The Process for Purchasers
In The Market
When you make the decision to buy a home, your mortgage rate will depend on your credit rating, the amount of money you wish to borrow and your loan to value ratio. Before you start looking for a loan, remove any marks against your credit as soon as possible by paying off debts, parking tickets and judgments. Close any unused store-credit lines. You may wish to check your credit report to address any errors which may complicate your loan application. If not already available, you should consider gathering your tax filings, pay stubs and other financial documents which the lender will later require.
Calculate first the purchase price you can afford. You should thoroughly researchthe neighborhood where are considering moving to. Keep in mind, the amount you can afford, property taxes, school district and other aspects of your home purchase. Calculate the estimate of what you are willing to pay and the amount of the loan you will require. The most favorable interest rates are available to those who borrow eighty-percent or less of the purchase price.
At this point, you consider retaining an attorney. Your attorney can help you become familiar with the home buying process before you start.
Pre-Contract
After you make a firm offer (basic agreement on price and terms) on the residence you will then provide your attorney’s information to your Real Estate Broker. Your broker may then request that you sign a “binder.” Despite the name, a binder may or may not legally bind you and the Seller. Make sure that it is subject to approval by an attorney. Only after both you and the Seller have signed the Contract of Sale can you be secure that you are both bound by the contract. As soon as possible after your offer is accepted, order an engineer’s report or home inspection. Refrain from employing an engineer/inspector referred by the real estate agent, as they would have an interest in ensuring a "deal killer" is not hired. It is better to use a service recommended by a friend or your attorney. Accompany the inspector to the residence in order to ask questions and gain as much knowledge about the condition of the premises as possible. Examine the inspection report closely as it may disclose issues which may have you reconsider or renegotiate the sale. With few exceptions, the doctrine of caveat emptor (buyer beware) applies to real estate transactions in New York. You, as the Purchaser, have the duty to act diligently to ascertain the fitness of your purchase and should not rely upon the Seller to disclose any defects.
Research the premises and neighborhood. Speak with neighbors or building management to ascertain any problems prior to signing the contract. Search governmental websites to find more information about the premises. NYC, Nassau, Suffolk, Westchester, Rockland,Orange, FEMA. You should now consider making the earnest-money deposit funds readily available. During the purchase negotiations, be aware that the earnest-money deposit is traditionally ten-percent of purchase price, but you may be able to negotiate lower.
In Contract
Usually after the home inspection is conducted, and specific terms agreed upon, the Contract of Sale is drafted by the Seller’s attorney. Your attorney will discuss the contract terms with you and will have you sign the contract and submit a check for the earnest-money deposit to be held in escrow by the Seller’s attorney. Your attorney will order the Abstract of Title after receiving the fully executed contract. When the fully signed contract is received, you will arrange for the mortgage loan. Attempt to learn the terminology and types of mortgage loans before you start looking. Try shopping at several lenders. It is best to be apprised of daily interest rates when negotiating the terms of the loan. Make sure that the funds you plan to bring to the closing and the loan amount at least meets the selling price and all additional fees (see below). You must comply with your lender's requests or conditions for obtaining the loan or you risk defaulting. Request that the lender send you a commitment letter as soon as it is available. Make sure that your loan commitment date extends passed your anticipated closing date. Notify your attorney of the lender and the loan amount and forward a copy of the commitment letter when available. Obtain hazard insurance (homeowner’s), in accordance with the lender’s terms and forward a copy of the insurance binder to the lender and your attorney. Contact the local utilities, phone, cable and carting company for information regarding the establishment/transfer of service.
Transaction fees in a home purchase are significant. Additional fees can expectedly add $10,000 to $15,000 above the purchase price. An estimate of the some of the expected expenses are:
- Attorney’s fee ($1,100+)
- Inspection fee ($450+)
- Home Owner’s (hazard insurance) ($900+)
- Survey ($750+)
Title fees:
- Title Insurance ($2,000-$3,000 depending on sale price and loan amount),Searches, Endorsements, ($500+), Recording Charges ($400+), property and school tax for the next tax cycle (varies),
- Mortgage Tax (NYC more than 2% of purchase price) (surrounding counties between 1%-2% of purchase price.)
- Attendance fee gratuity for title closer ($200)
Bank fees:
Upfront bank fees (application fee), Origination fee, Discount Points, Appraisal Fee, Credit Report, Processing fee, Commitment fee, Prepaid Interest, Escrows, Prepaid PMI, Bank Attorney fee. These fees vary but your lender will advise you. They will send you a Closing Disclosure which you must timely acknowledge.
Real Estate Taxes and Reimbursements to Seller:
- Reimbursement to seller for prepaid property/school tax, common charges and fuel in tank.
- Next period property/school tax if due within 60 days of closing.
- Homeowner Association fees or common charges.
To learn more about our real estate and estate planning services, please contact us today by calling (212) 343-5658.
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