Buying Information

Choose a link below to learn more about buying a home:


MAKING THE DECISION TO BUY

Today, home buyers have more choices than ever before. You can choose financing options that are flexible and affordable, home styles that fit a variety of lifestyles and professional services that make the home buying process fast, effective and enjoyable.

When you begin the decision-making process of buying your first home, your Best Homes GMAC Real Estate Sales Associate can guide you through the pros and cons of renting vs. buying. A simple evaluation can help you decide if you are financially and personally ready to make the investment of homeownership.

Here are some facts about homeownership that may surprise you:

  • Homeownership can be a good investment opportunity. A house offers leverage and the possibility for appreciation in value. And, you can use this investment while it’s working for you!
  • You can’t afford to overlook the tax breaks of homeownership. Since mortgage interest and property taxes are tax deductible, homeownership can save you money each year.
  • Young people aren’t priced out of the market. Figures from the National Association of Realtors put the average age of first-time buyers at 32 years old. Ask your GMAC Real Estate Sales Representative about the number and variety of financing options available.
  • Renting doesn’t protect you against rising prices. Rental units are just as susceptible as homes to increases in taxes, insurance, utilities and other costs. Landlords will pass along these increases to the tenants.
  • The waiting game is a losing game. Don’t put off buying a home waiting for prices to come down. For example, from 1984 to 1994, the median price of existing homes increased from $89,400 to $145,400 — a total increase of 61 percent.

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HOME HUNTING CHECKLIST

Make a list. Check it twice.

Touring homes is exciting, exhausting and – after enough of them – often confusing. By the end of the day, your memory may become fuzzy so you won’t be able to remember if the house with the fabulous kitchen had three bedrooms or four, or which house had the spot for the garden you’ve always dreamed of.

That’s why we’ve developed the Best Homes GMAC Real Estate Home Hunting Checklist. Print extras so you can complete one for each home you tour and use it to track important details such as square footage, condition and age of the roof, and noise level of the neighborhood.

And while you’re looking at the feature you want in a new home, be sure to step back and consider the bigger picture — the permanent attributes — of the house. Remember that while you can change superficial elements like wallpaper, paint color and window treatments, you shouldn’t discount them completely. Keep in mind that even minor remodeling can cost both time and money. Conversely, don’t let outward appearances alone keep you from a house that would otherwise be a perfect fit.

If you’ve taken good notes, your GMAC Real Estate Home Hunting Checklists will be a great tool moving forward in the home-buying process. Keep them handy, refer to them often and be sure to share them with your Best Homes GMAC Real Estate agent so s/he can continually refine the types of homes s/he’s researching for you.

Click here to download a printable checklist.
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CHOOSING A LENDER

Home financing is available from mortgage companies, banks, credit unions and others. Each will have its own rules, rates and fees. When you compare financial institutions, be sure to look for variations in the way mortgages are offered — distinctions that can mean dollars of difference to you. You will want to research the various lenders in your area to see which is the best “fit.” Your Best Homes GMAC Real Estate REALTOR® may be helpful in your selection of a quality lender in your area.
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TYPES OF LOANS

While finding the financing package that best suits your needs can be a complicated process, your local Best Homes GMAC Real Estate REALTOR® can help you find the financing method that works best for you.

Remember that financing options are affected by local and regional real estate and banking practices as well as federal law.

Mortgage Approval
A pre-approved mortgage certificate is not a guarantee of being approved for the mortgage loan. Even if you have a pre-approved mortgage certificate, you must still meet your lender during the conditional offer period to get a final mortgage approval. To ensure that the process goes smoothly, make sure you bring:

  • A copy of the property listing
  • A copy of the signed Offer to Purchase

Your lender will update/verify your financial information, the property and other information required to complete the mortgage application. Your lender may require an appraisal and/or a survey. Title insurance may also be required. Your lender will also inform you on the various types of mortgages, terms, interest rates, amortization periods and payment schedules available.

Depending on your down payment, you may have a conventional or high-ratio mortgage.

A conventional mortgage is a mortgage loan that does not exceed 75% of the lending value of the property. The lending value is typically the lesser of the property’s purchase price and market value. Your down payment is at least 25% of the purchase price or market value.

If you contribute less than 25% of the home price as a down payment — and as little as 5% — you will need a high-ratio mortgage. This type of mortgage usually requires mortgage loan insurance, which is available from CMHC or a private company. Your lender may add the mortgage insurance premium to your mortgage or ask you to pay it in full upon closing.

Fixed, Variable or Adjustable Interest Rate
Mortgage interest rates are either fixed, variable or adjustable. A fixed rate is a locked-in rate that will not increase for the term of the mortgage. A variable rate fluctuates based on market conditions while the mortgage payment remains unchanged. With an adjustable rate, both the interest rate and the mortgage payment vary based on market conditions.

Closed Mortgage
A closed mortgage may be a good choice if you’d like to have a fixed payment that will allow you to adjust your budget to your new lifestyle. However, closed mortgages are not flexible and there are often penalties or restrictive conditions attached to prepayments or additional lump sum payments. It may not be the best choice if you decide to move before the end of the term or if you want to benefit from a potential decrease of interest rates.

Open Mortgage
This type of mortgage is flexible and can usually be pre-paid by any lump sum or paid off at any time without penalty. An open mortgage can be a good choice if you plan to sell your home in the near future or to pre-pay with large lump sums. Most lenders will allow you to convert to a closed mortgage at any time, although you may have to pay a small fee.

Term
Your lender will also inform you on the term options for the mortgage. This is the length of time that the agreed-upon mortgage contract conditions, including interest rate, will be fixed. It can vary from six months to ten years. Choosing a longer term (e.g.: five years) gives you the chance to plan ahead and protects you from interest rate increases while you adjust to homeownership. Weigh your options carefully and don’t be afraid to ask your lender to work out the differences between a one, two, five-year term or longer term.

Amortization
This is the amount of time over which the entire debt will be repaid. Most mortgages are amortized over 15, 20 or 25-year periods. The longer the amortization, the lower your scheduled mortgage payments, but the more interest you pay in the long run.

Payment Schedule
A mortgage loan is often repaid in regular payments, either monthly, biweekly or weekly. Payment schedules that are more frequent can save some interest costs by reducing the outstanding principal balance more quickly than with monthly payments. The more payments you make in a year, the lower the overall interest you have to pay on your mortgage.

Keep in mind that mortgages may have important payment features that can save you money and let you be mortgage-free sooner.
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THE LOAN PROCESS

Application review
At the application, the lender will ask you some basic financial questions about your current income, debts and assets available for investment in your new home. The lender will review your credit report, along with any verification needed from your bank, landlord or employer. After the initial approval, the lender will order an appraisal of the property to make sure it’s worth the mortgage amount (since it will serve as collateral for the loan).

Approval process
The days of the 45- or 90-day loan decision are gone. Now, processing your application is much faster. The information you submit will be joined electronically with a credit report and submitted through financial institution’s automated underwriting system, which automatically determines whether your application meets the requirements for approval.
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APPLICATION INFORMATION

Your lender will need a complete picture of your financial situation to help determine how much home you can afford. You and a loan officer will fill out a Loan Application, a document that asks in-depth questions about you, your income, your assets and liabilities and your credit as well as a description of the property you wish to buy. The process will go much smoother if you have everything with you when first meeting with the loan officer.

Determining your down payment
As part of the application process, you must state how much of a down payment you can make. Obviously, the bigger the down payment, the smaller the mortgage. As little as three percent down may be possible. On loans with less than 25% percent down, you will be required to purchase mortgage insurance which protects lenders against losses. The cost of mortgage insurance will be reflected in either slightly higher monthly payments, or as additional fee at closing.

What you will need for the application:

  • Agreement or contract of sale
  • Employment history
  • Income information
  • Source of down payment and closing costs
  • Credit information
  • Real estate owned
  • Application fee

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HOME INSPECTION

A Complete Home Physical
Even if you’ve looked in every nook and cranny of the home you want to buy, we at Best Homes GMAC Real Estate believe it’s crucial for you to protect yourself by having a home inspection conducted when you purchase a home. A professional assessment by a reputable home inspector could possibly uncover any problems (large or small), alerting you to any needed repairs and updates. With your Best Homes GMAC Real Estate agent’s help, you may even be able to negotiate for repair or replacement of items before the purchase is complete.

You’ll have the opportunity to bring in a home inspector of your choosing once you’ve made your offer conditional upon a home inspection. The inspector will perform a comprehensive evaluation of the home and property, doing everything from testing outlets and faucets; to identifying signs of dampness, termites or carbon monoxide; to making sure walls are strong and windows are secure.

Hire an inspector you can count on
If you don’t already have a particular inspector in mind, ask someone you trust for a reference. The inspection will cost several hundred dollars (actual cost depends on the size of the property and complexity of the report), so it’s important that you feel confident about the person conducting it and the quality of his/her work. In fact, your Best Homes GMAC Real Estate agent is a good resource for home inspection references, as he/she has undoubtedly worked with a number of quality inspectors.

It’s best to schedule your home inspection during daylight hours. If possible, you and/or your Best Homes GMAC Real Estate agent should attend; expect it to last from 2-4 hours, depending on the size of the home. And feel free to ask questions of the inspector – the more you know about your potential new home, the better.

Take care of repairs
The inspector should deliver a written report upon the completion of the home inspection. It’s perfectly normal to have a handful of small issues that need attention or repair. Work with your Best Homes GMAC Real Estate agent to decide which of these to ask the seller to handle or pay for, and which you’ll handle yourself.

Remember there is no perfect home and even if your home inspector finds no serious problems, the inspection can pay off indirectly. In addition to identifying immediate-need repairs, you’ll be alerted to future maintenance issues as well. It’s always good to know up-front what to expect, and how much such repairs could cost.
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CLOSING THE DEAL

Closing Day
Closing day is the day when you finally achieve your goal — you take legal possession and finally get to call your new house your own. You are sure to feel great relief and satisfaction but remember that the home buying process isn’t over just yet. There are quite a few things that need to be done on closing day:

  • Your lender will provide the mortgage money.
  • You must provide the balance of the purchase price along with any closing costs.
  • The title company pays the seller, registers the home in your name, provides you with a deed and the keys to your new home.

Although it is a much anticipated day most of the work is completed ahead of time with all of the legal documents being signed in the title office usually a few days prior to the closing date. You won’t see any cash exchange hands; rather, you’ll go to the title office to simply pick up the keys to your new home.

Any terms agreed to in the Agreement of Purchase and Sale such as painting a room, replacing appliances, exchanging light fixtures, et cetera, must be completed prior to the date of closing.

Closing costs
Costs in addition to the purchase price of the home, such as legal fees, transfer fees and disbursements, that are payable on closing day.

Deed
A legal document that is signed by both seller and purchaser, transferring ownership. This document is registered as evidence of ownership.
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