Buying a new home can be daunting. This page outlines some of the territory to help you navigate the steps toward your new home.
Earnest Money Deposit
With your offer, you will need to put up an "earnest money deposit" as a sign of good faith that you are seriously interested in buying a home. That deposit becomes a part of the purchase price and is held in a trust account until there is full acceptance of the offer. Typically, an earnest money deposit is 3-5% of the offer amount.
Closing Costs & Fees
Your mortgage lender, who is required by law to give you an accurate estimate based on the price of your new home and the mortgage terms, determines your closing costs. In general these include:
- Title insurance
- Title search (If applicable, have your agent ask the seller for a copy of their title insurance so you can get the re-issuance rate instead of the new policy rate, which will save you money. This rate is typically only available to buyers if the property seller has owned the home for less than ten years.)
- Homeowner's insurance (for first year)
- Mortgage application fee
- Recording fees for deed and mortgage
- Attorney’s settlement fee
- Lender's attorney review
- Private Mortgage Insurance (PMI), if applicable (usually one to two months due at closing)
- Courier fees for sending the documents
- Tax adjustment, a prorated amount depending on the property tax schedule
- Tax escrow (usually 2-3 months of property tax payments plus any prorated amount required (as with the tax adjustment)
- Mortgage interest adjustment, a prorated amount of the monthly interest depending on what day of the month is closing
- County, state, and local transfer and recordation taxes
Fees
As a buyer, the fees are generally limited to mortgage lender fees, lawyer fees and various home inspection fees. If issues turn up on your inspection which require a specialist or a second opinion, that will require additional fees.
Choosing an Attorney
Generally speaking, it's a good idea to choose a local attorney who is familiar with the area's real estate laws, as they vary widely from state to state.
Pre-qualifying for a Mortgage
It is vital to obtain a pre-qualifying letter from a reputable local mortgage lender in advance of pursuing a new home in earnest. As a buyer, it is important to have an accurate picture of how much house you can afford. It will help you refine your search, allow you to make a bid with greater confidence and prevent wasted time. When it comes to actually placing an offer, a seller will generally require a pre-qualifying letter before considering your offer. With events moving rapidly during the bidding process, it is important to have this detail worked out well in advance.
