7 Reasons to Own Your Home
1. Tax breaks. The U.S. Tax Code lets you deduct the interest you pay on your mortgage, your
property taxes, as well as some of the costs involved in buying your home.
2. Appreciation. Real estate has long-term, stable growth in value. While year-to-year
fluctuations are normal, median existing-home sale prices have increased on average 6.5
percent each year from 1972 through 2005, and increased 88.5 percent over the last 10 years,
according to the NATIONAL ASSOCIATION OF REALTORS®. In addition, the number of U.S.
households is expected to rise 15 percent over the next decade, creating continued high
demand for housing.
3. Equity. Money paid for rent is money that you’ll never see again, but mortgage payments let
you build equity ownership interest in your home.
4. Savings. Building equity in your home is a ready-made savings plan. And when you sell, you
can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any
federal income tax.
5. Predictability. Unlike rent, your fixed-mortgage payments don’t rise over the years so your
housing costs may actually decline as you own the home longer. However, keep in mind that
property taxes and insurance costs will increase.
6. Freedom. The home is yours. You can decorate any way you want and benefit from your
investment for as long as you own the home.
7. Stability. Remaining in one neighborhood for several years gives you a chance to participate
in community activities, lets you and your family establish lasting friendships, and offers your
children the benefit of educational continuity.
Online resources: To calculate whether buying is the best financial option for you, use the “Buy
vs. Rent” calculator at www.GinnieMae.gov.
Common First-Time Home Buyer Mistakes
1. They don’t ask enough questions of their lender and end up missing out on the best deal.
2. They don’t act quickly enough to make a decision and someone else buys the house.
3. They don’t find the right agent who’s willing to help them through the homebuying process.
4. They don’t do enough to make their offer look appealing to a seller.
5. They don’t think about resale before they buy. The average first-time buyer only stays in a
home for four years.
Source: Real Estate Checklists and Systems, www.realestatechecklists.com.
Lender Checklist: What You Need for a Mortgage
□ W-2 forms — or business tax return forms if you're self-employed — for the last two or three years for every
person signing the loan.
□ Copies of at least one pay stub for each person signing the loan.
□ Account numbers of all your credit cards and the amounts for any outstanding balances.
□ Copies of two to four months of bank or credit union statements for both checking and savings
accounts.
□ Lender, loan number, and amount owed on other installment loans, such as student loans and
car loans.
□ Addresses where you’ve lived for the last five to seven years, with names of landlords if
appropriate.
□ Copies of brokerage account statements for two to four months, as well as a list of any
other major assets of value, such as a boat, RV, or stocks or bonds not held in a brokerage account.
□ Copies of your most recent 401(k) or other retirement account statement.
□ Documentation to verify additional income, such as child support or a pension.
□ Copies of personal tax forms for the last two to three years.
□ W-2 forms — or business tax return forms if you're self-employed — for the last two or three years for every
person signing the loan.
□ Copies of at least one pay stub for each person signing the loan.
□ Account numbers of all your credit cards and the amounts for any outstanding balances.
□ Copies of two to four months of bank or credit union statements for both checking and savings
accounts.
□ Lender, loan number, and amount owed on other installment loans, such as student loans and
car loans.
□ Addresses where you’ve lived for the last five to seven years, with names of landlords if
appropriate.
□ Copies of brokerage account statements for two to four months, as well as a list of any
other major assets of value, such as a boat, RV, or stocks or bonds not held in a brokerage account.
□ Copies of your most recent 401(k) or other retirement account statement.
□ Documentation to verify additional income, such as child support or a pension.
□ Copies of personal tax forms for the last two to three years.
Factors That Decide Your Credit Score
Credit scores range between 200 and 800, with scores above 620 considered desirable for obtaining a mortgage.
The following factors affect your score:
1. Your payment history. Did you pay your credit card obligations on time? If they were late, then how late?
Bankruptcy filing, liens, and collection activity also impact your history.
2. How much you owe. If you owe a great deal of money on numerous accounts, it can indicate that you are
overextended. However, it’s a good thing if you have a good proportion of balances to total credit limits.
3. The length of your credit history. In general, the longer you have had accounts opened, the better. The average
consumer's oldest obligation is 14 years old, indicating that he or she has been managing credit for some time,
according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.
4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more
risky, even if you pay them promptly.
5. The types of credit you use. Generally, it’s desirable to have more than one type of credit — installment loans,
credit cards, and a mortgage, for example.
For more on evaluating and understanding your credit score, visit www.myfico.com.
Credit scores range between 200 and 800, with scores above 620 considered desirable for obtaining a mortgage.
The following factors affect your score:
1. Your payment history. Did you pay your credit card obligations on time? If they were late, then how late?
Bankruptcy filing, liens, and collection activity also impact your history.
2. How much you owe. If you owe a great deal of money on numerous accounts, it can indicate that you are
overextended. However, it’s a good thing if you have a good proportion of balances to total credit limits.
3. The length of your credit history. In general, the longer you have had accounts opened, the better. The average
consumer's oldest obligation is 14 years old, indicating that he or she has been managing credit for some time,
according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.
4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more
risky, even if you pay them promptly.
5. The types of credit you use. Generally, it’s desirable to have more than one type of credit — installment loans,
credit cards, and a mortgage, for example.
For more on evaluating and understanding your credit score, visit www.myfico.com.
6 Creative Ways to Afford a Home
1. Investigate local, state, and national down payment assistance programs. These programs give qualified
applicants loans or grants to cover all or part of your required down payment. National programs include the
Nehemiah program, www.getdownpayment.com, and the American Dream Down Payment Fund from the Department
of Housing and Urban Development, www.hud.gov.
2. Explore seller financing. In some cases, sellers may be willing to finance all or part of the purchase price of the
home and let you repay them gradually, just as you would do with a mortgage.
3. Consider a shared-appreciation or shared-equity arrangement. Under this arrangement, your family, friends, or
even a third-party may buy a portion of the home and share in any appreciation when the home is sold. The
owner/occupant usually pays the mortgage, property taxes, and maintenance costs, but all the investors' names are
usually on the mortgage. Companies are available that can help you find such an investor, if your family can’t
participate.
4. Ask your family for help. Perhaps a family member will loan you money for the down payment or act as a co-signer
for the mortgage. Lenders often like to have a co-signer if you have little credit history.
5. Lease with the option to buy. Renting the home for a year or more will give you the chance to save more toward
your down payment. And in many cases, owners will apply some of the rental amount toward the purchase price. You
usually have to pay a small, nonrefundable option fee to the owner.
6. Consider a short-term second mortgage. If you can qualify for a short-term second mortgage, this would give you
money to make a larger down payment. This may be possible if you’re in good financial standing, with a strong
income and little other debt
1. Investigate local, state, and national down payment assistance programs. These programs give qualified
applicants loans or grants to cover all or part of your required down payment. National programs include the
Nehemiah program, www.getdownpayment.com, and the American Dream Down Payment Fund from the Department
of Housing and Urban Development, www.hud.gov.
2. Explore seller financing. In some cases, sellers may be willing to finance all or part of the purchase price of the
home and let you repay them gradually, just as you would do with a mortgage.
3. Consider a shared-appreciation or shared-equity arrangement. Under this arrangement, your family, friends, or
even a third-party may buy a portion of the home and share in any appreciation when the home is sold. The
owner/occupant usually pays the mortgage, property taxes, and maintenance costs, but all the investors' names are
usually on the mortgage. Companies are available that can help you find such an investor, if your family can’t
participate.
4. Ask your family for help. Perhaps a family member will loan you money for the down payment or act as a co-signer
for the mortgage. Lenders often like to have a co-signer if you have little credit history.
5. Lease with the option to buy. Renting the home for a year or more will give you the chance to save more toward
your down payment. And in many cases, owners will apply some of the rental amount toward the purchase price. You
usually have to pay a small, nonrefundable option fee to the owner.
6. Consider a short-term second mortgage. If you can qualify for a short-term second mortgage, this would give you
money to make a larger down payment. This may be possible if you’re in good financial standing, with a strong
income and little other debt
Tips to Guide for Your Home Search
1. Research before you look. Decide what features you most want to have in a home, what neighborhoods you
prefer, and how much you’d be willing to spend each month for housing.
2. Be realistic. It’s OK to be picky, but don’t be unrealistic with your expectations. There’s no such thing as a perfect
home. Use your list of priorities as a guide to evaluate each property.
3. Get your finances in order. Review your credit report and be sure you have enough money to cover your down
payment and closing costs. Then, talk to a lender and get prequalified for a mortgage. This will save you the
heartache later of falling in love with a house you can’t afford.
4. Don’t ask too many people for opinions. It will drive you crazy. Select one or two people to turn to if you feel you
need a second opinion, but be ready to make the final decision on your own.
5. Decide your moving timeline. When is your lease up? Are you allowed to sublet? How tight is the rental market in
your area? All of these factors will help you determine when you should move.
6. Think long term. Are you looking for a starter house with plans to move up in a few years, or do you hope to stay
in this home for a longer period? This decision may dictate what type of home you’ll buy as well as the type of
mortgage terms that will best suit you.
7. Insist on a home inspection. If possible, get a warranty from the seller to cover defects for one year.
8. Get help from a REALTOR®. Hire a real estate professional who specializes in buyer representation. Unlike a
listing agent, whose first duty is to the seller, a buyer’s representative is working only for you. Buyer’s reps are
usually paid out of the seller’s commission payment.
1. Research before you look. Decide what features you most want to have in a home, what neighborhoods you
prefer, and how much you’d be willing to spend each month for housing.
2. Be realistic. It’s OK to be picky, but don’t be unrealistic with your expectations. There’s no such thing as a perfect
home. Use your list of priorities as a guide to evaluate each property.
3. Get your finances in order. Review your credit report and be sure you have enough money to cover your down
payment and closing costs. Then, talk to a lender and get prequalified for a mortgage. This will save you the
heartache later of falling in love with a house you can’t afford.
4. Don’t ask too many people for opinions. It will drive you crazy. Select one or two people to turn to if you feel you
need a second opinion, but be ready to make the final decision on your own.
5. Decide your moving timeline. When is your lease up? Are you allowed to sublet? How tight is the rental market in
your area? All of these factors will help you determine when you should move.
6. Think long term. Are you looking for a starter house with plans to move up in a few years, or do you hope to stay
in this home for a longer period? This decision may dictate what type of home you’ll buy as well as the type of
mortgage terms that will best suit you.
7. Insist on a home inspection. If possible, get a warranty from the seller to cover defects for one year.
8. Get help from a REALTOR®. Hire a real estate professional who specializes in buyer representation. Unlike a
listing agent, whose first duty is to the seller, a buyer’s representative is working only for you. Buyer’s reps are
usually paid out of the seller’s commission payment.
Questions to Ask Your Lender
1. What are the most popular mortgages you offer? Why are they so popular?
2. Which type of mortgage plan do you think would be best for me? Why?
3. Are your rates, terms, fees, and closing costs negotiable?
4. Will I have to buy private mortgage insurance? If so, how much will it cost, and how long will it be required?
(NOTE: Private mortgage insurance is usually required if your down payment is less than 20 percent. However,
most lenders will let you discontinue PMI when you’ve acquired a certain amount of equity by paying down the loan.)
5. Who will service the loan — your bank or another company?
6. What escrow requirements do you have?
7. How long will this loan be in a lock-in period (in other words, the time that the quoted interest rate will be
honored)? Will I be able to obtain a lower rate if it drops during this period?
8. How long will the loan approval process take?
9. How long will it take to close the loan?
10. Are there any charges or penalties for prepaying the loan?
Used with permission from Real Estate Checklists & Systems, www.realestatechecklists.com
1. What are the most popular mortgages you offer? Why are they so popular?
2. Which type of mortgage plan do you think would be best for me? Why?
3. Are your rates, terms, fees, and closing costs negotiable?
4. Will I have to buy private mortgage insurance? If so, how much will it cost, and how long will it be required?
(NOTE: Private mortgage insurance is usually required if your down payment is less than 20 percent. However,
most lenders will let you discontinue PMI when you’ve acquired a certain amount of equity by paying down the loan.)
5. Who will service the loan — your bank or another company?
6. What escrow requirements do you have?
7. How long will this loan be in a lock-in period (in other words, the time that the quoted interest rate will be
honored)? Will I be able to obtain a lower rate if it drops during this period?
8. How long will the loan approval process take?
9. How long will it take to close the loan?
10. Are there any charges or penalties for prepaying the loan?
Used with permission from Real Estate Checklists & Systems, www.realestatechecklists.com
Budget Basics Worksheet
The first step in getting yourself in financial shape to buy a home is to know exactly how much money comes in
and how much goes out. Use this worksheet to list your income and expenses below.
INCOME ...............................................................................................................
Take Home Pay (all family members) ...................................................................
Child Support/Alimony...........................................................................................
Pension/Social Security.........................................................................................
Disability/Other Insurance.....................................................................................
Interest/Dividends.................................................................................................
Other.....................................................................................................................
Total Income..........................................................................................................
EXPENSES
Rent/Mortgage (include taxes, principal, and insurance) .......................................
Life Insurance.........................................................................................................
Health/Disability Insurance......................................................................................
Vehicle Insurance....................................................................................................
Homeowner’s or Other Insurance............................................................................
Car Payments.........................................................................................................
Other Loan Payments.............................................................................................
Savings/Pension Contribution.................................................................................
Utilities (gas, water, electric, phone).......................................................................
Credit Card Payments.............................................................................................
Car Upkeep (gas, maintenance, etc.)......................................................................
Clothing...................................................................................................................
Personal Care Products (shampoo, cologne, etc.)..................................................
Groceries.................................................................................................................
Food Outside the Home (restaurant meals and carryout)........................................
Medical/Dental/Prescriptions....................................................................................
Household Goods (hardware, lawn, and garden).....................................................
Recreation/Entertainment.........................................................................................
Child Care................................................................................................................
Education (continuing education, classes, etc.).......................................................
Charitable Donations...............................................................................................
Miscellaneous..........................................................................................................
Total Expenses......................................................................................................
Remaining Income After Expenses...........................................................................
(Subtract Total Income from Total Expenses)...........................................................
The first step in getting yourself in financial shape to buy a home is to know exactly how much money comes in
and how much goes out. Use this worksheet to list your income and expenses below.
INCOME ...............................................................................................................
Take Home Pay (all family members) ...................................................................
Child Support/Alimony...........................................................................................
Pension/Social Security.........................................................................................
Disability/Other Insurance.....................................................................................
Interest/Dividends.................................................................................................
Other.....................................................................................................................
Total Income..........................................................................................................
EXPENSES
Rent/Mortgage (include taxes, principal, and insurance) .......................................
Life Insurance.........................................................................................................
Health/Disability Insurance......................................................................................
Vehicle Insurance....................................................................................................
Homeowner’s or Other Insurance............................................................................
Car Payments.........................................................................................................
Other Loan Payments.............................................................................................
Savings/Pension Contribution.................................................................................
Utilities (gas, water, electric, phone).......................................................................
Credit Card Payments.............................................................................................
Car Upkeep (gas, maintenance, etc.)......................................................................
Clothing...................................................................................................................
Personal Care Products (shampoo, cologne, etc.)..................................................
Groceries.................................................................................................................
Food Outside the Home (restaurant meals and carryout)........................................
Medical/Dental/Prescriptions....................................................................................
Household Goods (hardware, lawn, and garden).....................................................
Recreation/Entertainment.........................................................................................
Child Care................................................................................................................
Education (continuing education, classes, etc.).......................................................
Charitable Donations...............................................................................................
Miscellaneous..........................................................................................................
Total Expenses......................................................................................................
Remaining Income After Expenses...........................................................................
(Subtract Total Income from Total Expenses)...........................................................
How Big of a Mortgage Can I Afford?
Not only does owning a home give you a haven for yourself and your family, it also makes great financial sense
because of the tax benefits — which you can’t take advantage of when paying rent.
The following calculation assumes a 28 percent income tax bracket. If your bracket is higher, your savings will be, too.
Based on your current rent, use this calculation to figure out how much mortgage you can afford.
Rent: _________________________
Multiplier: x 1.32
Mortgage payment: _________________________
Because of tax deductions, you can make a mortgage payment — including taxes and insurance — that is
approximately one-third larger than your current rent payment and end up with the same amount of income.
For more help, use Fannie Mae’s online mortgage calculators.
Not only does owning a home give you a haven for yourself and your family, it also makes great financial sense
because of the tax benefits — which you can’t take advantage of when paying rent.
The following calculation assumes a 28 percent income tax bracket. If your bracket is higher, your savings will be, too.
Based on your current rent, use this calculation to figure out how much mortgage you can afford.
Rent: _________________________
Multiplier: x 1.32
Mortgage payment: _________________________
Because of tax deductions, you can make a mortgage payment — including taxes and insurance — that is
approximately one-third larger than your current rent payment and end up with the same amount of income.
For more help, use Fannie Mae’s online mortgage calculators.
Loan Types to Consider
Brush up on these mortgage basics to help you determine the loan that will best suit your needs.
• Mortgage terms. Mortgages are generally available at 15-, 20-, or 30-year terms. In general, the longer the
term, the lower the monthly payment. However, you pay more interest overall if you borrow for a longer term.
• Fixed or adjustable interest rates. A fixed rate allows you to lock in a low rate as long as you hold the
mortgage and, in general, is usually a good choice if interest rates are low. An adjustable-rate mortgage is designed
so that your loan’s interest rate will rise as market interest rates increase. ARMs usually offer a lower rate in the first
years of the mortgage. ARMs also usually have a limit as to how much the interest rate can be increased and how
frequently they can be raised. These types of mortgages are a good choice when fixed interest rates are high or when
you expect your income to grow significantly in the coming years.
• Balloon mortgages. These mortgages offer very low interest rates for a short period of time — often three to
seven years. Payments usually cover only the interest so the principal owed is not reduced. However, this type of loan
may be a good choice if you think you will sell your home in a few years.
• Government-backed loans. These loans are sponsored by agencies such as the Federal Housing
Administration (www.fha.gov) or the Department of Veterans Affairs (www.va.gov) and offer special terms, including
lower down payments or reduced interest rates to qualified buyers.
Slight variations in interest rates, loan amounts, and terms can significantly affect your monthly payment. For help in
determining how much your monthly payment will be for various loan amounts, use Fannie Mae’s online mortgage
calculators.
Brush up on these mortgage basics to help you determine the loan that will best suit your needs.
• Mortgage terms. Mortgages are generally available at 15-, 20-, or 30-year terms. In general, the longer the
term, the lower the monthly payment. However, you pay more interest overall if you borrow for a longer term.
• Fixed or adjustable interest rates. A fixed rate allows you to lock in a low rate as long as you hold the
mortgage and, in general, is usually a good choice if interest rates are low. An adjustable-rate mortgage is designed
so that your loan’s interest rate will rise as market interest rates increase. ARMs usually offer a lower rate in the first
years of the mortgage. ARMs also usually have a limit as to how much the interest rate can be increased and how
frequently they can be raised. These types of mortgages are a good choice when fixed interest rates are high or when
you expect your income to grow significantly in the coming years.
• Balloon mortgages. These mortgages offer very low interest rates for a short period of time — often three to
seven years. Payments usually cover only the interest so the principal owed is not reduced. However, this type of loan
may be a good choice if you think you will sell your home in a few years.
• Government-backed loans. These loans are sponsored by agencies such as the Federal Housing
Administration (www.fha.gov) or the Department of Veterans Affairs (www.va.gov) and offer special terms, including
lower down payments or reduced interest rates to qualified buyers.
Slight variations in interest rates, loan amounts, and terms can significantly affect your monthly payment. For help in
determining how much your monthly payment will be for various loan amounts, use Fannie Mae’s online mortgage
calculators.
Get Your Finances in Order: To-Do List
1. Develop a household budget. Instead of creating a budget of what you’d like to spend, use receipts to create a
budget that reflects your actual spending habits over the last several months. This approach will factor in unexpected
expenses, such as car repairs, as well as predictable costs such as rent, utility bills, and groceries.
2. Reduce your debt. Lenders generally look for a total debt load of no more than 36 percent of income. This figure
includes your mortgage, which typically ranges between 25 and 28 percent of your net household income. So you
need to get monthly payments on the rest of your installment debt — car loans, student loans, and revolving balances
on credit cards — down to between 8 and 10 percent of your net monthly income.
3. Look for ways to save. You probably know how much you spend on rent and utilities, but little expenses add up, too.
Try writing down everything you spend for one month. You’ll probably spot some great ways to save, whether it’s
cutting out that morning trip to Starbucks or eating dinner at home more often.
4. Increase your income. Now’s the time to ask for a raise! If that’s not an option, you may want to consider taking on a
second job to get your income at a level high enough to qualify for the home you want.
5. Save for a down payment. Designate a certain amount of money each month to put away in your savings account.
Although it’s possible to get a mortgage with only 5 percent down, or even less, you can usually get a better rate if you
put down a larger percentage of the total purchase. Aim for a 20 percent down payment.
6. Keep your job. While you don’t need to be in the same job forever to qualify for a home loan, having a job for less
than two years may mean you have to pay a higher interest rate.
7. Establish a good credit history. Get a credit card and make payments by the due date. Do the same for all your
other bills, too. Pay off the entire balance promptly.
1. Develop a household budget. Instead of creating a budget of what you’d like to spend, use receipts to create a
budget that reflects your actual spending habits over the last several months. This approach will factor in unexpected
expenses, such as car repairs, as well as predictable costs such as rent, utility bills, and groceries.
2. Reduce your debt. Lenders generally look for a total debt load of no more than 36 percent of income. This figure
includes your mortgage, which typically ranges between 25 and 28 percent of your net household income. So you
need to get monthly payments on the rest of your installment debt — car loans, student loans, and revolving balances
on credit cards — down to between 8 and 10 percent of your net monthly income.
3. Look for ways to save. You probably know how much you spend on rent and utilities, but little expenses add up, too.
Try writing down everything you spend for one month. You’ll probably spot some great ways to save, whether it’s
cutting out that morning trip to Starbucks or eating dinner at home more often.
4. Increase your income. Now’s the time to ask for a raise! If that’s not an option, you may want to consider taking on a
second job to get your income at a level high enough to qualify for the home you want.
5. Save for a down payment. Designate a certain amount of money each month to put away in your savings account.
Although it’s possible to get a mortgage with only 5 percent down, or even less, you can usually get a better rate if you
put down a larger percentage of the total purchase. Aim for a 20 percent down payment.
6. Keep your job. While you don’t need to be in the same job forever to qualify for a home loan, having a job for less
than two years may mean you have to pay a higher interest rate.
7. Establish a good credit history. Get a credit card and make payments by the due date. Do the same for all your
other bills, too. Pay off the entire balance promptly.
Tax Benefits of Homeownership
The tax deductions you’re eligible to take for mortgage interest and property taxes greatly increase the financial
benefits of homeownership. Here’s how it works.
Assume:
$9,877 = Mortgage interest paid (a loan of $150,000 for 30 years, at 7 percent, using year-five interest)
$2,700 = Property taxes (at 1.5 percent on $180,000 assessed value)
______
$12,577 = Total deduction
Then, multiply your total deduction by your tax rate.
For example, at a 28 percent tax rate: 12,577 x 0.28 = $3,521.56
$3,521.56 = Amount you have lowered your federal income tax (at 28 percent tax rate)
Note: Mortgage interest may not be deductible on loans over $1.1 million. In addition, deductions are decreased
when total income reaches a certain level.
The tax deductions you’re eligible to take for mortgage interest and property taxes greatly increase the financial
benefits of homeownership. Here’s how it works.
Assume:
$9,877 = Mortgage interest paid (a loan of $150,000 for 30 years, at 7 percent, using year-five interest)
$2,700 = Property taxes (at 1.5 percent on $180,000 assessed value)
______
$12,577 = Total deduction
Then, multiply your total deduction by your tax rate.
For example, at a 28 percent tax rate: 12,577 x 0.28 = $3,521.56
$3,521.56 = Amount you have lowered your federal income tax (at 28 percent tax rate)
Note: Mortgage interest may not be deductible on loans over $1.1 million. In addition, deductions are decreased
when total income reaches a certain level.
CENTURY 21 Court Square Realty
Closing Documents You Should Keep
On closing day, expect to sign a lot of documents and walk away with a big stack of papers. Here’s a list of the most
important documents you should file away for future reference.
• HUD-1 settlement statement. Itemizes all the costs — commissions, loan fees, points, and hazard insurance —
associated with the closing. You’ll need it for income tax purposes if you paid points.
• Truth in Lending statement. Summarizes the terms of your mortgage loan, including the annual percentage rate
and recision period.
• Mortgage and note. Spell out the legal terms of your mortgage obligation and the agreed-upon repayment terms.
• Deed. Transfers ownership to you.
• Affidavits. Binding statements by either party. For example, the sellers will often sign an affidavit stating that they
haven’t incurred any liens.
• Riders. Amendments to the sales contract that affect your rights. Example: The sellers won’t move out until two
weeks after closing but will pay rent to the buyers during that period.
• Insurance policies. Provide a record and proof of your coverage.
Sources: Credit Union National Association; Mortgage Bankers Association; Home-Buyer’s Guide (Real Estate Center at
Texas A&M, 2000)
Closing Documents You Should Keep
On closing day, expect to sign a lot of documents and walk away with a big stack of papers. Here’s a list of the most
important documents you should file away for future reference.
• HUD-1 settlement statement. Itemizes all the costs — commissions, loan fees, points, and hazard insurance —
associated with the closing. You’ll need it for income tax purposes if you paid points.
• Truth in Lending statement. Summarizes the terms of your mortgage loan, including the annual percentage rate
and recision period.
• Mortgage and note. Spell out the legal terms of your mortgage obligation and the agreed-upon repayment terms.
• Deed. Transfers ownership to you.
• Affidavits. Binding statements by either party. For example, the sellers will often sign an affidavit stating that they
haven’t incurred any liens.
• Riders. Amendments to the sales contract that affect your rights. Example: The sellers won’t move out until two
weeks after closing but will pay rent to the buyers during that period.
• Insurance policies. Provide a record and proof of your coverage.
Sources: Credit Union National Association; Mortgage Bankers Association; Home-Buyer’s Guide (Real Estate Center at
Texas A&M, 2000)
Common Closing Costs for Buyers
You’ll likely be responsible for a variety of fees and expenses that you and the seller will have to pay at the time of closing. Your
lender must provide a good-faith estimate of all settlement costs. The title company or other entity conducting the closing will tell you
the required amount for:
• Down payment
• Loan origination
• Points, or loan discount fees, which you pay to receive a lower interest rate
• Home inspection
• Appraisal
• Credit report
• Private mortgage insurance premium
• Insurance escrow for homeowner’s insurance, if being paid as part of the mortgage
• Property tax escrow, if being paid as part of the mortgage. Lenders keep funds for taxes and insurance in escrow accounts as
they are paid with the mortgage, then pay the insurance or taxes for you.
• Deed recording
• Title insurance policy premiums
• Land survey
• Notary fees
• Prorations for your share of costs, such as utility bills and property taxes
A Note About Prorations: Because such costs are usually paid on either a monthly or yearly basis, you might have to pay a bill for
services used by the sellers before they moved. Proration is a way for the sellers to pay you back or for you to pay them for bills they
may have paid in advance. For example, the gas company usually sends a bill each month for the gas used during the previous
month. But assume you buy the home on the 6th of the month. You would owe the gas company for only the days from the 6th to the
end for the month. The seller would owe for the first five days. The bill would be prorated for the number of days in the month, and
then each person would be responsible for the days of his or her ownership.
You’ll likely be responsible for a variety of fees and expenses that you and the seller will have to pay at the time of closing. Your
lender must provide a good-faith estimate of all settlement costs. The title company or other entity conducting the closing will tell you
the required amount for:
• Down payment
• Loan origination
• Points, or loan discount fees, which you pay to receive a lower interest rate
• Home inspection
• Appraisal
• Credit report
• Private mortgage insurance premium
• Insurance escrow for homeowner’s insurance, if being paid as part of the mortgage
• Property tax escrow, if being paid as part of the mortgage. Lenders keep funds for taxes and insurance in escrow accounts as
they are paid with the mortgage, then pay the insurance or taxes for you.
• Deed recording
• Title insurance policy premiums
• Land survey
• Notary fees
• Prorations for your share of costs, such as utility bills and property taxes
A Note About Prorations: Because such costs are usually paid on either a monthly or yearly basis, you might have to pay a bill for
services used by the sellers before they moved. Proration is a way for the sellers to pay you back or for you to pay them for bills they
may have paid in advance. For example, the gas company usually sends a bill each month for the gas used during the previous
month. But assume you buy the home on the 6th of the month. You would owe the gas company for only the days from the 6th to the
end for the month. The seller would owe for the first five days. The bill would be prorated for the number of days in the month, and
then each person would be responsible for the days of his or her ownership.
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| The information provided herein is supplied by several sources and is subject to change without notice. Niza Rodriguez does not guarantee or is any way responsible for its accuracy, and provides said information without warranties of any kind, either express or implied. 2009 Niza Rodriguez All Rights Reserved. |
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