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HOW TO START CALIFORNIA DREAMIN

Let s say you re thinking about buying your first house or condominium. The process of buying real estate can be an extremely rewarding experience, both from a personal and financial standpoint.

Why Buy
There are many reasons you may wish to buy a home, whether you need or want:

  • A place to live
  • Feeling of permanence
  • Stable housing costs
  • Good use of your money
  • Tax benefits.

On the other hand, you may not be ready to buy a home. Buying a home:

  • Is a complex, time-consuming and costly process
  • May bring unwelcome responsibilities such as maintenance and repairs
  • Makes it harder for you to move
  • Can create financial hardship.

The purchase of a home is, in part, a financial transaction. Much like a trip to the grocery store to buy coffee, you have many choices and a significant price range. But unlike a bag of Costa Rican coffee, a house has certain bonuses: Equity, Tax Savings and Ownership.

What s all that mean
A house is an investment in land and the existing structure. History tells us that there is a good chance that a house will increase in value over time. Also, by making timely mortgage payments, you are paying down the debt you owe and building equity.

Equity is the difference between the value of your home and how much you still owe. You may not own your home outright, but your investment has a cash value.

In addition to increasing in value over time, owning a home can have a significant impact on your monthly paycheck  in a very positive way! When you borrow money to purchase a home, the interest that you pay on that money is usually tax deductible.

For example, if you have an annual income of $45,000 and owe $200,000 on a 30-year mortgage at a fixed 7% interest rate, you ll likely save about $200 per month in taxes the first year you own the home!

Q-A Series – CLOSING

Q. WHAT HAPPENS AFTER I’VE APPLIED FOR MY LOAN

It usually takes a lender between 1-6 weeks to complete the evaluation of your application. Its not unusual for the lender to ask for more information once the application has been submitted. The sooner you can provide the information, the faster your application will be processed. Once all the information has been verified the lender will call you to let you know the outcome of your application. If the loan is approved, a closing date is set up and the lender will review the closing with you. And after closing, you’ll be able to move into your new home.

Q. WHAT SHOULD I LOOK OUT FOR DURING THE FINAL WALK-THROUGH

This will likely be the first opportunity to examine the house without furniture, giving you a clear view of everything. Check the walls and ceilings carefully, as well as any work the seller agreed to do in response to the inspection. Any problems discovered previously that you find uncorrected should be brought up prior to closing. It is the seller’s responsibility to fix them.

Q. WHAT MAKES UP CLOSING COST

There may be closing cost customary or unique to a certain locality, but closing cost are usually made up of the following:
– Attorney’s or escrow fees (Yours and your lender’s if applicable)
– Property taxes (to cover tax period to date)
– Interest (paid from date of closing to 30 days before first monthly payment)
– Loan Origination fee (covers lenders administrative cost)
– Recording fees
– Survey fee
– First premium of mortgage Insurance (if applicable)
– Title Insurance (yours and lender’s)
– Loan discount points
– First payment to escrow account for future real estate taxes and insurance
– Paid receipt for homeowner’s insurance policy (and fire and flood insurance if applicable)
– Any documentation preparation fees

Q. WHAT CAN I EXPECT TO HAPPEN ON CLOSING DAY

You’ll present your paid homeowner’s insurance policy or a binder and receipt showing that the premium has been paid. The closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide proofs of any inspection, warranties, etc.

Once you’re sure you understand all the documentation, you’ll sign the mortgage, agreeing that if you don’t make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. You’ll also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.

You’ll pay the lender’s agent all closing costs and, in turn,he or she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state Registry of Deeds, and you will be a homeowner.

Q. WHAT DO I GET AT CLOSING

– Settlement Statement, HUD-1 Form (itemizes services provided and the fees charged; it is filled out by the closing agent and must be given to you at or before closing)
– Truth-in-Lending Statement
– Mortgage Note
– Mortgage or Deed of Trust
– Binding Sales Contract (prepared by the seller; your lawyer should review it)
– Keys to your new home

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