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The Journey to Your Own Home
Made simple…
By: Multicultural Marketing Division
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We understand that it
can be overwhelming…
We will explain the process for you in 8 simple steps!
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The 8 important steps:
1. Selecting a Real Estate Agent2. Selecting a Lending Professional3. Deciding on a Place to Call “Home”!4. Presenting the Offer to Purchase5. The Mortgage Loan Process6. Escrow Process Begins
More…
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7. Concurrent Events Preliminary Title Report Inspections and Disclosures Appraisal Meeting of all Conditions Final Inspection
8. The Closing Execute the documents and send them to the lender The Funds Transfer and Deed Registry The Closing
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1. Selecting a Real Estate Agent
As a homebuyer, a real estate professional is an available complimentary resource to you, as sellers pay for their professional fees! While not required – highly recommended.
There is a BIG the difference! ANYONE with a real estate license is a real estate
agent Only a member of the National Association of
Realtors® is a REALTOR®
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Why a REALTOR ®? Code of Ethics
As a member of the National Association of Realtors®, agents must legally abide by a comprehensive code of ethics protecting you
Education and Expertise Only Realtors® have access to a number of certification
courses and educational opportunities uniquely poised to mirror current trends and market changes
Extensive property search capabilities Only Realtors® have access to the complete multiple
property listing service, known as the “MLS”
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2. Selecting a Lending Professional A lending professional is the next key player –
as he/she can determine how much you can afford based on a combination of facts about you – this is known as the “pre-approval”
Typically, a pre-approval is based on good faith analysis of the information you have provided on your lending application In most cases, NOT verified until later in process
In return, a good faith estimate of costs and payments is prepared for your review
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3. Deciding on a Place to Call “Home”!
Now that how much you can afford has been determined, your Real Estate agent can help you find your “dream home”, based on: Your preferred style and size The calculated price range Desired location
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4. Presenting the Offer to PurchaseYou have found your new home! Your Real Estate agent will prepare, on your
behalf, the correct contract agreements to present to the seller or seller’s agent as your offer to purchase
The seller or seller’s agent reviews your offer for approval
Purchase agreement is NOT considered executed until both the seller and buyer have agreed and SIGNED
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5. The Mortgage Loan Process
Remember those details you provided to the lending professional for pre-approval? They are now VERIFIED Ability Willingness Equity Collateral
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Ability
Ability – Basically, how much can you afford to pay per month? Debt to income ratios – Are checked to ensure
your debt is appropriate compared to your income
Stability (two years, same field) Does not necessarily have to be in the same company –
note, same field desirable
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Ability
Verifiability How much has to or can you have verified to get
loan approved? Employment Income Assets
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Willingness Willingness
Credit score – traditionally 620 or above to get a “prime loan” – the higher the score, the lower the interest rate on a loan
Credit history – you are entitled to a free copy every 12 months at www.annualcreditreport.com
Public record, Social Security Number, Fraud Alerts
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Equity
Simply put – value of the property less debt Traditionally, the debt CANNOT exceed the value
of the property – you will become familiar with the term LTV – which means “loan to value”
You can not expect to request a $500,000 loan for a home priced at $385,000
The equity becomes more stable over time, as property increases value and mortgage payments are made towards existing debt
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Collateral
Lenders approve a loan based on RISK The higher the “collateral” or down payment, the
lower the risk The lower the collateral, the higher the risk
The higher the risk – the higher the interest rate The lower the risk – the lower the interest rate
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6. The Escrow Process Begins Once purchase agreement is fully executed, it
must accompany a good faith deposit This good faith deposit is entrusted to an
escrow representative for protection in a third party account – most commonly known as a Title company
This officially marks the beginning of the “escrow process”
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7. Concurrent Events
Preliminary Title Report Inspections and Disclosures Appraisal Meeting of all Conditions Final Inspection
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• Preliminary Title Report
Ordered by escrow agent to review for presence of any defects
Reviewed Accepted by escrow agent to move forward
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• Inspections and disclosures General property inspector
Usually hired and paid by you as buyer to check for cosmetic, structural, plumbing and electrical defects, may also be certified to check for termites.
If new home or a construction loan, as required by local building codes and ordinances, as well as loan approval (construction loan)
Disclosures – If seller has made any disclosures in regards to property – these are reviewed
All must occur within timeframe specified in written agreement
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• Appraisal
The appraiser assesses and confirms value of the home purchased –
required for loan approval
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• Meeting of All Conditions
“Condition” - something that must exist for something else to happen, e.g. to bring a situation about or make a contract valid – Encarta Dictionary
The escrow agents ensures all stipulated conditions are met - to finalize closing
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• Your Final Inspection
Your goal – to approve home is in “move in” condition
Also, if any prior inspection items needed attention – that these have been satisfied
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8. Closing
Lending instructions are reviewed with you by escrow agent
Documents to be recorded reviewed with you for accuracy
Don’t forget your PHOTO ID and CERTIFIED Check for any amounts due at closing
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Closing continued The escrow agent returns signed documents
to the lender The lender’s funds are transferred to the
escrow agent (title company) – electronically The Deed is registered at the county office
(the deed is later sent to buyer) The transaction is now closed – all
accounting final and account statement remitted
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Congratulations!
You can now receive the keys to YOUR own home!