The Smart Home Buyer’s

COURTESY OF: Handbook

FINDING AND NEGOTIATING THE PURCHASE OF YOUR DREAM HOME.

Own your niche.™ Six Steps to a Successful Home Purchase

CHOOSE A REALTOR®

The only way to make sure you see the widest selection and get the best possible deal when you buy a home is to hire your own Exclusive Buyer Agent to represent you before you start shopping.

Why do you need your own agent? Because the seller’s agent does not work for you—in fact, he or she works against you. By law, the agent who lists a for sale typically has an exclusive fiduciary dutyto the seller. In fact, no matter how friendly and helpful the listing agent is, they must do everything possible to give the seller any advantage in the transaction. The listing agent’s job is to sell the home for as much money as possible, for the most seller-friendly terms that can be negotiated.

It costs you nothing to hire your own Exclusive Buyer Agent. Typically, our fee is paid by the seller. So you get expert representation, usually at no out-of-pocket cost to you.

ARRANGE FINANCING

Pre-Qualification

Before you start shopping for your next home, it’s a great idea to get “pre-qualified.” This informal process is offered as a free service by most mortgage lenders. You simply share a thumbnail sketch of your income, debts and assets, and the lender estimates how much they may be willing to lend you to buy a home.

The good news is you can get pre-qualifiedin just a few minutes, and the lender doesn’t pull a credit report, so there’s no impact on your credit score. Being pre-qualified gives youa ballpark figure to shoot for when you’re shopping for . You’ll also know what your approximate monthly payment is going to be.

The bad news is, because pre-qualificationis non-binding, you can’t typically lock in an interest rate. And sellers may not think you’re a serious buyer until you take the next step: pre-approval.

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Pre-Approval FIND YOUR HOME

The single most important step in the home buying process—especially in a seller’s market—is getting This is where all your hard work starts to pay off and the fun begins.To help your Realtor help you, pre-approved for a . take the time to spell out exactly the kind of home you want to buy. Where is it located? How many bedrooms does it have? How many baths? What style is it? Do you want a finished basement? How The Consumer Finance Protection Bureau suggests that you assemble the following documents before about a swimming pool? How do you feel about HOAs? Be honest with yourself: which items are really starting the pre-approval process. (If you are self-employed or your income is irregular, you may need must-haves and which are like-to-haves? additional documentation).

AA Proof of your identity (typically a drivers’ license AA Documentation of the source of your down Now that you have a specific list of must-haves, your Realtor will do their best to meet them, given your or non-driver ID) payment: investment or savings account budget and what’s currently on the market. She will generate lists of homes for you to consider, and set statements showing at least two months’ AA Documentation of legal name change, if recent up private showings of your favorites on your behalf. history of ownership. If some of the funds were A A Social security number a gift, get a signed statement from the giver You can also go to open houses on your own, but be sure not to share confidential information with AA Pay stub(s) for the last 30 days stating that the funds were a gift. the Realtor hosting the open . Remember, he works for the seller, and if you tell him how much A AA W-2 forms, last two years A Certificate of housing counseling or home you love the house, and how much you’re willing to pay, he is obligated to share those details with the buyer education, if you have one AA Signed federal tax return, last two years seller. Your Realtor will typically give you a stack of business cards so you can give one to the agent A A If you’re applying for a VA loan, get a copy hosting the open house to let him know you’re represented. AA Documentation of any other sources of income of your Certificateof Eligibility from the VA. AA Bank statements, two most recent MAKE YOUR OFFER

The lender will pull a credit report to examine your credit score, payment history and debt-to-income Once you’ve found the home of your dreams—congratulations! Now it’s time to make your best offer. ratio, among other metrics. After a thorough examination of your finances, the lender will conditionally Your agent will advise you on an appropriate offer, basedon recent comparable sales, how long the pre-approve you in writing for a specific loan amount, which often allows the borrower to lock in a house has been on the market, how motivated the sellers are, and other factors. If your first offer specific interest rate. is declined, your Realtor will handle all of the negotiations with the listing agent until you agree on a price and terms. If you can’t agree, or if you are outbid, your agent will help you find other homes This pre-approval gives you instant credibility with sellers, because when you make an offer, it won’t be to look at. contingent on obtaining financing. Thisis especially important when you’re competing against other buyers for the same home. If two offers are very similar, the seller’s Realtor will almost always advise them to take the offer with pre-approvedfinancing. GET INSPECTIONS Great! You have an accepted offer, and the houseis now under contract. Most contracts include Down Payment, Fees & Costs an inspection contingency. A home inspection conducted by a qualified home inspector can help You’ll need some cash reserves to buy your home, so keep these line items in mind uncover hidden problems in the house that impact its value, habitability, and even its safety. when you start saving: Home Inspections typically cover the following systems: AA Upfront Fees: Fees may include earnest money, AA Closing Costs: When it comes time to close A A A option fee and appraisal cost, as well as fees for on your new home, there are a number of fees A Plumbing A Air Conditioning and Heating A General Structure home inspections. owed to lenders and other third parties. These AA Electrical AA Foundation AA Ventilation fees are to be paid in full at the time of closing AA Down Payment: Many loans require and typically account for 2 to 5 percent of the a minimum down payment between 3.5 and You may need to hire specialty inspectors to check for issues such as wood-destroying insects, lead home purchase price. Your Realtor may be able 5 percent. However, the more you can put paint, mold and radon gas. to negotiate for the seller to pay some closing down, the better. You can avoid paying Private costs on your behalf, but it’s a good idea (PMI) if you put at least If the inspection reports include expensive repairs or maintenance items, or safety issues such as mold to have extra funds available to cover them 20 percent down with some types of loans, and or radon, the inspection clause in your contract should allow you to renegotiate the deal with the seller. just in case. typically you’ll pay a lower interest rate if you You may ask the seller to reduce the selling price or fix the issues from the inspection reports before put at least 10 percent down. you’ll move forward to closing. However, in a seller’s market, there may be so many buyers competing for each house that the seller may choose to sell the house as-is.

2 Provided Courtesy of NicheZips The Smart Home Buyers Handbook 3

CLOSE THE DEAL

Now that you’ve agreed on a price and terms, the title company takes over and completes the final parts of the transaction. They typically include:

AA Tax Check: Assessors are contacted AA Document Preparation: Appropriate forms and to determine what taxes are owed on the paperwork are assembled for conveyance and property, if any. Your purchase contract settlement. should state who is responsible for paying any AA Settlement: An escrow officer oversees the outstanding taxes. closing of the transaction. The seller signs the AA Title Search: Title company representatives , you sign the , the title search public records to examine the chain company cuts a check to pay off the old loan of title and verify that the seller is the current with the new loan, and all third parties acting and sole owner of the property, and has the on behalf of the buyer and seller are paid. legal right to sell it to you. is issued to the buyer and the buyer’s lender.

BUYING NEW CONSTRUCTION

Newly constructed homes are springing up all over the the country. Many buyers don’t know that they can work with their own when purchasing semi-custom or build-to-suit homes, as builders typically have an onsite agent that can execute the sale.

There are many advantages to working with your own real estate agent when you’re buying a new home, even if the builder has an agent on-site. The builders’ agent solely represents the interests of the builder, making it vital that your interests be professionally represented as well.

Your exclusive buyer agent can help you navigate the many intricacies of purchasing a new construction home, at every stage in the purchase process:

AA Finding respected builders and high-quality AA Identifying selections for your home that will developments in the area add value

AA Identifying new-home buying incentives AA Contract settlements, including contingencies

AA Negotiations with the builder’s representative AA Finding the right lender

AA Inspections and walkthroughs GET FREE REPRESENTATION

Q: Is there any cost to using an agent to purchase a new home? A: Just as in any home resale, the seller, in this case the builder, is responsible for paying all agent fees.

Essentially, we provide thorough and thoughtful representation on your behalf at no cost to you, while the builder works out commission for both buyer and seller agents.

If you choose to have representation in your new home purchase, an agent must accompany you on your first visitto the builder’s sales office.

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WHY WORK WITH THE AN EXCLUSIVE BUYER AGENT? Consideration: anything of value to induce another to enter into a contract, i.e., money, A house is perhaps the largest and most important purchase you will make in your lifetime. Glossary of services, a promise. Our team acts as your advocate from the start, through the home search to negotiations Deed: a written instrument, which when and to closing, helping you get the home of your dreams with minimal hassles. So, why Real Estate properly executed and delivered, conveys work with us? title to . AA It’s free to you: Sellers typically pay all AA We’re transparent: State law mandates Discount Points: a loan fee charged REALTOR® commissions, so you don’t have that all real estate brokers and Terms to pay a cent for the first-class service salespersons disclose the type of working by a lender of FHA, VA or conventional loans we provide. relationship to their buyers. We adhere to increase the yield on the investment. One to all regulations to ensure that you Acceptance: the date when both parties, sell- point = 1% of the loan amount. AA We’re experts in the field: We gather understand our duties and responsibilities er and buyer, have agreed to and completed on our knowledge of the market and years Easement: the right to use the land to you as your buyer’s agent. signing and/or initialing the contract. of experience for each and every client, of another. making sure it’s swift, straightforward and AA We work only for you: As a buyer’s agent, Adjustable Rate Mortgage: a mortgage anything that burdens (limits) produces the result you desire. We are we operate solely on your behalf. While that permits the lender to adjust the mort- : the title to property, such as a lien, easement, members of the National Association we agree to treat all parties honestly and gage’s interest rate periodically on the basis ® or restriction of any kind. of REALTORS , which means we are also fairly, our fiduciary dutyis to you alone. of changes in a specified index. Interest rates required to abide by a strict Code of Ethics may move up or down, as market condi- Equity: the value of real estate over and and Standards of Practice. tions change. above the liens against it. It is obtained by subtracting the total liens from the value. Amortized Loan: a loan that is paid in equal installments during its term. Escrow Payment: that portion of a mortgag- or’s monthly payment held in trust by the Appraisal: an estimate of real estate value, lender to pay for taxes, hazard insurance and usually issued to standards of FHA, VA and other items as they become due. FHMA. Recent comparable sales in the neighborhood is the most important factor : nickname for Federal National in determining value Mortgage Corporation (FNMA), a tax-pay- ing corporation created by congress Appreciation: an increase in the value to support the secondary mortgages in- of a property due to changes in market sured by FHA or guaranteed by VA, as well conditions or other causes. The opposite as conventional loans. of depreciation. Federal Housing Administration (FHA): Assumable Mortgage: purchaser takes an agency of the U.S. Department of Housing ownership to real estate encumbered by an and Urban Development (HUD). Its main existing mortgage and assumes responsibil- activity is the insuring of residential mort- ity as the guarantor for the unpaid balance gage loans made by private lenders. The FHA of the mortgage. sets standards for construction and under- Bill of Sale: document used to transfer title writing but does not lend money or plan (ownership) of personal property (belongings) or construct housing. as opposed to real property (real estate and a mortgage under improvements). FHA-Insured Mortgage: which the Federal Housing Administra- Cloud on Title: any condition that affects the tion insures loans made, according to its clear title to real property. regulations. Fixed Rate Mortgage: a loan that fixes the Note: a written promise to pay a certain interest rate at a prescribed rate for the dura- amount of money. tion of the loan. Origination Fee: a fee paid to a lender for : procedure whereby property services provided when granting a loan, pledged as security for a debt is sold to pay usually a percentage of the face amount the debt in the event of default. of the loan.

Freddie Mac: nickname for Federal Home Private Mortgage Insurance (PMI): see Mort- Loan Mortgage Corporation (FHLMC), gage Insurance Premium. a federally controlled and operated corpo- Second Mortgage / Second Deed of Trust / ration to support the secondary mortgage Junior Mortgage / Junior Lien: an additional market. It purchases and sells residential loan imposed on a property with a first mort- conventional home mortgages. gage. Generally, a higher interest rate and Graduated Payment Mortgage: any loan shorter term than a “first” mortgage. where the borrower pays a portion of the Settlement Statement (HUD-1): a financial interest due each month during the first few statement rendered to the buyer and seller years of the loan. The payment increases at the time of transfer of ownership, giving gradually during the first few yearsto the an account of all funds received or expended. amount necessary to fully amortize the loan during its life. Severalty Ownership: ownership by one per- son only. Sole ownership. Purchase Agreement: buyer makes a deposit for future purchases of a property Tenancy In Common: ownership by two with the right to lease property in the interim. or more persons who hold an undivided in- terest without right of survivorship. (In event Lease with Option: a contract, which gives of the death of one owner, his/her share will one the right to lease property at a certain pass to his/her heirs.) sum with the option to purchase at a fu- ture date. Title Insurance: an insurance policy that protects the insured (buyer or lender) against Loan to Value Ratio (LTV): the ratio of the loss arising from defects in the title. mortgage loan principal (amount borrowed) to the property’s appraised value (selling price). Example – on a $100,000 home, with a mortgage loan principal of $80,000 the loan to value ratio is 80%.

Mortgage: a legal document that pledges All rights reserved. ©2019 ZipNiche, LLC. a property to the lender as security for pay- ment of a debt. The information contained herein has been obtained through sources deemed reliable but cannot be guaranteed as to its accuracy. Any information of special interest should be obtained through independent verification.

Mortgage Insurance Premium (MIP): the ZipNiche, LLC provides a suite of branding, marketing and promotional materials to agents on a limited use license.

amount paid by a mortgagor for mortgage in- ZipNiche, LLC is not a real estate brokerage, and, although all ZipNiche, LLC affiliated agents are licensed real estate surance. This insurance protects the investor agents, ZipNiche, LLC does not provide any brokerage services to their clients. We think it is important that you retain from possible loss in the event of a borrow- a licensed real estate agent to provide you advice regarding your home purchase. er’s default on a loan. ZipNiche, LLC, has prepared this document for informational purposes only. It is intended, but not promised or guaranteed, to be correct, complete and up to date.

Readers should not act upon the information located in the document without first seeking professional advice in their own home jurisdiction.

8 Provided Courtesy of NicheZips The Smart Home Buyers Handbook 9