Questions and Answers - Buying a Home

We Are Planning To Buy A Home. What Are The Advantages To "Tenants In Common" Ownership?

I'm Buying A New Home. How Do I Know If I Need Flood Insurance?

I'm About To Buy A New House. Should I Be Concerned About Radon Gas?

Why Should I Hire A Professional To Inspect A House Before I Buy?

I'm Buying My First Home. Do I Need Mortgage Insurance?

I Am Considering Purchasing A Home On A Contract For Deed. How Does This Work?

I'm About To Purchase A Home. How Can I Find You If There Has Been Termite Damage?

I Just Received A Notice That My Mortgage Service Has Been Sold. What Does This Mean?

How Will I Know If There Are Any Defects In The Property I Am Buying?

I'm Ready To Buy My First Home And A Lender Has Offered My A Buydown Mortgage. Would This Be A Smart Move?

I'm Buying A House And My Real Estate Agent Says That My Down Payment Will Be Put In Escrow. What Does This Mean?

Should I Contract With An Agent Before Buying A Home So That My Interests Are Protected?

I'm Buying A Home. How Can I Be Sure The Real Estate Agent Represents Only My Interests?

The House I'd Like To Buy Needs Extensive Rehabbing. How Can I Afford The Rehabbing And The Mortgage At The Same Time?

What Is Title Insurance?

WE ARE PLANNING TO BUY A HOME. WHAT ARE THE ADVANTAGES TO "TENANTS IN COMMON" OWNERSHIP?

Many couples believe that ownership as tenants in common is a more flexible option that joint tenancy because it allows each co-owner to will his or her share of the property separately. Other possible advantages to tenants in common ownership include an independent method of holding title in case of divorce and potential tax benefits in some states. Consult a real estate attorney for a complete explanation of ownership alternatives. A real estate agent who is a REALTOR®, a member of the National Association of REALTORS®, can assist you in locating a qualified attorney.

I'M BUYING A NEW HOME. HOW DO I KNOW IF I NEED FLOOD INSURANCE?

The U.S. Army Corps of Engineers, which surveys, land and outlines flood-prone areas, can provide you with additional information. If your home is in an area classifies as a "designated flood plain" area, your mortgage lender most likely will require you to obtain flood insurance. Many people mistakenly believe that flood insurance is automatically covered in their homeowner's policy, but this is rarely so. All flood insurance sold today originates from the U.S. government's flood insurance program. Private insurance companies can process the forms and then provide the insurance as part of a comprehensive homeowner's policy. All programs are essentially similar, and the cost is based on the size and value of the home. For further information on other conditions which may affect the value of your property, contact a real estate agent who's a REALTOR®, an member of the National Association of REALTORS®.

I'M ABOUT TO BUY A NEW HOUSE. SHOULD I BE CONCERNED ABOUT RADON GAS?

It is wise to be aware of the presence of radon in a home and of the possible health hazards unacceptable levels can pose. Radon, a tasteless, colorless and odorless gas, is produced by the decay of natural radioactive elements in soil. It seeps into basements through cracks in the foundation, sump pumps or pipes. Prolonged exposure to high levels of radon can cause damage in lung tissue and may lead to lung cancer. Testing for radon is relatively simple and may bring you greater peace of mind. Kits for detecting radon are available in most hardware stores at a nominal cost and home radon levels can often be reduced by sealing cracks and improving household ventilation. An EPA-trained radon remediation contractor can recommend more extensive solutions. For more information on improving your home's safety and value, consult a real estate who's a REALTOR®, a member of the National Association of REALTORS®.

WHY SHOULD I HIRE A PROFESSIONAL TO INSPECT A HOUSE BEFORE I BUY?

The purchase of a home is a major investment. A professional home inspector can protect you by providing an objective evaluation of a home's value and soundness. An inspector visually surveys the major working elements of a house, including heating, cooling, electrical and plumbing components as well as a home's structure. A test for radon may also be performed. Consult a real estate agent who is a REALTOR®, a member of the NATIONAL ASSOCIATION OF REALTORS®, for recommendations on qualified home inspectors.

I'M BUYING MY FIRST HOME. DO I NEED MORTGAGE INSURANCE?

Mortgage insurance, which protects the lender against a part of the loss should you default on the loan, is generally required when loans are granted with a low down payment. Mortgage life and disability insurance, on the other hand, is not usually required, and is designed to pay off the entire loan is case of your death or disability. Keep in mind that mortgage insurance policies usually name the lender as the beneficiary. You can obtain coverage through your lender or from a variety of other sources. A real estate agent who is a REALTOR® can provide you with information on a variety of mortgage insurance alternatives.

I AM CONSIDERING PURCHASING A HOME ON A CONTRACT FOR DEED. HOW DOES THIS WORK?

Under a contract for deed, also called a land contract or contract of sale, the seller retains the title deed until the buyer makes a certain number of payments. The buyer is considered an "equitable" owner of the property, receiving all the tax and other benefits of homeownership, except possession of the deed. Under this agreement, the buyer receives the deed after giving the seller a mortgage for the remainder of the purchase price or after paying the first installment. Consult a real estate agent who is a REALTOR®, a member of the National Association of REALTORS®, for recommendations on legal professionals who can assist you with this type of transaction.

I'M ABOUT TO PURCHASE A HOME. HOW CAN I FIND YOU IF THERE HAS BEEN TERMITE DAMAGE?

As termite infestation is not readily visible to the untrained eye, a professional inspection generally is a good idea. If termite damage is extensive, it is important to know up front, before the final contract is signed. Although termites are common, they can easily be identified and controlled. If termites are present, treatment of exposed wood and soil can control damage and also be effective in prevention. A real estate agent who is a REALTOR®, a member of the National Association of REALTORS®, can assist you in locating qualified termite inspectors.

I JUST RECEIVED A NOTICE THAT MY MORTGAGE SERVICE HAS BEEN SOLD. WHAT DOES THIS MEAN?

It means that the lender who originated your loan has sold the servicing of the mortgage to another company. Although the sale of servicing is a relatively new trend in the lending industry, about one in five mortgages is affected. Problems can arise from transfers due to computer errors and inefficiency on the part of service companies. To protect yourself, review statements from your lender to ensure that all payments have been credited; that property tax and insurance payments are being made; and that your escrow payments are not excessive. If you receive a delinquency notice for taxes or insurance, contact your lender immediately and do a thorough follow-up. For professional advice on real estate matters, consult a real estate agent who is a REALTOR®, a member of the National Association of REALTORS®.

HOW WILL I KNOW IF THERE ARE ANY DEFECTS IN THE PROPERTY I AM BUYING?

Courts are increasingly ruling that sellers must disclose any known defects that are not readily apparent to the buyer. If the seller does not inform you of known defects, it generally is considered as deceptive as making a false statement. You can further protect yourself by carefully reading your contract. Most contract state that home systems, electrical, plumbing, heating, and cooling--are in working order and will be when you move in. If your contract does not contain such a provision, you may want your lawyer to add the necessary statements. Finally, an increasing number of homebuyers choose to have professional inspect the home before the transaction is finalized. For help in locating qualified home inspectors, contact a real estate agent who's a REALTOR®, a member of the National Association of REALTORS®.

I'M READY TO BUY MY FIRST HOME AND A LENDER HAS OFFERED ME A BUYDOWN MORTGAGE. WOULD THIS BE A SMART MOVE?

It depends. If you are a first-time buyer who may be considered borderline when trying to qualify for a loan, this may be a good option. With a buydown mortgage, the lender agrees to offer the loan at a lower interest rate for the first few years of a longer term, fixed-rate mortgage. After the discounted period, you return to paying the regular interest rate, and in some cases, could end up paying a higher rate that if you obtained a conventional fixed-rate mortgage from the start. However, many first-time buyers find they buydown mortgages help them get a larger home that they initially expected. It's critical, though, that you consider your ability to make the mortgage payments after the buydown period ends. There are many variations in formulating buydown mortgages, so check with various lenders for the arrangement best suited to your needs and circumstances. For additional information regarding mortgage options, contact a real estate agent who's a REALTOR®, and a member of the National Association of REALTORS®.

I'M BUYING A HOUSE AND MY REAL ESTATE AGENT SAYS THAT MY DOWN PAYMENT WILL BE PUT IN ESCROW. WHAT DOES THIS MEAN?

Escrow is a general term for an agreement between two parties for funds, documents, or property to be placed with a neutral third party for safekeeping, pending the completion of a specified act or condition. Is simple terms. your down payment is deposited in an account, usually maintained by the broker, pending the completion of the property transaction. This typically is done to ensure that you still have the down payment money available at the time of closing. In the event the sellers choose to not complete the transaction, your money will be returned. There are other aspects of escrow that a real estate agent can discuss with you. For professional information and advice, contact a real estate agent who's a REALTOR®, a member of the National Association of REALTORS®.

SHOULD I CONTRACT WITH AN AGENT BEFORE BUYING A HOME SO THAT MY INTERESTS ARE PROTECTED?

As a homebuyer, you do have the option of employing a real estate agent to represent you throughout the property transaction. Such an agent is normally called a buyer's broker or buyer's agent. Although still relatively new to the residential real estate industry and not available from every broker, this concept is growing. A buyer's agent or a buyer's broker will help you to get the best possible price, negotiate terms for contract, and may help you find legal assistance, among other services. While most agents typically represent the seller, real estate professionals who are REALTORS® subscribe to a strict Code of Ethics and pledge to handle each transaction in a fair and ethical manner. For more information on buyer's brokerage, contact a real estate agent who's a REALTOR®, a member of the National Association of REALTORS®.

I'M BUYING A HOME. HOW CAN I BE SURE THE REAL ESTATE AGENT REPRESENTS ONLY MY INTERESTS?

When you hire a buyer's agent or buyer's broker, you contract with an agent who agrees to legally represent you throughout the property transaction. In turn, you agree to pay the agent, usually a percentage commission, an hourly rate, or a fixed fee. Although, still relatively new in the real estate industry, the concept of buyer's brokerage is growing. To locate an agent who will represent you as a buyer, contact a real estate agent who is a REALTOR®, a member of the National Association of REALTORS®. All REALTORS® agree to abide by a strict Code of Ethics, binding them to fair treatment for both buyers and sellers.

THE HOUSE I'D LIKE TO BUY NEEDS EXTENSIVE REHABBING. HOW CAN I AFFORD THE REHABBING AND THE MORTGAGE AT THE SAME TIME?

Many lenders now offer mortgage-rehab loans which help people do just that. The interest rates will probably be a fraction or a percent higher that regular mortgage rates, however because construction tends to be more of a risk. To apply for a mortgage-rehab loan you'll most likely have to show the lender an architect's drawing and contractor's estimates as the lending decision is based mainly on what the finished building will be. Generally, you can obtain an 80% loan for the purchase of the home and a 90% loan for the rehabbing. For additional information on available mortgages and other real estate matters, consult a real estate agent who's a REALTOR®, a member of the National Association of REALTORS®.

WHAT IS TITLE INSURANCE?

Title insurance protects against any defects of record in the title aside from those listed in the policy. Common defects include fraudulent or improperly signed deeds, restrictions such as covenants and easements, unpaid taxes, and encroachments. Most leaders require insurance in the amount of the mortgage to ensure that they have first lien on the property. Many homeowners also choose to purchase an owner's title policy, which protects them during and after the sale of the home from claims of a superior right to the property by persons in the chain of title. When buying or selling a home, consult a real estate agent who is a REALTOR® for professional advice and service.

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