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  • Steven Maffei

Tips For a First Time Homebuyer

Buying a home will most likely be the largest purchase you will ever make. Here are a few things to keep in mind when you begin your search and find the house you want to buy.

Know how much you can borrow.

If you are getting a mortgage, you should know how much you can borrow before you begin to shop for a home so you can realistically know your price range. You do not want to go through the trouble of finding a home only to be disappointed when you learn you cannot get a mortgage for the amount you need to purchase it.

Your lender can either pre-qualify or pre-approve you for a mortgage. To be pre-qualified, you give the lender your information and you will be told how much it will lend you assuming all the information you give is correct.

The pre-approval process is somewhat more involved. Your lender will have you fill out an application, submit paperwork, such as paystubs, and run your credit report. With a pre-approval, the lender is approving you for the actual mortgage amount based on your financial situation subject to the property wish to buy.

Your lender will give you a letter stating how much they will lend you. Showing the letter to a Seller may make your offer more attractive than a rival Purchaser who has not contacted a lender because the letter shows you are financially capable of purchasing the home. In a competitive real estate market, this could be the difference between having your offer accepted over competing offers.

Get a home inspection from a licensed home inspector.

You need a trained professional to help spot any problems with the property. A simple visual inspection will not be enough. Before you sign a contract to purchase, you should hire a licensed home inspector to inspect the property and issue you a report. The report should include the heating, cooling, plumbing, and electrical systems as well as structural components such as the foundation or roof. You should use a licensed home inspector because he or she must pass a licensing test, complete continuing education once licensed, and carry liability insurance.

Any problems raised in the report, such as a needed repair, could then be addressed in the contract of sale. For example, your attorney could put in a clause in the contract that a leak that the inspector finds in the roof would have to be repaired and that the Seller would have to give you proof that the work was done. If there are any issues with the property that are not addressed in the contract, the Seller may not have to correct it and you will be the one who has to pay for the repair. If the inspection uncovered a major flaw with the property, such as with the foundation, you may not want to purchase it at all.

Even though it is not customary to get an inspection for a co-op or condo, you can get an inspector to inspect the common areas and systems of the building such as the boiler because if a repair is needed, you will be responsible to pay a share of any repairs that are performed once you close on the sale.

Purchase title insurance

Title insurance is insurance that protects lenders and owners from financial loss if there is a defect in a property’s title. For example, if you purchased a home from two people and then someone comes forward and claims that he or she also owned the property, your title insurance company would defend you against that claim and pay any loss you may incur. If you get a mortgage, you must get title insurance and name the lender as an insured in order to protect the lender’s interest in the property. You can also purchase title insurance to protect your interest. The policy you purchase for yourself is commonly referred to as an owner’s policy.

Many people feel that it is unlikely that someone will make a claim so it is not worth the expense to get title insurance for themselves. The risk of losing all or some of the value of your property far outweighs any insurance premiums you would pay so we always recommend you purchase a policy for yourself.

Basic title insurance protects against all claims arising from any event up to closing. You can also get additional insurance for coverage for events that happen subsequently to your purchase known as TOEPP which stands for TIRSA Owner’s Extended Protection Policy. This insurance affords additional coverage for post-closing events such as someone fraudulently filing a mortgage on your property.

Budget for closing costs

When you close on the sale of your new home, you will have to bring enough funds to the closing table. In addition to paying the Seller the balance of the sale price, you will have to pay closing costs.

There are generally two sets of closing costs. Some costs are paid by a Purchaser regardless of whether you have a mortgage or not. Examples are title insurance premiums, property taxes, and deed filing fees.

There are also mortgage closing costs. The bank will charge you certain fees, such as a fee for preparing the mortgage paperwork. These fees will be subtracted from the loan amount so you will not have the full amount of your loan to apply to the purchase price. For example, if your mortgage is $500,000.00 and the bank charges you $3,500.00 in closing costs, you will have $496,500.00 of net mortgage proceeds to apply to the sale’s price. You must know your net in order to determine how much you must bring to the closing table outside of your mortgage.

You should contact your attorney a few days before you close to get the amount of your closing costs so you will not have to scramble the day of closing to get the needed funds.

These are just some issues Purchasers face and are why you need an experienced real estate attorney to help you handle your transaction.

The preceding is for factual information only and is not intended to be legal advice. You should never attempt to address any of the issues raised here without the assistance of an attorney.

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