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www.LongandFoster.com®

Family owned and operated, Long & Foster® is

proud to be the #1 independent real estate

company in America, with nearly 13,000 Sales

Associates and annual sales of nearly $47.7 billion

worth of residential real estate services and

related financial services—mortgage, title, and

insurance—in 2010.

We offer our thanks and appreciation to each and

every one of our clients and customers for the

trust and confidence they have placed in us

throughout the years.

We look forward to helping you

with the sale or purchase of your

next home.

Helping people buy and sell homessince 1968.

®

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C O N T E N T SH O M E B U Y E R S G U I D E

Owning your own home is the American Dream.And that dream is more alive today than ever

before. Yet one of the first realizations a prospectivehome buyer often comes to is that the “dream home”does not always seem affordable.

Buying a home has changed. Before, buyers usuallyshopped for the best house they could find, then “tookout” a loan. Today, prospective buyers must shop asthoroughly as they can for the best financing as they dofor the best house. In today’s market, both tasks areequally important.

Experience has taught us that the buying processinvolves common stages for all homebuyers. To help youunderstand that process, and make the most of every dayand dollar you spend, LONG & FOSTER® REAL ESTATE,INC. has prepared this Homebuyers Guide to provide anoverview from the planning table to the closing table.

Of course, this short guide cannot answer all your questions. For specific answers, we encourage you to consult a Long & Foster Sales Associate. After all, helpingyou fulfill your homeownership dream is our business.

PlanningHow Much House Can You Afford?. . . . . . . 2

ShoppingWhat To Look For . . . . . . . . . . . . . . . . . . . . . . . 4

Offer To BuyNegotiating The Purchase. . . . . . . . . . . . . . 12

MoneyLocating The Right Loan . . . . . . . . . . . . . . . 16

ProtectionInspecting Your Investment . . . . . . . . . . . . 19

ClosingThe Big Day! . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

FinancingDifferent Mortgage Strategies . . . . . . . . . . 23

GlossaryWords To The Wise . . . . . . . . . . . . . . . . . . . . . 25

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HOW MUCH HOUSE?House hunting begins at home—with planning. The firststep toward buying a house is to sit down. Before you grabthe road maps and hit the streets, you need to do a littleplanning. We call it “pre-qualifying”. Simply, it’s determininghow much house you can afford to buy. Knowing youraffordable price range will bring your house-hunting intofocus. Many lenders will send out all required verificationand pre-approve you for a mortgage, allowing you theopportunity to negotiate as a cash buyer.

How much house you can afford to buy depends on twothings: how much you can afford for the monthly housingpayment, and how much you can invest in the down pay-ment. Monthly payments include principal and interest onthe mortgage loan, and property taxes and insuranceagainst fire and other hazards. These four costs are oftenabbreviated “P.I.T.I.”. For some buyers and lenders, monthlyhousing costs may also include homeowners associationdues, condominium fees, and mortgage insurance.

QUALIFYINGIn today’s market, an “affordable” home is not so much deter-mined by sales price as it is by the financing which translatesthat price into a monthly payment. A house hunter’s firststep is to set a housing budget, then go shopping for thehouse (price) and payments (P.I.T.I.) that fit that budget.

Even though there are many ways to qualify to buy a home,make sure the monthly payment makes sense for you. Howlarge a payment you qualify for will depend upon a variety offactors. These factors include credit history, size of downpayment, and length of employment. Everyone’s circum-stances are different.

HOW MUCH HOUSE CAN I AFFORD? The key items are the size of the down payment, interestrate, any monthly property fees, and the amount of themortgage. The down payment might be zero in the case ofVA-backed mortgages. A down payment of 20% or more ona conventional loan will eliminate the need for mortgageinsurance. Your Long & Foster Sales Associate can be veryhelpful to you in determining just how much house you canafford.

SOURCES FOR YOUR DOWN PAYMENTThe obvious source of money for your down payment iseither your savings or the proceeds from the sale of a homeyou already own. But there are some other not so obvioussources. In recent years, for example “parent power” hastaken some new twists for first-time buyers.

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P L A N N I N G

Home Equity Loan. Parents often have considerable equitybuilt up in their own homes—and many are tapping thatasset through home equity loans to make a gift to their children. Ask your tax advisor for current information. Oftenlenders will require a “gift letter” to verify that parents don’texpect repayment.

Life Insurance. If you have built up a cash value on your lifeinsurance policy over the years, you may be able to borrowfrom your insurance company up to the amount of this accu-mulated cash value. Often, they will even ask a more favorableinterest rate than would be asked for other types of loans.

Stocks and Bonds. If you feel the market doesn’t favor sell-ing your stocks or bonds now, you may be able to secure abank loan using your portfolio as security.

Company Profit Sharing or Savings Plan. Look into thepossibility of withdrawing what you have in your profit sharing or savings plan account or borrowing against it, ifyour company has these programs.

MORTGAGE INSURANCE CAN REDUCE DOWNPAYMENTIf you obtain a conventional loan, you may make a downpayment of 20% or less. Through the lender, you will berequired to buy private mortgage insurance (PMI). This insur-ance provides protection for the lender in case of default,allowing the lender to approve a larger loan amount.

Mortgage insurance offers a variety of payment options. Youmay make an initial payment at closing and monthly pay-ments with the house payment. You may make only an initialpayment or only monthly payments. You may even increaseyour interest rate and have the lender pay the insurance. Besure to ask your lender for a comparison of the benefits ofeach of these plans.

ONE CAUTIONThe larger the down payment, the less money you need toborrow. This means a lower monthly payment. However,remember that in addition to your down payment andmonthly payments, you will need money to pay for closingcosts, moving, appliances, household setup, a reserve forfamily emergencies, and other miscellaneous items. So don’tplan to put your last penny down on the closing table.

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WHAT TO LOOK FORChoosing a place to live can be one of the most exhilaratingexperiences of a lifetime. We’ve learned through the thousands of home seekers we have helped that the bestapproach is to be prepared. Literally, to do some homework.Our observation is simple. Your move can be an improve-ment if you duplicate what you like in your present community and avoid what you dislike.

HOUSE HUNTING BEGINS AT HOMEThe search can begin in your present home so we’ve developed some questions to stimulate your thinking andhelp you identify your needs and preferences. Once you’ve clarified what you like in your present community, you will have a better idea of what you want to find. Plus, you will be able to express your preferences clearly to your Long & Foster Sales Associate who can help you find it.

One hint to keep in mind as you go house hunting is an oldwisdom: “The best time to think about selling your home iswhen you’re buying it.” In other words, what appeals to youas a buyer today will probably also appeal (or what turns youoff will be a turn off ) to buyers tomorrow. A careful househunter will benefit years from now when it’s time to sell to anequally value-conscious buyer. Build your buyer savvy byviewing real estate Websites, reading newspaper classifiedads, homes-for-sale magazines, and visiting open houses.

COUNTY AND CITY QUESTIONSWould you characterize your present area as urban, suburban, semi-rural, or rural? Is the population density low, medium, or high? Is the population decreasing, stable, orincreasing?

What natural features are the most significant? Woods?Hills? Flat land? River? Ocean shore? Man-made lakes?Streams and ponds?

How do you commute to work? Do you walk? Drive? Carpool? Taxi? Bus? Train? How far must you travel and how longdoes it take morning and evening? Do you use availablepublic transportation for local trips or to visit close-by communities? Can someone reach your home on publictransportation?

Where do you do your shopping? Central commercial districts? Shopping malls? Supermarket shopping clusters?

Community shops or home delivery? Imagine a list of typical stops in one week . . . how many miles and how muchtime would visiting the entire list require. Do you wantgreater convenience?

S H O P P I N G

What types of schools does your family attend now? Fromgrade school to graduate school, and from day care needs tospecial vocational training, what facilities will you require inthe next few years? Are there any special needs or plans?Although it’s extremely difficult to compare quality of education, especially when the most important ingredient isthe relationship between teacher and student, some statisti-cal indicators can be helpful. Average class size at gradelevel. Comparative standardized text scores. Average salaryof teachers. Percentage of high school graduates who go tocollege.

What does the area offer for recreation and entertainment?Music? Movies and live stage? Sports arenas? Museums?Nightlife? What types of indoor and outdoor sports facilitiesare available? Are there public parks, country clubs, athleticclubs, fraternal groups? Do you require any special facilities?

CHOOSING A NEIGHBORHOODAfter you take stock of the larger view of the county and city,this section helps you zero in on your neighborhood prefer-ences. In real estate, an old maxim says there are three criteriathat determine market value: “location, location, and location”.

The concept of neighborhood isn’t as precise as county orcity. Some people consider the boundaries to be the districtaround a grade school. Others consider it “walking distance”,more or less within a half-mile radius. Wherever you drawthe line, a neighborhood is the immediate area around yourhouse.

PEOPLE, SERVICESEvery neighborhood can be described from three stand-points: its people (your future neighbors), what it looks like,and where its services are located. Yet any neighborhooddescription is highly subjective, which brings up anotherobservation from our experience.

No matter how much hard data one gathers about a neigh-borhood, nothing compares with information that local people provide. Whether it’s fellow workers, letter carriers, orpeople at a bus stop . . . neighbors are the best observers ofa neighborhood. Talk to as many people as you can, and askthem the following questions:

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NEIGHBORHOOD QUESTIONSDo neighbors socialize regularly, or hold block parties,picnics, holiday parties, organize sports teams? What are theways they have met their neighbors? Walking a dog, commuting, PTA, parties, little league, gardening?

What types of dwellings: high-rise or low-rise apartments,condominiums, multi-family structures, single-family houses, mobile homes? How much do the neighbors care forlawns and gardens? Are the houses maintained “like new”,adequately, poorly? Is there a Homeowners Association?

Are cars parked mostly in garages, driveways, in the street?How old are the houses? More than 30 years old? 15 to 30years? New? How far apart are the houses? Are propertyupgrades common? Swimming pools, tennis courts, fences,walls, patios, extensive landscaping?

For convenience, how does the neighborhood rate? Can youwalk to shopping or is a car necessary? List your five most frequent destinations. Are they clustered in one stop-and-shop location? Two stops? How much time is required for fire, police, or ambulance services to arrive in an emergency? How close are cultural centers, parks, restaurants, theaters, playgrounds?

How do the children routinely reach their schools, playareas, friends’ homes? By walking, bicycle, bus, or do parentsdrive them? Is public transportation available for commut-ing or shopping? Do any local ordinances affect pets, parking, lawn, etc.?

What are the disadvantages of the neighborhood?Freeway, railroad, or airplane noise? Factory pollution, heavytraffic, exposure to heavy storms, possible flooding?

AREA HOUSE STYLESThe metropolitan area is known for its variety of housing.This section is designed to introduce some of the basic stylesmost frequently found in the area. Numerous variations andother unique styles not mentioned here are also available.

CAPE COD. A symmetrical peaked roof often withdormer windows which creates a one-and-a-halfstory design with living space upstairs in an“expansion attic”.

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COLONIAL. A two-story design with center hall orside entry, often with basement. Variations oftenfeature double or single wings with garage.Numerous styles include New England, Federal,Plantation, Dutch Colonial, Georgian, FrenchColonial.

CONTEMPORARY. Modern and non-traditionalcreation of living spaces using a spectrum ofshapes, materials, and designs. An “open” use ofspace is characteristic. May be single or multiplestories.

HI-RISE CONDOMINIUM. Multi-story building withelevator access to owned apartments; monthly feeusually pays for use of recreation facilities, mainte-nance and utilities.

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LOW-RISE CONDOMINIUM. A cluster of attachedunits, four stories or less ranging from convertedgarden apartments to ramblers and two-storytownhouses. Resident owns title to living spacewhile jointly owning public areas; condominiumfee often covers maintenance, amenities, some-times water; other utilities may be individuallybilled.

RAMBLER. A single-story house with all livingareas on same level. Variations include L-shape or U-shape plan, perhaps with basement.Sometimes called “ranch”; if it is small, a “bunga-low” or “cottage”.

SPLIT FOYER. Entry is between floors. Makes useof slope by placing basement partially aboveground level on uphill side, thus basementbecomes livable space. Also called “split entry”.

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CHOOSING A HOUSEWe’ve saved the best for last. In many ways, finding a homeis easier than choosing a county and a neighborhood,because you are considering tangible details. Yet our experi-ence suggests that many people “decide” with emotion and“justify” with facts. This section will help you find a betterbalance.

First, one should realize that thousands of houses are sold inthe area every year. Inspecting the thousands of houses onthe market is obviously impossible. But you can turn thisoverwhelming selection to your advantage. If you can clearly describe the features you require, your Long & FosterSales Associate can make a preliminary screening for you.After you select the best houses, you can concentrate oninspecting your top choices. The key is knowing what youneed.

SPLIT LEVEL. Side wing has two levels off mainground floor; designed for maximum living spacewhile occupying the least land. Garage and sub-basement are frequent options.

TOWNHOUSE. A row of two-or-three-storydwellings sharing common walls, also called “rowhouses”. Wide range of styles from contemporaryto colonial. The term “semi-detached” describes apair of townhouse end units; similar in function toa duplex.

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HOUSE QUESTIONSHow many people will be living in the house? Do you pre-fer a new or resale home? What is your preferred housingstyle? Townhouse, colonial, contemporary, split level, splitfoyer, Cape Cod, rambler, or something else?

How many total rooms do you need? Bedrooms, bathrooms?How strongly do you require features such as: separate livingroom, dining room, laundry room, basement or attic, familyroom, fireplace, workshop area, garage? How much propertydo you require? Do you have preferences for any particularnatural features?

HOUSE HUNTINGMany of our customers find it helpful to keep a record of thehouses they inspect. A notebook is handy with pages largeenough to record vital information, as well as hold stapledpictures of attractive houses and neighborhoods or clippedadvertisements.

FINANCIAL DETAILSIs the asking price comparable to other houses in theneighborhood? Higher or lower? However, when carefully comparing properties, be sure to take into account uniquefeatures and improvements that vary house-to-house, andconsult your Long & Foster Sales Associate who can providea Comparative Market Analysis (CMA).

Is the existing mortgage assumable? Required down pay-ment amount? What financing method is acceptable to theseller?

What are the annual property taxes? Will the taxesincrease with the transfer of deed and a new market price?Any local bonds or assessments?

PHYSICAL DETAILSOutside. Address of property? House style? Lot size?Landscaping details? Degree of grounds maintenancerequired? Age of house? Structural condition? Are any majorrepairs or improvements necessary? Maintenance of building?

Inside. Make a sketch of floor plans. Total number of roomsand baths on each floor? Any extras such as intercom, fire-places, phone jacks? Built-in appliances: dishwasher,garbage disposal, trash compactor? Adequate storagespace?

Construction. Inspect quality of materials, present condi-tion, craftsmanship both inside and outside. Insulation?Weather stripping or storm windows?

Major Systems. Plumbing, electrical, heating and cooling. What type of fuel does the heating system use?Approximate annual cost? A professional inspection of themajor systems is recommended for a house that you areinterested in purchasing.

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HOUSE HUNTING ON THE WEBAt any moment a complete description of homes you wouldlike to visit is available through Long & Foster’s Web site,www.longandfoster.com. Here’s how it works.

When a house is listed for sale by any area broker, the home’svital statistics are fed into the computer: the lot size; the ageand kind of home (condo, townhouse, single family); style(colonial, contemporary, Cape Cod, etc.); material (brick,stone, wood); the number, size, and use of rooms (4 bed-rooms, 2 1/2 baths, kitchen, living and dining rooms, familyroom, finished basement and attic, foyer, utility room,garage).

Also included are features (fireplace, walkout deck, patio,wooded lot); equipment (stove, dishwasher, carpeting, etc.);the heating and/or cooling systems; the water and sewagesystems; the annual taxes; the mortgage balance, monthlypayments and the amount of cash a buyer would need toassume the existing mortgage (if it’s assumable), or theamount of cash required if the seller offers to take a secondmortgage; and, finally, the price.

FINGER-TIP HOME SEARCHA buyer’s requirements can be fed into the computer by aLong & Foster Sales Associate: particular neighborhoods,styles of homes; the number and kinds of rooms, and theprice range. In minutes, the computer makes a quick searchamong the houses listed, and prints out all the houses thatmeet the buyer’s criteria.

The computer also helps buyers determine which home sellers will offer seller financing. It can calculate the amountof mortgage payments at various interest rates, under various financing plans. It can also help evaluate the invest-ment and the financing that is right for the buyer. Plus, it’supdated each morning, as houses enter and leave the market. In short, it’s the only way a buyer can check outalmost everything that’s “out there”.

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NEGOTIATING THE PURCHASEYou’ve found it—your “dream house”! You want to buy it.Now what? You make an offer by submitting a signed realestate offer to purchase with the type of financing youdesire.

This will be the sales contract once the seller accepts. Whenyou and the seller sign, you are agreeing to the contract conditions. Before you sign it, read it carefully and make sureyou understand every detail. Ask questions. Verbal agree-ments should be written into the contract. If you plan tohave a lawyer represent or advise you, retain one as early aspossible. This is where your Long & Foster Sales Associateand an attorney can give you the assistance you need.

OFFERS AND COUNTER OFFERSYour Long & Foster Sales Associate will take the offer to a“contract presentation” with the home seller and the listingbroker. In some areas, the three of them will discuss the offer,and the seller will accept it as written, or make “counteroffers” on unacceptable aspects, or reject it. The selling broker will then bring back the offer to buy to the home-buyer, who can accept it, counter-the-counter offer, or rejectit. The offer to buy becomes a contract when all parties have initialed every counter and signed the offer.

When you sign the offer to buy, you also will have to submita deposit to show that you are earnest about your desire tobuy—appropriately called “earnest money”.

MAKING SURE YOUR CONTRACT IS COMPLETESales contracts differ, depending on circumstances, butthere are several provisions you may want to include in acontract for the purchase of real estate.

1. Deposit. The amount of “earnest money” should be clearly stated, plus the amount of money you will be pay-ing at settlement and your sources of financing. A common purchase deposit in many areas is 1-2% of thepurchase price, deposited in escrow.

2. Contingency on Financing. Be specific about the totalloan amount, the date a second or third mortgage is due,and the exact financing terms. Many contracts have an“alternative financing clause” that allows buyers to acceptdifferent financing than that which is written in the con-tract, as long as it doesn’t affect seller’s net proceeds.

3. Contingency on Inspection. You may make the contractcontingent on a building inspection report. You will usu-ally have to pay for this inspection, but the peace of mindor detection of a problem is well worth the cost ofinspecting.

OFFER TO BUY

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4. Termites. The contract may require the seller or buyer,depending upon the area, to pay for a termite inspection.The results of this inspection may further require paymentfor removal of the infestation and repair of any damagesfrom the infestation. You should get a written report atsettlement indicating that the property is free and clear ofany active termite infestation. In some areas, well and sep-tic certificates are also required.

5. Personal Property. Light fixtures, drapery rods, chande-liers, washers, dryers, refrigerators, heating oil in the tank,storm windows and doors, firewood, even swimmingpool chemicals, and other items not physically attachedshould be specified in writing if they’re to be conveyed tothe buyer. Misunder standings based on verbal agree-ments can delay settlement as well as cause friction.

6. Repair Work. Standard contracts of sale require sellers tobe responsible for plumbing, heating, mechanical, andelectrical systems to be in working order at time of settle-ment. You should conduct a “pre-settlement walk-throughinspection” which should be made several days before ornot later than the day of settlement.

7. Title Attorney or Insurance Company. The buyer has theright to select a title attorney or insurance company. Youshould shop and compare prices before deciding whatattorney or title company will conduct your settlement.Also, be sure to clear the title company with the lender,whose interests are also involved. Ask your Long & FosterSales Associate for a list of our Prestige Partners®, whoprovide settlement and insurance services throughoutour seven state Mid-Atlantic Region and the District ofColumbia.

8. Closing and Occupancy Date. Include an arrangement withthe seller in the event you can’t secure possession on theagreed date, such as a daily rent-back agreement for “post-settlement occupancy”.

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PRE-SETTLEMENTINSPECTION

HOME INSPECTION

CONTACTUTILITY COMPANY

MAKE OFFER TOPURCHASE

SELECTSETTLEMENTATTORNEY

PREVIEWHOMES

DISCUSSBUYER AGENCY

DETERMINENEEDS & DESIRES

LONG & FOSTER

Looking to buy a home? There’s more to finding it than meets the eye. We will take you through the home-buying process, oversee the details, and

guide you to the home of your dreams . . . every step of the way.

BUYING YOUR HOME

www.LongandFoster.com

REAL ESTATE • MORTGAGE • TITLE

LONG & FOSTER

s more to finding it than meets the eye. We will take you through the home-buying process, oversee the details, and

guide you to the home of your dreams . . . every step of the way.

BUYING YOUR HOME

www.LongandFoster.com

ITLE • INSURANCE

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CONTRACTACCEPTANCE

CONTINGENCIES:• HOME INSPECTION• FINANCING

COMMITMENT• OTHER

CONTINGENCIES

OBTAINHAZARD

INSURANCE

ARRANGETERMITE

INSPECTION

MORTGAGEPRE-APPROVAL

DETERMINEPURCHASING

POWER

SETTLEMENT MOVING DAY

®

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LOCATING THE RIGHT LOANYou have the option of shopping around for the best termsyou can obtain. Generally, a mortgage acceptance requires30-45 days for conventional, 45-60 days for VA and FHA fromapplication to approval. In some cases, loans may beapproved more quickly. Prosperity Mortgage® Company isa joint venture between Long & Foster and Wells FargoHome Mortgage.

SHOP SMART FOR MORTGAGE MONEYIt used to be that qualified homebuyers simply went to theirnearest bank or savings and loan for the standard, fixed-rate,30-year mortgage or the VA/FHA backed loan. Interest rateswere not highly competitive—back then.

Now, of course, things have changed. Competition amonglenders is lively, and smart borrowers shop carefully to findthe financing that best suits their circumstances and needs.Here’s where to shop:

Mortgage Lenders. Mortgage lenders issue mortgages toborrowers. They then process and sell the mortgages tolarge investors or into the secondary mortgage market.

Mortgage Loan Brokers. Some individuals or groupscharge a fee (usually to the borrower) to match borrowerswith lenders. Sometimes they make direct loans. An advan-tage of working with mortgage brokers is that they oftenrepresent many investors and can provide you with manymore financing alternatives, usually at the same price as themortgage banker.

Financial Institutions. Mutual savings banks, savings andloan associations, insurance companies, and some commer-cial banks are the traditional sources of mortgage loans.Savings and Loans often grant favorable terms to their ownaccount holders.

Private Lenders. Individuals (often home sellers) andgroups (sometimes seller’s employers—if the seller is beingtransferred) lend money. This source is especially helpful inarranging second mortgages, but can also assist with firsttrusts, wrap-arounds, and other mortgage plans.

Credit Unions. Federal credit unions can write 30-year con-ventional and government insured mortgages. Some willmake loans; others may not. This may be a good source forcredit union members.

Finance Companies. To compete with the more traditionallenders, some finance companies promise quick service andsome do not charge mortgage “points” or “pre-paymentpenalties”.

M O N E Y

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TEN QUESTIONS MOST LENDERS WILL ASK YOU

Here’s the information most lenders will need:

1. The amount of money you wish to borrow and thelength of time you will need the money.

2. Your current address and any other addresses coveringthe previous 24 months.

3. Your social security number.

4. Your current employer’s name, address and phonenumber and the same information for any otheremployers in the previous 24 months.

5. Your gross monthly income including documentation:most recent pay stub, final pay stub for any job you mayhave left in the current year and previous year’s W-2form(s).

6. Complete account statements (all pages) for any bank,credit union, retirement, or brokerage accounts.

7. Your assets (real estate, personal property, stocks andbonds, life insurance with cash value, etc.).

8. A complete list of your debts including account num-bers, balances and minimum payments.

9. A copy of the sales contract.

10. An account, in writing, of any problems concerningyour application and any documentation of the circum-stances of those problems.

With this information in hand, here are the general steps thelender will take to process your application:

1. Verify the facts.

2. Get a credit report.

3. Make a property appraisal.

4. Review your application.

5. Decide whether or not to make the loan.

SOME QUESTIONS YOU SHOULD ASK MOSTLENDERSHere’s how to shop; a few of the questions to ask a lender:

✔ Are both fixed-rate and adjustable mortgage loansavailable?

✔ What is the interest rate?

✔ What is the total origination charge?

✔ How long can I “lock-in” the financing at the currentinterest rate?

✔ What are the other fees a lender may charge me inconjunction with my loan?

✔ Are funds for a second mortgage available?

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✔ On adjustable loans: How often will the interest ratebe adjusted? Is there a maximum limit on each ratechange? How often will the monthly payment beadjusted? Is there a ceiling on payment adjustments?Can the term of the loan be extended?

✔ Is there a pre-payment penalty clause? This involvesextra charges for paying off the loan before maturity.About 80% of all loans in the United States are paid offearly.

✔ What is the “grace” period? How late can a monthlypayment be made before a late charge is assessed?What will happen if a payment is missed?

✔ If you sell your house, will the new buyer be able toassume your mortgage at the same interest rate?

✔ Do you have to pay “points” to get your new mort-gage? Usually lenders charge points for the cost ofgiving you a mortgage loan.

✔ Will the lender require mortgage insurance?

SLICING INTEREST RATESIt is important to keep the tax advantage in mind when considering whether to rent or buy. A mortgage payment of$1,500 could result in a lower overall cost than an $1,200rent amount after you consider tax advantages.

Remember a buyer may not realize this “tax break” until taxtime comes around unless withholding taxes are decreasedin anticipation of increased interest payment deductions.Please contact your tax advisor for more information.

FIRE AND HAZARD INSURANCEMost lenders require a homebuyer to provide a one-yearpaid receipt at settlement for a fire and hazard insurancepolicy, often called homeowner’s insurance. These policiesare available from several leading insurance companiesthrough Long & Foster Insurance Agency, Inc., or theinsurance company of your choice. Fire and hazard insur-ance provides protection for fire and other perils to yourhome and its contents.

WHAT TO EXPECT FROM A HOME INSPECTORWhat can homebuyers expect from a home inspector —besides a bill for $300 and up (depending on the size ofproperty and/or complexity of the inspector’s report)?

First of all, require proof of membership in the AmericanSociety of Home Inspectors. Next, expect a quickly-delivered(one or two-day) written report.

Expect practical returns. While you can see for yourself manyflaws in a house, the practiced eye of a professional inspec-tor can probably spot more, especially in areas not easilyaccessible to a homebuyer. Specific information could evenreduce the price of a house if the seller will agree the pricehas not already been discounted for defects.

POSSIBLE REPAIRS✔ Serious problems (heating, roofing, plumbing)

✔ Medium problems (insulation, paint)

✔ Minor problems (electrical outlets, kitchen sink)

If no serious problems are found, inspection can pay off indirectly in assurance that you are making a sound invest-ment.

Many states now require that sellers provide buyers with eithera residential property disclosure or disclaimer statement.

TITLE INSURANCETitle insurance provides protection in the event any of anumber of past actions threaten the title to your property.Most lenders will require title insurance to protect theirinterests. Be sure to ask about an “owner’s” policy as well, toprotect your title. You may save money if you buy owner’stitle insurance at the same time as mortgage title insurance,rather than buying it separately later.

As a homebuyer, you may be able to save money with a “re-issue rate” for title insurance, if the property changedhands within the last several years. The title insurance mayallow a lower “re-issue rate” premium because the recenttitle search is still valid. Consult your title attorney and insurance company.

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P R O T E C T I O N

AFTER LOAN APPROVALAfter the lender approves the mortgage, the buyer willreceive a “loan commitment letter” stating the mortgageamount, interest rate, and length of loan term. The buyershould check it carefully, and return a signed copy to thelender or follow other specific instructions.

Next, the selling and listing brokers will coordinate a settle-ment date. You should be sent a letter confirming the date,place, time, and a checklist of everything you, as the home-buyer, need to bring.

WALK-THROUGH INSPECTIONThe purpose of the walk-through inspection on the day ofsettlement or several days prior to settlement is to deter-mine if all conditions in the contract are satisfied. The timefor the buyer to inspect and note defects for correction bythe seller is during the contract negotiations and prior tosigning the sales agreement. Repair or replacement itemsshould be noted in the contract or contingent on a houseinspection, otherwise, most resale homes are sold in “as is”condition.

It is up to the buyer to perform the walk-through inspection,not the seller, who may or may not be present. The buyershould be accompanied by the selling agent. The home seller should be sure utilities are on so that equipment canbe operated.

ROOM BY ROOMThe buyer should try all lights and switches; turn all faucetson and off, run shower, flush toilets; turn on the furnace andcentral air conditioning (in the off-season, buyer should hirea professional to certify proper functioning of both heatingand air conditioning); test all stove burners, oven at bakeand broil; run some ice cubes through disposal to testblades; run dishwasher, washer, dryer through completecycles; open and close all windows and doors. In short, tryeverything, even keys and the fireplace flue.

All deficiencies should be noted, and funds may be withheldfrom the home seller by the settlement attorney for repairs,if seller does not correct problems prior to settlement. Theselling broker will coordinate with the listing broker and seller to make repairs before settlement, if possible. Uponreceipt of bills and notification that repairs are complete, theattorney will release balance of funds to the seller, if moneyis escrowed for needed repairs.

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THE BIG DAY! The big day is here! Tonight you can pop open the cham-pagne, but today there will be a lot of paper signing and apoignant passing of the keys (don’t forget the garage keysand electric door opener, too).

At the settlement there will be an attorney or title companyrepresentative (chosen by the buyers), all buyers, listing and selling brokers, and all owners. The home seller should bringall warranties on equipment and any instructions on equip-ment maintenance or operation.

The attorney will have searched the title, provided title insur-ance, and obtained old and new lender instructions. First, allunresolved walk-through deficiencies are resolved.

With the buyer, the attorney explains the deed of trust ormortgage; the deed of trust note or mortgage note; VA, FHA,or lender forms; and settlement sheets. Buyer signs all theseand pays the balance of the down payment and buyer’s closing costs with cashier or certified check.

OPEN LOOK AT CLOSING COSTS“Closing costs” have lost much of their mystery in recentyears.

Under the Real Estate Settlement Procedure Act (RESPA), thehomebuyer is furnished an estimate of closing costs by thelender, in advance of the closing. In some cases, some of theclosing costs may be paid by the seller; this is particularlytrue for new housing, where the seller is the builder.

Settlement fees vary widely depending on price, location,and other factors, but overall the buyer’s costs usually aver-age between 3% and 7% of the sales price. Items that areusually included in the settlement fees are the loan origina-tion fee, mortgage insurance premium (M.I.P.), attorney fees,owner and lender title insurance, recording fees, county taxstamps, state tax stamps, and the survey fee. In addition, thelender will require an appraisal fee and a credit report fee inadvance of the closing.

A few other items, not required to be listed under the law, mayalso have to be paid at a closing. These include advancedeposits held in escrow for real estate property taxes andinsurance. The lender collects a portion of these every monthand then pays the insurance and taxes when they are due.

Because specific closing costs vary from area to area, and transaction to transaction, we encourage you to consult with your Long & Foster Sales Associate. Sometimesclosing costs can amount to a sizable sum. Remember thatsome of the items are tax deductible. Check with your taxadvisor.

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C L O S I N G

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SIGNING ON THE DOTTED LINEWith the seller, the attorney explains the settlement sheetsand gets the home seller’s signature on them and the deed.Seller pays appropriate closing costs.

If the seller’s taxes or insurance have been escrowed, the seller will receive any money accumulated in the account forbills not yet due. Additionally, the seller will be reimbursedfor any money paid in advance and not used, such as prop-erty taxes. The seller will receive these refunds at or after settlement, depending on the area. Taxes and homeownersassociation dues or condominium fees will be prorated on adaily basis. Seller, buyer, and brokers are supplied a copy ofsettlement sheets for their records.

The house keys are passed. You are now the proud owner!Congratulations!

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DIFFERENT MORTGAGE STRATEGIESWhen it comes to paying for a home, buyers today havenumerous financing options. This is a summary of the primaryalternatives. Information about rates and programs is avail-able from your Long & Foster® Sales Associate through yourProsperity Mortgage® Company Loan Originator. ProsperityMortgage is a joint venture between Long & Foster and WellsFargo Home Mortgage. Interest rates are for illustration only.

CONVENTIONAL/VA/FHAConventional Mortgage. A conventional loan is a mortgagemade between a lender and a borrower with no other partiesinvolved (such as VA or FHA). Conventional loans customarilyrequire a 20% down payment. Down payments may be as lowas 5% with mortgage insurance.

Example: A buyer purchases a $400,000 home. The lenderrequires a 20% down payment ($80,000). At 7% the$320,000 balance has a monthly P&I payment of $2,391over 30 years. Mortgage insurance could lower the downpayment requirement to 5%, or $20,000, which increasesthe monthly payment.

Advantage: Conventional mortgages are straightforwardand easy to understand. Conventional loans offer thelargest variety of financing options.

Fixed Rate conventional loans feature equal monthly pay-ments that are made over the term of the mortgage. Thestandard time period is 30 years or less. The interest rateremains the same which keeps the principal and interestpayments the same over the term. Payments can vary iftaxes or insurance escrow payments change.

Adjustable Rate loans are mortgages that allow for pay-ments which change periodically over the life or term of themortgage. An ARM loan has a set interest rate and paymentfor a period of time and then adjusts to the market rate at apredetermined point. ARM loans feature lower rates over theinitial loan period.

VA Loan. The letters ‘VA’ stand for Veteran’s Administration – abranch of the US government. VA is not a lender but ratherguarantees mortgages for lenders to help eligible veterans. VAloans require no down payment up to the VA maximum loanlimit. VA loans can be assumed by qualified borrowers.

Example: A veteran purchases a $235,000 home. With nodown payment the loan amount is $240,050 including theVA Funding Fee, for a first time veteran’s purchase. At 6%interest over 30 years the monthly P&I payment is $1,439.

Advantage: VA requires no down payment. The seller can(but is not required to) pay all closing costs for a veteran.

F I N A N C I N G

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FHA Loan. FHA is the Federal Housing Administration, adivision of the US Department of Housing and UrbanDevelopment. FHA does not lend money; instead, like VA, itinsures mortgages allowing lenders to make loans thatmight not be eligible for conventional financing. Down payments are as low as 3.5%. Both fixed-rate and ARM mortgages are available. FHA loans are assumable by quali-fied borrowers. FHA mortgages have credit standards andother rules that are more flexible than typical conventional mortgages.

Example: A buyer of a $200,000 home makes a down pay-ment of $7,000. The loan amount including up-front MIPwould be $194,930. At 6% interest over 30 years the monthly P&I payment is $1,169.

Advantage: FHA offers a low down payment.

LONG & FOSTER® REAL ESTATE, INC. is not a mortgagelender. These figures are provided by Prosperity Mortgage®Company. Prosperity Mortgage is a joint venture betweenLong & Foster and Wells Fargo Home Mortgage. The actualterms of any financing are subject to the requirements of eachindividual case. Choosing the “best” mortgage depends uponthe circumstances of the individual borrower. Your Long &Foster® Sales Associate will be happy to refer you to aProsperity Mortgage® Company loan officer to explain theoptions available to each buyer for mortgage financing.

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WORDS TO THE WISEAgent. A person acting on behalf of another, called the prin-cipal.

Agreement of Sale. Known by various names, such as “contract of purchase”, “purchase agreement”, “sales agree-ment”, or “binder”, according to location or jurisdiction. Acontract in which a seller agrees to sell and a buyer agrees tobuy, under certain specific terms and conditions spelled outin writing and signed by both parties.

Annual Percentage Rate (APR). Includes quoted interestrate on the loan plus all additional service and financecharges associated with the loan. Includes all costs of financ-ing; those paid at the time of closing and those paid over theterm of the loan. The APR is usually slightly higher than thenote rate.

Appraisal. An expert judgment or estimate of the quality orvalue of real estate as of a given date.

Assessed Value. The valuation placed upon property by apublic tax assessor as the basis for taxes.

Bill of Sale. An instrument which transfers title to personalproperty (chattels); a “Deed” transfers real property.

Certificate of Title. A document signed by a title examineror attorney, stating that the seller has a good marketableand insurable title.

Closing Statement (Settlement). The computation offinancial adjustments between the buyer and seller as of theday of closing a sale to determine the net amount of moneywhich the buyer must pay to the seller to complete the purchase of the real estate and seller’s net proceeds. Also,“Settlement Sheets”, “HUD-1”.

Commission. Payment to a real estate broker for servicesperformed.

Convey. To deed or transfer title of property from one per-son to another.

Deed. A formal written instrument by which title to realproperty is transferred from one owner to another. Also,“conveyance”.

Deed of Trust. Like a mortgage, a security instrumentwhereby real property is given as security for a debt.However, in a deed of trust there are three parties to theinstrument: the borrower, the trustee, and the lender (orbeneficiary).

Earnest Money. The money given to the seller by the poten-tial buyer (usually held in escrow) upon the signing of theagreement of sale to show that buyer is serious about buyingthe house. Also, “Deposit”.

G L O S S A R Y

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Equity. The interest or value which the owner has in realestate over and above the debts against it. (Sales Price –Mortgage Balance = Equity.)

Escrow. Funds, property, or other things of value left in trustto a third party. The escrow may be released upon the fulfill-ment of certain conditions or by agreement of the parties.

Fixture. What was formerly personal property which is nowpermanently attached to real property and goes with theproperty when it is sold.

Hazard Insurance. Protects against damages caused toproperty by fire, windstorms, and other common hazards.

Listing Contract. Between a homeowner (as principal) anda licensed real estate broker (as agent) by which the brokeris employed to market the real estate within a given time forwhich service the owner agrees to pay a commission. Also,“listing agreement”.

Market Value. The highest price which a buyer, ready, will-ing and able but not compelled to buy, would pay, and thelowest price a seller, ready, willing and able but not com-pelled to sell, would accept. Basis for “listing price”, or “askingprice”.

Market Price. The actual amount for which a piece of prop-erty is sold. Also, “Sales Price”, “Purchase Price”.

Mortgage. A lien or claim against real property given by thebuyer to the lender as security for money borrowed.

Mortgage Note. A written agreement to repay a loan. Theagreement is secured by a mortgage, serves as proof of anindebtedness, and states the manner in which it shall bepaid. Also, “Deed Of Trust Note”.

P.I.T.I. Principal, interest, taxes, and insurance. Most residential mortgage payments include the above and aretherefore referred to as P.I.T.I.

Points. Sometimes called “Discount Points”, a point is onepercent of the amount of the mortgage loan.

Prepayment Penalty. Penalty for the payment of a mort-gage note or deed of trust note before it actually becomesdue.

Principal. This word has several meanings:(A) to denote the most important;(B) a capital sum lent on interest;(C) one who appoints an agent to act on their behalf;(D) either party to a contract.

Property Management. The operation of real property,including the leasing of space, collection of rents, selectionof tenants, and the repair and renovation of the buildingsand grounds.

Prorate. To allocate between the seller and buyer their proportionate share of an obligation paid or due. For example, a prorate of real property taxes, fire insurance, orcondominium fee.

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Sales Associate. A person with a real estate license andassociated with a specific real estate broker.

Survey. A map or plat made by a licensed surveyor showingthe results of measuring the land with its elevations,improvements, boundaries, and its relationship to surround-ing tracts of land. A survey is often required by the lender toassure a building is actually sited on the land according to itslegal description.

Title. As generally used, a document that indicates rights ofownership and possession of a particular property.

Title Abstract. A summary of the public records relating tothe title to a particular piece of land. An attorney or titlecompany reviews an abstract or title to determine whetherthere are any title defects.

Title Insurance. Protects lenders and homeowners againstloss of their interest in property due to legal defects in title.

Title Search or Examination. A check of the title records,generally at the local courthouse, to make sure the buyer ispurchasing a house from the legal owner and there are noliens, overdue special assessments, or other claims.

Transfer Tax. State tax, local tax (where applicable), and taxstamps (in some areas) required by law when title passesfrom one owner to another.

© 2011 The Long & Foster® Companies/Corporate Marketing Department. All Rights Reserved.

Ask your Long & Foster Sales Associate for a copy of the“Understanding the Role of the Real Estate Agent” (LF1192,for use in the state of Maryland only) or “A REALTORS® ROLE”(LF1193, for use in the state of Virginia only).

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888-409-1066

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866-954-7565

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888-820-9837 800-874-9634

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Th is is why Long & Foster® has streamlined the process of buying, selling and owning a home from contract to closing and beyond.

We partner together to offer services in: Financing Commercial Insurance Home Improvement Settlement Property Management Short Sale Transaction Management

and more. . .

What does this mean for you?Long & Foster agents, in addition to being the best-trained and best-equipped in the market, are also backed by a family of companies off ering impressive service to help you reach your homeownership goals.

Your Long & Foster sales associate serves as your single point-of-contact in the home buying or selling process, from start to fi nish.

Your transaction is managed effi ciently for you as our family of companies is working towards the common goal of providing a seamless buying or selling experience from contract to closing and beyond.

With Long & Foster’s family of companies working together to complete your transaction, you can rest easy knowing that we share a desire to deliver you an experience that exceeds your expectations.

Every step of the way, The Long & Foster® Companies is your

real estate partner.

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