied.
Another common reason that a mortgage is denied is due to a negative item on the buyers credit report. It’s important that you, as a buyer, know what your credit score is when you get pre-approved and have a strong understanding of how credit scores impact mortgages.
Do you need perfect credit when buying a home? No. However, there are specific credit score guidelines that each type of mortgage will have.
A Change in Lender Guidelines or Loan Requirements
It’s possible that after a pre-approval is issued that a lender or mortgage product may experience changes to their requirements and guidelines. For example, if a lender allows a buyer to have a 620 credit score and changes their requirement to a 650, this can lead to a mortgage denial if they choose to apply it retroactively.
Other changes to loan requirements or lender guidelines that could lead to a mortgage being denied after pre-approval may include;
- Debt to income guideline changes
- Amount of reserves (savings) required of buyer
Issues with Appraisal
It varies from lender to lender, however, some lenders will issue a mortgage pre-approval for a buyer subject to a satisfactory bank appraisal. The reality is that there can be issues with the bank appraisal. Many of the issues with a bank appraisal are fairly common.
Tips to Ensure Your Loan Does NOT Get Denied After Approval
- Increase your debts
- Take on additional lines of credit, for example, buying a car
- Withdraw large amounts of money from your bank accounts
- Make any large deposits into your bank accounts without having proof as to where they came from
- Continue to save money in the event your closing expenses are more than originally estimated
- Provide all requested documentation to lender in timely fashion
💳Have the Right Credit Score
What credit score do you need to buy a home? If only it were that simple. A credit score is just three little digits, but can be the difference between moving into your dream home or an overpriced rental.
There’s not a set rule as to what your credit score should be when buying a home. There are, however, credit score requirements for different loan products. You can see them here.
Here’s what we can say: if you have a ‘good’ credit score, let’s say a score of 660, you should qualify. Of course, that assumes that you’re buying a home you can afford and applying for a mortgage program that make sense for you.
How long after Bankruptcy can I buy a house?
Although the standard answer is 7 years, it really depends on your personal history, credit store, current employment and so forth. Best bet is to connect with a lender and get an inside look at your finances today. Your agent can connect you with a lender. To get started, call 443-692-8800 or email firstname.lastname@example.org.
👔Hiring a Real Estate Agent
You want an agent that cares more about you and your family than they care about bragging about themselves. One way to determine this is to look at what they post on their Facebook page. Are they more interested in ‘hawking’ a listing or bragging about their accomplishments or are they trying to post insightful information that will help you make the best decision for you and your family?
5 Reasons Why You Should Hire a Real Estate Professional When Buying a Home
Whether you are selling or buying a home it can be quite an adventurous journey, which is why you need an experienced real estate professional to guide you on the path to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO. The 5 reasons you NEED a real estate professional in your corner haven’t changed, but have rather been strengthened by the projections of higher mortgage interest rates & home prices as the market continues to pick up steam.
1. What do you do with all this paperwork?
Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true real estate professional is an expert in his or her market and can guide you through the stacks of paperwork necessary to make your dream a reality.
2. Ok, so you found your dream house, now what?
There are over 180 possible steps that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, someone who knows what these actions are, to make sure that you achieve your dream?
3. Are you a good negotiator?
So maybe you’re not convinced that you need an agent to sell your home. After looking at the list of parties that you will need to be prepared to negotiate with, you’ll soon realize the value in selecting a real estate professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people who you will need to be knowledgeable of, and answer to, during the process.
4. What is the home you’re buying/selling really worth?
It is important for your home to be priced correctly from the start to attract the right buyers and shorten the amount of time that it’s on the market. You need someone who is not emotionally connected to your home to give you the truth as to your home’s value. According to the National Association of REALTORS, “the typical FSBO home sold for $185,000 compared to $245,000 among agent-assisted home sales.”Get the most out of your transaction by hiring a professional.
5. Do you know what’s really going on in the market?
There is so much information out there on the news and the internet about home sales, prices, and mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively, and correctly, price your home at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a lowball offer? Hiring an agent who has his or her finger on the pulse of the market will make your buying or selling experience an educated one. Buying a home is a huge decision. You need someone who is going to tell you the truth, not just what they think you want to hear.
You’ve decided to buy a home. Now you must decide what you need, as well as want, in a home. Here are 3 home buying tips to consider:
1.) Your new home should fit the way you live, or the way you want to live. Required features and space for the entire family should be considered. If you’re flying solo, then you get to choose for yourself! Think: will my family be expanding in the next 2-3 years?
2.) Start by making a list of your priorities. Consider location – should your home be in a certain school district? Should your home be 10 minutes from where you work? Do you want to live near public transportation? Rancher or two-story home? HOA?
3.) How large should the home be? Does the lot size matter?
🏘️Decide Where You Want to Live – Location
Fair housing laws prohibit realtors to guide buyers away from a particular neighborhood. It is best that you do your own research on neighborhoods, based on what’s important to you.
Some communities may be a part of at least one home owners association. If this is something that is important to know, make sure to tell your realtor.
Although a real estate agent is required to list these schools in the MLS when they place a home on the market, they aren’t always up-to-date. We suggest you check the school district links below, before you make an offer on a home. Your agent can also verify this for you.
🏡Choose a Home
During your home search, you are going to be viewing a lot of properties. So how do you pick which one? Here are some home search tips to keep track of all the homes you see:
📝 Make sure you bring a notepad, or something that you can easily jot down notes. Write down what you like and don’t like about each house. If you have friends or family with you, ask them to weigh in.
📷 This is an important one. Make sure to bring along a camera so that you can take photos of the home. If you’re like me, photos help jog my memory. Your smart phone is perfect for this. Take pictures of your favorite areas, and maybe of some trouble areas. When you get home, make some sort of catalog of the photos by address. Seeing them side-by-side for a quick review can help you decide which home you’d like to make an offer on.
💯 You’ve seen those house hunting shows, right? Where the potential buyers rate the homes they see on a scale from 1-5 or 1-10. Well, it works just as well here. Rate each home you see based on its appearance/curb appeal, features and how well it fits your needs.
❓Finish with asking yourself one simple question: “Would I want to make an offer on this house?”
If you start with this question, you can get in and out of houses much faster. If, for some reason, you don’t like the surrounding neighborhood as you drive to the property, you don’t even have to go inside of it. You can save everyone time and simply pass.
✏Make the Offer
Congrats! You’ve found a home. Now it’s time to make an offer. If you’ve made it to this step, the finish line is right around the corner. In order to get into your dream home, your offer must be as strong as possible. Together, you and your Realtor® can write up a strong contract to present to the seller and listing agent to make your dream a reality.
What exactly does an offer include?
Still, it’s important to understand what the offer contains. The offer is an important document; it contains pertinent information, like the sales price, expected close date, the amount of earnest money you need to deposit, and contingencies. It may also state the time period that the seller has to respond to your offer.
How much should I offer to pay?
This can be a difficult step and an element of the contract that presents most concern. You should work with someone you trust to come up with a price. Remember, the market determines the price of homes. Your Realtor® will use similar homes, that have recently sold in the area, to come up with a reasonable offer price. It is common for the seller to submit a counter offer. It is best to enter the negotiating process with the expectation of receiving at least one counter offer. Keeping this in mind, it may not be a good idea to offer top-dollar for the home right away. However, you have to be careful if you decide to low-ball the seller.
Terms and Contingencies
Although price can be the most influential factor when buying a home, the terms and contingencies may affect whether a seller accepts or denies an offer. Most real estate agents will suggest that you insist upon a home inspection. That way, you have the ability to back out of the purchase if you find a home with major problems. You may also write contingencies on your ability to finance or sell your current home. If your dream home has multiple offers, and you have a contingency on selling your current home and the other offers do not, it is more likely that the sellers will decline your offer.
Sealing the deal
The final step in the process is presenting your offer to the seller. Negotiations will take place between your agent, the listing agent and seller. You have a right to back out of your offer, for any reason, up until the offer is accepted. If the seller comes back with a counter offer, you can either accept the new agreement or write up another counter offer, yourself.
Once both parties have agreed upon an offer, you may not be able to back out without the possibility of getting your earnest money back. The earnest money is like a deposit, and is withdrawn from your funds a few days after the offer is accepted.
When you’ve finally “sealed the deal,” the home is ‘under contract’ as you await the closing date. Unless there are unforeseen issues, a signed contract essentially means you’ve bought yourself a house. Congrats on reaching the end of the long process!
What is included in the sale of the home?
Disputes often arise between the sellers and buyers in regards to what property is included in the sale of the home. It isn’t always clear, but it is best practice to include each item you care about in writing.
Below are the general practices with regard to various items to use as a starting point in negotiations.
The general rule for appliances is that the permanently attached stay, and the freestanding ones go. Freestanding appliances include refrigerators, washers and dryers, and, in some cases, microwaves. If you fell in love with a home because of its appliances, ensure that they are specifically included. On the other hand, if there are appliances that you want out, specify this so you avoid the time and expense of removing them.
Air Conditioning and Heating Systems
Air and heating systems typically follow the same rules as appliances. That being said, permanently central or ductless systems stay with the house, but window units go. Be sure to determine the age of the systems. Older systems may need to be replaced or need new duct work that can be very expensive, and an expense a buyer may not want to incur.
Decorations and furniture are typically never included in the sale of a home. There are some instances where the sellers are moving to another state or country, and do not want to move the items. Also, if it is an estate sale, the furniture may be included. However, if there is an item that the buyers love, they can always ask the seller. Sometimes the seller is willing to include it in the sales price, or depart it for a certain price.
Electronics may be bargained for, but they should never be assumed to be included in the contract.
Homes with large lots tend to have play-equipment, gazebos, sheds and other structures that are not a part of the home. In some cases, a buyer may want them removed when the seller planned on leaving them behind. These items are usually large enough that they will be included in the listing, but never make any assumptions if the listing doesn’t explicitly say “yes” or “no.”
What is and isn’t permanently attached, when it comes to light and ceiling fans, is sort of a grey area. The fans and lights may be attached overhead, but can be removed quite easily and quickly. While everything, along with the light bulbs inside, should be included, ensure that they are included in the contract to avoid unpleasant surprises. You would hate to have fallen in love with a chandelier, come to find out on move-in day the sellers removed it.
Window coverings seem like they would be included with the sale of the home – at least to buyers. However, curtains, curtain rods, drapes and blinds are usually removed by sellers. In most cases, curtain rods or blinds are included because removing them can cause holes in the wall. But, like other items, don’t assume the sellers are leaving them behind. If you want them, ensure that they are included in the contract.
✔️4 Tips to Success When Making an Offer
1. Understand How Much You Can Afford
“While it’s not nearly as fun as house hunting, fully understanding your finances is critical in making an offer.”
This ‘tip’ or ‘step’ really should take place before you start your home search process. As we’ve mentioned before, getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and will allow you to make your offer with the confidence of knowing that you have already been approved for a mortgage for that amount. You will also need to know if you are prepared to make any repairs that may need to be made to the house (ex: new roof, new furnace).
2. Act Fast
“Even though there are fewer investors, the inventory of homes for sale is also low and competition for housing continues to heat up in many parts of the country.”
According to the latest Existing Home Sales Report, the inventory of homes for sale is currently at a 4.7-month supply. This is well below the 6-month supply that is needed for a ‘normal’ market. Buyer demand has continued to outpace the supply of homes for sale, causing buyers to compete with each other for their dream home. Make sure that as soon as you decide that you want to make an offer, you work with your agent to present it as soon as possible.
3. Make a Solid Offer
Freddie Mac offers this advice to help make your offer the strongest it can be:
“Your strongest offer will be comparable with other sales and listings in the neighborhood. A licensed real estate agent active in the neighborhoods you are considering will be instrumental in helping you put in a solid offer based on their experience and other key considerations such as recent sales of similar homes, the condition of the house and what you can afford.”
Consider ways of making your offer stand out! Many buyers write a personal letter to the seller letting them know how much they would love to be the new homeowners. Your agent will be able to help you figure out if there are any other ways your offer could stand above the rest.
4. Be Prepared to Negotiate
“It’s likely that you’ll get at least one counteroffer from the sellers so be prepared. The two things most likely to be negotiated are the selling price and closing date. Given that, you’ll be glad you did your homework first to understand how much you can afford.Your agent will also be key in the negotiation process, giving you guidance on the counteroffer and making sure that the agreed-to contract terms are met.”
If your offer is approved, Freddie Mac urges you to “always get an independent home inspection, so you know the true condition of the home. If the inspection uncovers undisclosed problems or issues, you can typically re-negotiate the terms or cancel the contract.”
☑️Understand your Earnest Money Deposit (EMD)
The earnest money deposit, or EMD, is placed into an escrow account. The EMD is similar to a security deposit and lets the seller know that you are a serious buyer. The funds put into this account will be applied towards the closing of the transaction. An EMD is required in all real estate contracts. If you don’t have at least 1% of the sales price to offer as an earnest deposit, you should wait on placing any offers until you have the funds available. If your market is competitive, you may want to consider increasing the EMD to make your offer stand out, and stronger than others.
The earnest money deposit is placed into an escrow account within a few days offer acceptance. That being said, you will want to ensure you have the funds available for an immediate withdrawal. If for any reason you decide to cancel the contract while in escrow, the seller may be entitled to keeping your deposit.
Your earnest money should not be taken lightly. Ensure you read your contract in its entirety to know how to expect.
Earnest: resulting from or showing sincere and intense conviction. If you don’t intend to buy, do not put earnest money on the table.
You might hear this term a lot: “escrow.” But what exactly does it mean? An escrow is a third party that holds funds until conditions are met.
When do you enter escrow?
The escrow, or closing process, begins when the buyer and seller have agreed on a price of the home and all conditions for the sale. In conjunction with signing the sales agreement, your real estate agent will collect an agreed upon percentage of the sales price that will be placed in an escrow account. Your escrow account also comes with an assigned escrow agent.
This money that is put into escrow is also known as earnest money. This lets the seller know that you are a serious buyer. Think of it as a deposit.
What is an escrow agent?
An escrow agent is a neutral third party who holds the funds and documents associated with buying a home or selling a home. The agents role is to make sure that all parts of the sale are executed in an equitable and legal manner. You can think of an escrow agent as a referee or umpire – ensuring that all of the rules are followed and everyone plays fair.
🔍Schedule a Home Appraisal
If you are buying a home, it is likely that you will be requesting a home appraisal on the property. If you are planning on getting a loan for the house, an appraiser will be a part of that process. The appraiser will determine the value of the home you choose, using recent properties that have sold in the area, while also considering the condition, age and size of the home.
If the home is appraised high, your agent may suggest that you make a lower offer with the attached appraisal to qualify for your loan. In some cases, the seller may still hold to their original asking price and ask you to pay the difference in cash. It is not likely to receive a loan amount for higher than the appraised value of the home for purchase.
The home appraisal process includes the following:
- A complete walk through of the house to get a room count and to get an idea of the overall condition
- An evaluation of the value of the house
- The quality of construction and modernization of the home
- Documentation of the entire condition of the property – both inside and out
- Estimates of the “contributory value,” which is any additions or repairs you have done to the home prior to listing
- Information on the house, including square footage, and the condition of the garage, carport, or other similar properties
- Other features of the home which would add to its market value
*It is important to note that the appraiser is NOT an inspector. Therefore, the appraiser cannot preform structural assessments, and other items that inspectors complete. A home inspection and appraisal should be completed before buying a home.
🔎Schedule a Home Inspection
A thorough home inspection can take several hours. Because buying a home is such a huge decision, and evaluation of the home is an imperative part of determining the wisdom of the purchase. The home inspection provides the buyer with an unbiased view of what issues to expect and which problems should be addressed before moving in.
The inspection evaluates many components, including:
- heating and central air conditioning systems
- electrical systems
- the attic
- visible insulation
- and any other visible structure
Many inspection companies offer additional services, like water testing, radon testing and energy audits.
It’s important to note that a home inspection does not protect against future issues. For instance, a water heater may pass inspection only to break 4 months later. In addition, the home inspection does not determine the value of the home. The sole purpose of a home inspection is to educate the buyer(s) so that they know what they are buying.
In Maryland, the buyer pays for the home inspection. Inspections typically range from $300-$400. Rates will vary across companies.
Buyers are not required to have a home inspection. However, an experienced Realtor® will always recommend that a home inspection is preformed. It is better to know in advanced what you are buying.
What is the inspection turns up problems?
Upon completion, the buyer should evaluate any issues that the home inspection brought to light. The buyer should make a list of the issues that he or she believes the seller needs to address before closing on the property, and present this list to their real estate agent ASAP.
🚶Have a Final Walk Through
When buying a home, there are so many ‘to-dos.’ From hiring a realtor and finding a home to getting a loan on the home to scheduling the home inspection. Before any closing documents are signed, and before you move any of your personal belongings in the home, a final walk through should be done. Final walk thru’s need to be done between a week and 48 hours of closing. This is to ensure the home is still what you expect ‘as-is.’
What should the buyer know?
The final walk through is different than the previous viewings of the home (appraisal, inspection, etc.). This allows one last opportunity to make sure the house is in the condition stated in the contract. It also allows you to ensure that any requested repairs have been taken care of, and to ensure there are new problems.
If, for some reason, the sellers were in a hurry, they could have left behind some damage when moving out their personal belongings. Some may even intentionally damage the house – yes, its happened. You also want to ensure that any appliances, or any other things for that matter, were left behind if it is something that was negotiated in the contract.
The final walk through is important to you, as a buyer. Really take the time to examine every inch of that home. It’s common to lose sight of things in the midst of the excitement of finally moving into your new home. But once the exhilaration wears off, you’ll be stuck with everything the seller has left behind – whether it’s good or bad.
When should I schedule my final walk through?
Typically, you will want to schedule your final walk through as close to the closing date as possible. By waiting, you lessen the chance of possible damage.
If, however, there have been requested repairs, we would recommend scheduling two walk thru’s. This way, you can review any changes and still have time for any necessary negotiations or additional repairs if you are not satisfied. Communication is key – if you are unhappy, don’t be afraid to voice your concerns. This is a huge investment, it should be up to your standards before closing.
Buying a home involves a lot of fees and taxes. These expenses are not just what you need to bring to the table, but costs that will occur after you close.
1. Inspection Fees
When buying a home, a home appraisal and home inspection should preformed. A home appraisal typically involves a visit by the lender’s surveyor to walk through the property – inside and out – to ensure that the home is not being sold at an inflated price. The appraiser also checks for any apparent structural problems.
On the other hand, a home inspection evaluates various components of the home, such as plumbing, roof, heating and central air conditioning systems, electrical systems, floors and more. In Maryland, you can expect to pay anywhere from $300 – $400 for a decent home inspection.
2. General Closing Costs
Closing costs are fees charged by lenders and third parties that are involved in the purchase of your home. These fees usually include recording charges, title service fee and insurance, loan origination fee, and checking your credit report.
In some cases, sellers will offer to pay contribution towards these costs. Otherwise, you can expect to pay anywhere from 2 to 5 percent of the purchase price.
As a homeowner, you are required to pay a property tax to your county or a municipality. This amount is based on the appraised value of your home – the more your home is worth, the more you pay. Any improvements that you make to your home can raise the tax bill.
Home Owners Association fees help pay for communal expenses, such as lawn care, trash removal, painting, and more. Every HOA covers different things, so make sure you see the HOAs financial document before you commit to buy, and to ensure you can afford the payments.
Defaulting on your HOA bills can have serious consequences. In most cases, the HOA can fine you. In serious cases of default, the HOA may foreclose your home.
Homeowners insurance pays out if your home is damaged or destroyed by any of the calamities listed on the policy. Similar to your car insurance, the more risks the policy covers, the higher the premium.
In some cases, your mortgage company may require you to pay your insurance premium and property tax into an escrow account, every month. The lender, along with the escrow company, will take the money from the escrow account to pay your bills. This gives your lender peace of mind that you are paying your bills on time.
6. Mortgage Insurance
If you cannot put down 20 percent of the homes price, or take out a conventional loan with a loan-to-value ratio (the amount you borrow compared to the value of your home) of 80 percent or more, you will most likely have to pay insurance on your mortgage. This is referred to as Private Mortgage Insurance, or PMI. PMI pays the mortgage company if you cannot make your mortgage payment. It is a way for lenders to protect themselves from risky borrowers.
Once you’ve closed on you home, you’re on your own. If the day after settlement, the water heater breaks or pipes burst, you’re responsible for fixing it.
Home maintenance typically runs 1 to 2 percent of the homes’ value each year, and more if your home is older. Try to put away money in an emergency fund for any unwanted surprises.
8. Moving Costs
Do you have a big enough truck to move all of your personal belongings? Have to move out faster than expected? Is there a place you can store your things in the meantime? Costs vary depending on if you rent a truck to move things yourself, or hire a professional moving company. The further you have to travel and the more stuff you have to move, the more you pay. Most companies can give you a quote over the phone.
😊Close on Your New Home
Congratulations! You’ve closed on your new home. 😊
💡FAQ for Buyers: What to know about buying a house.
What if I can’t afford it?
At this point, we advise our buyers to speak with an experienced lender. The lender will help you review monthly budgets and narrow down a purchase price, based on the comfortable monthly payment and loan program.
I don’t have the best credit, can I still qualify?
Don’t disqualify yourself! There are loan programs that allow for credit scores as low as 580. Speak with an experienced loan officer so he or she can review your credit with you and create a strategy for credit improvement and strengthening.
This will be more challenging, but there are ways to buy a home with bad credit. See tips on how you can buy a home with bad credit, here.
Do I need a down payment when buying a home?
Contrary to popular belief, it is possible to buy a home without a down payment, or a small down payment. Talking with lenders about possible mortgage programs is a free consultation. Ask your Realtor® to connect you with one, or more, of their trusted lenders to discuss various options.
Yes, absolutely! Maryland offers many different first time home buyer grants and programs. Familiarizing yourself with them all, and talking with a lender will help you choose which program makes the most sense for you. You can view some of the first time home buyer programs, that Maryland offers, here.
I am a public servant (teacher, nurse, military, member of law enforcement, firefighter, EMS, etc.), do I qualify for special home buying programs/discounts?
We don’t like using the term “public servant.” Rather, we call you ‘heroes.’ More specifically, Maryland Hometown Heroes.
The Maryland HOMEtown Heroes Program is our way to give back to those who make our community a better place to live, by offering real savings when buying a home.
If you want to know more about this program, you can go to MDHOMEtownheroes.com or call 443-692-8800.
Follow Maryland HOMEtown Heroes on Facebook.
How much are buyer closing costs?
This typically depends on the price of the home you are buying. If you’re buying a home, the most common closing cost you’ll encounter is the down payment. However, there are other costs and fees associated with a home purchase. Not including your down payment, average closing costs generally range from $2,500 to $5,000 or, rather, 6% of your loan.
To get a breakdown of buyers closing costs, click the link below.
Do I have to pay commission to a Realtor®?
No. In Maryland, buyers are not required to pay their real estate agent commission. Typically, the seller pays all commission to the listing and buyers agent, out of the sale proceeds. In Maryland, Realtors typically charge around 6% commission for selling a home. This amount is typically split 50/50 between the listing broker and the buyers agent.
Do I need to hire a Realtor® when buying a home?
You don’t need to have a Realtor® to buy a home. There are For Sale by Owners (FSBO) in which you will deal directly with the seller. However, at least in the state of Maryland, having a buyers agent is typically paid for by the seller. It is in your best interest to make sure that you are represented properly when buying a home. You wouldn’t want to be taken advantage of on one of the most expensive purchases of your life.
Do I have to pay commission to a Realtor®?
In Maryland, you’re not required to pay commission, to your buyers agent. Typically, the seller pays all commission to the listing and buyers agent, out of the sale proceeds. In Maryland, Realtors typically charge around 6% commission for selling a home. This amount is typically split 50/50 between the listing broker and the buyers agent.
➡️Glossary of Real Estate Terms: Buying a Home
One who represents or has the power to act for another person (called the principal). The authorization may be express, implied, or apparent. A fiduciary relationship is created under the law of agency when a property owner, as the principal, executes a listing agreement or management contract authorizing a licensed real estate broker to be his or her agent.
A loan in which the principal and interest are payable in monthly or other periodic installments over the term of the loan.
A written opinion of property value by a licensed professional. Appraisals, generally, are not professional statements of the property condition and should not be relied upon as such.
APR: Annual Percentage Rate
The truest cost of a home loan. Per the Truth in Lending Act, all mortgage lenders must disclose their APR. In the mortgage industry, APR may include fees such as documentation fees, private mortgage insurance and more.
This acronym stands for Adjustable Rate Mortgage. In contrast with a mortgage loan with a fixed rate of interest, the ARM rate will adjust from time to time in accordance with an agreed upon formula. Upon each adjustment, the new payment amount will be calculated by applying the new interest rate to the principal balance amortized over the remaining life of the loan.
Provisions in a mortgage loan that allows for the purchaser of your home to assume the balance of your mortgage and to take over your payments. Most mortgages are not assumable unless the prospective purchasers make application with and are approved by the holder of the existing loan.
Real estate transaction-related fees payable by the buyer and seller at closing.
A five-page document provided by the Lender or Settlement/Escrow Agent delivered to the home buyer 3 days before Closing.
A conventional loan characterized by loan limits that fall within those guidelines laid out by the Government Sponsored Enterprises, such as Freddie Mac and Fannie Mae.
A short-term loan for new home construction that is supplanted with a conventional long-term home loan. See combination loan.
A transaction consisting of two separate loans for the same borrower by the same lender. The initial loan is used to finance the construction of a new home; upon completion of construction, the loan is repaid by a second loan, which is a permanent mortgage on the home.
A mortgage offered by any one of the Government Sponsored Enterprises, different from FHA or VA loan.
The sold properties, listed in an appraisal report, which are substantially equivalent to the subject property.
An agreement entered into by two or more legally competent parties by the terms of which one or more of the parties, for a consideration, undertakes to do or to refrain from doing some legal act or acts. A contract may either be unilateral, where only one party is bound to act, or bilateral, where all parties to the instrument are legally bound to act as prescribed.
This means that an offer has been made on a home and the seller has accepted it, but the finalized sale is dependent upon a certain criterion that must be met. For example, a buyer must sell their current home before closing.
A number ranging from 350-800, that is based on an analysis of your credit history. Your credit score plays a significant role when securing a mortgage as it helps lenders determine the likelihood that you’ll repay future debts. The higher your score, the better, but many buyers believe they need at least a 780 score to qualify when over 55% of approved loans had a score below 750.
A legal instrument by which an interest in real estate is transferred from one owner to the next. The Deed is prepared by the settlement attorney. It will contain the names of the existing owners as “Grantors” and the new owners as “Grantees” and will describe the property conveyed.
Deed of Trust (Mortgage)
The legal instrument by which real estate is pledged as collateral for a loan. Like the Note, the Deed of Trust or Mortgage is prepared by the lender and delivered to the settlement agent in the closing package. The Deed of Trust/Mortgage will typically contain many standard terms and covenants. One important condition is that it gives the beneficiary of the Deed of Trust/Mortgage the legal right to foreclose on the real estate pledged as collateral if the other terms of the loan are breached and not cured.
The clauses in a deed limiting the future uses of the property. Deed restrictions may impose a variety of limitations and conditions, such as limiting the density of buildings, dictating the types of structures that can be erected, and preventing buildings from being used for specific purposes or from being used at all.
Failure to comply with the terms of the loan documents. A borrower’s default may allow the lender to demand full repayment of the loan immediately or result in foreclosure of the Deed of Trust.
A fee paid to the lender, at or before settlement, to secure a preferred rate of interest on a loan. This fee is generally referred to in terms of a percentage of the loan amount or “points.” Generally, the more discount points paid, the lower the interest rate.
A point equals 1% of your loan (1 point on a $200,000 loan = $2,000). You can pay points to buy down your mortgage interest rate. It’s essentially an upfront interest payment to lock in a lower rate for your mortgage.
This is a portion of the cost of your home that you pay upfront to secure the purchase of the property. Down payments are typically 3 to 20% of the purchase price of the home. There are zero-down programs available through VA loans for Veterans, as well as USDA loans for rural areas of the country. Eighty percent of first-time buyers put less than 20% down last month.
Due on Sale Clause
A standard provision in a note which provides that the note will become due immediately (or may be “accelerated” by the lender) upon the transfer by borrower of any interest in the real estate pledged as collateral for the loan, unless written consent from the lender is obtained.
The holding of money or documents by a neutral third party before closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.
An escrow account, sometimes called an “impound account,” is a separate account held by a mortgage lender out of which required property bills, separate from the loan payment, are made, for example property taxes and insurance.
The extent to which the fair market value (FMV) of the property exceeds the mortgage loan balance. (FMV-Loan Balance=Equity)
The maximum possible estate or right of ownership of real property continuing forever. Sometimes called a fee or fee-simple absolute.
Loans extended by FHA-approved lenders and insured by the Federal Housing Administration (FHA) – designed to assist borrowers unable (for various reasons) to get the approval necessary for conventional home loans.
Fixed Rate Mortgage
A mortgage that has an interest rate that never changes over the life of the loan.
A person to whom real estate is conveyed; the buyer.
A person who conveys real estate by deed; the seller.
A lease of land only, on which the tenant usually owns a building or is required to build her or his own building as specified in the lease. Such leases are usually long-term net leases; a tenant’s rights and obligations continue until the lease expires or is terminated through default.
A professional inspection of a home to determine the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation.
Home Inspection Report
A written report of the physical condition of the premises, prepared by a professional inspector. Typically, this inspection is ordered by the purchaser to be conducted within a specified time following contract ratification.
Protects the value of the home for both lender and borrower. Homeowner’s insurance typically covers damage incurred to the home. Most mortgage lenders require borrowers to carry a form of insurance.
House Location Drawing
A drawing which shows the structures and improvements on a lot in relation to the platted boundary lines, building restriction lines and easements. The drawing may also include a certification that the property is not within a special flood hazard zone.
1. Improvements on land; any structure, usually privately owned, erected on a site to enhance the value of the property; for example, buildings, fences, and driveways.
2. Improvements to land: usually a publicly owned structure; for example, curbs, sidewalks, and sewers.
This usually means the property is in poor condition. Cash or a rehab loan are likely ways to purchase. A property intended for an investor who can ‘flip’ it and sell it.
The ownership of real estate by two or more parties who have been named in one conveyance as joint tenants. On the death of a joint tenant, her or his interest passes to the surviving joint tenant or tenants by the right of survivorship.
A right given by law to certain creditors to have their debt paid out of the property of a defaulting debtor, usually by means of a court sale.
Once the loan has been approved, the lender will issue a loan commitment document.
An itemized list of anticipated loan costs and closing fees passed from a lender to a potential borrower within 3 days of an application for a home loan.
This often refers to a long-time homeowner who could be older. The home is very clean and neat, but may not be the most up-to-date property.
This usually means that the property has a small yard/lot.
The most profitable price a property will bring in a competitive and open market under all conditions requisite to a fair sale. The price at which a buyer would buy and a seller would sell, each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.
A conditional transfer or pledge of real estate as security for a loan. Also, the document creating a mortgage lien.
Mortgage Insurance Premium (M.I.P.)
The premium paid for insurance to protect the lender in the event of a foreclosure where the money collected from the sale of the real estate is insufficient to cover the outstanding balance and costs due to the lender. Mortgage insurance is usually required from conventional loans that exceed 80% of the appraised value of the property and for all Federal Housing Administration (FHA) loans.
Motivated Seller/bring offers
This can signal that a seller is willing to do whatever it takes to sell their property – meaning they will be flexible in price, timing, etc.. It could also mean that the seller does not want to reduce the price, but encourages offers.
The interest rate you pay to borrow money when buying a home. The lower the rate, the better. Interest rates for a 30-year fixed rate mortgage have hovered between 4 and 4.25% for most of 2017.
A legal instrument constituting a promise to repay money borrowed from a lender. It is typically prepared by the lender and delivered to the settlement agent with the closing package. It will include the original principal amount of the loan, the initial rate of interest, the maturity date, and it will describe any contemplated changes to the interest rate or due date. The Note will also describe the conditions of repayment and the penalties for failure to comply with its terms.
A fee charged by a lender or mortgage broker to initiate the loan process. This fee is typically referred to in terms of a percentage of the loan amount or “points.”
Common term used in the industry when referring to loan origination fees and discount fees. Each “point” represents one percent (1%) of the loan amount.
The process in which a homebuyer works with a lender to determine how much home he or she can afford.
A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you’re a serious buyer. Having a pre-approval letter in hand while shopping for homes can help you move faster, and with greater confidence, in competitive markets.
Priced to sell
This usually means that there is no room for negotiations. This sends a signal to agent’s and their buyers: don’t come in with a low offer.
Private Mortgage Insurance (PMI)
If you make a down payment lower than 20% on your conventional loan, your lender will require PMI, typically at a rate of .51%. PMI serves as an added insurance policy that protects the lender if you are unable to pay your mortgage and can be cancelled from your payment once you reach 20% equity in your home.
A short-term agreement by a lender to “hold” a certain interest rate on a mortgage while a buyer negotiates a sale transaction during the mortgage process.
Land; a portion of the earth’s surface extending downward to the center of earth and upward infinitely to space, including all things permanently attached thereto, whether by nature or by man.
A tax or levy customarily imposed against only those specific parcels of real estate that will benefit from a proposed public improvement, such as a street or sewer.
Settlement Statement (HUD-1)
The final accounting of all lender’s fees, settlement costs and adjustments paid by or exchanged between the Buyer and Seller. The HUD-1 is prepared on a standardized form by your settlement attorney or agent; it is reviewed and signed by all parties at the settlement table.
‘Sold as is’
This is a short way of saying the seller does not want to do many, if any, repairs to the property – so please don’t ask or use the inspection report to negotiate the price.
The legal term used to describe the form of co-ownership in which real estate title is held by more than one person. The tenancy of co-owners must be specified in the Deed.
Joint Tenancy (with right of survivorship) is a form of co-ownership where, upon the death of any joint tenant, title to the property will automatically transfer to the surviving joint tenant(s) (NOTE: each joint tenant must take title to an equal share of the property).
Tenancy by the Entirety is a form of co-ownership held by a married couple. Upon the death of either spouse, title to the property will automatically transfer to the surviving spouse.
Tenancy in Common is a form of ownership where, upon the death of any tenant in common, the share owned by the deceased does not automatically transfer to the surviving tenant(s) in common, but rather is distributed as part of the estate of the deceased (i.e., as designated in the decadent’s will or as prescribed by state law if the deceased died without a will.)
“Time Is of The Essence”
A phrase in a contract that requires the performance of a certain act within a stated period of time.
Insurance which protects the purchaser and the lender against loss or damage resulting from defects of title or the enforcement of liens against real estate existing at the time of issuance. Potential defects covered will include matters that may not be discovered from a search of public records, such as past frauds or forgeries. Title insurance requires one-time premium paid at settlement which protects you for a long as you own the property.
A VA Loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA). The VA loan is designed to offer long-term financing to eligible American veterans or their surviving spouses.
An exception from the zoning ordinances; permission granted by zoning authorities to build a structure or conduct a use that is expressly prohibited by zoning ordinance.
Are you thinking of selling your home or buying a home, or have a friend or family member who is? Contact The Pivec Group today by calling 443-692-8800 or visiting our website! We look forward to hearing from you and helping you find YOUR dream home!