Buying houses {buying house} {house buying} has many steps.
checklist
Before buying a house, check smells, sidewalks, roads, and traffic at rush hour and at other hours. Check noise inside and outside at rush hour and at other hours. Check natural light in rooms. Check heating and cooling type. Check stove and other appliance type. Check drawer, closet, and storage-room number. Check rug quality and cleanness. Check faucet noise and flow. Check leaks in pipes and faucets. Check toilets for seating comfort, drips, and noises. Check refrigerator size and type. Check handles and lights. Check doors and locks for fit and opening ease. Check doors for dead bolts. Check neighbor lifestyles, travel patterns, and nearness. Check termite or insect damage. Check inside walls for damage. Check brick cavity wall. Check insulation. Check roof for damage. Check upstairs and downstairs. Check stairs for creaks and damage. Check parking space location and size.
costs
Before buying, decide how much to pay for down payment, deposit, and monthly payment, including utilities, insurance, and taxes. Monthly payments for principal, interest, utilities, insurance, and taxes should not be more than 33% of family monthly income. Principal and interest monthly payment should not be more than 25% of family monthly income. Yearly home maintenance costs are typically 1% to 2% of home price. House price should not be more than two times family yearly income. Do not buy a house priced higher than average house in neighborhood. Check with banks, savings and loans, credit unions, mortgage brokers, and real estate agents.
search
Obtain financing. Then look for a house that has required features, using Internet, newspaper, real-estate agents, friends, and relatives. Most important is neighborhood, followed by school quality, average neighbor income, utilities, house appearance, crime rate, earthquake zone, and flood zone. Take time. List homes liked, with owner's name, price, utilities and other costs, location, and features. Try to buy in fall and winter. Try to buy a house that is among the cheaper houses in the best affordable neighborhood. Try to get a warranty, for new or old homes (ERA).
move-in costs
People typically spend 10% of house price to furnish it and fix it up {move-in cost}.
Owners can sell, using a purchase contract and following contract law, or agents {real estate broker} {real estate agent} specializing in selling real estate can try to find buyers.
Agent and owner define price and conditions, under which agent gets a commission {listing}.
types
Owners can offer a commission to any agent that sells house {open listing}. Only one agent can have right to sell a house {exclusive listing}. Owners can keep right to sell house, and then agent gets nothing {exclusive agency}. Agents can have guaranteed commission if house sells {exclusive right to sell}. Agents can ask other agents to find buyers {multiple listing}. Then both agents split commission.
period
Listing period is typically 60 or 90 days. Listing contracts automatically extend, unless you notify agent in writing.
To qualify for a mortgage, a qualified appraiser must estimate house value {appraisal}.
Written standard contracts {sales contract, house} can state house condition, conditions for selling or buying, guarantees, and payment method. Contract lists all items accompanying house. It has street address, lot number, section number, land legal description copied from official records, and official-record reference. It lists full names, date, price, and payment terms. It can have contingency clauses. It requires seller to give buyer guarantee that title is valid {general warranty deed}. It specifies that all actions will finish by a date {closing date} {settlement date} or in 30 or 60 days. It states who must pay transfer fees, state revenue stamps, prorated tax, water service fee, sewer service fee, heating, oil, insurance, and other costs {closing costs, contract} until closing date.
financing
It requires a deposit. Buyer must find financing, or contract is void and seller returns deposit.
Mortgages typically do not cover entire property cost, so buyer pays 5% to 20% {down payment} of price. Deposit counts toward down payment. Buyer pays down payment to escrow.
Parties give legal documents and money to a third party {escrow, house}, such as a title company,, who gathers all approvals, money, and documents for closing.
Buying a house has a final step {closing house sale}.
process
Lender's representative {closer} records deed and mortgage at county courthouse, gets title insurance in new owner's name, and mails document to buyer. Seller gets last payment from closer after recording deed and finishing financing arrangements. By closing or settlement date, financing, title search, title insurance, and deed are ready for execution and delivery to new owner.
After meeting all requirements, third party gives escrow documents and moneys to parties. At closing, parties correct defects in title. A statement {closing statement} lists transaction costs and determines income-tax deductions, rented-property depreciation, and capital gains.
Finally, sellers sign deed {execute deed} and deliver it to buyers, along with keys and copies of services and public utilities. Closing takes one hour. House sells when seller receives money and title transfers to buyer. Moneys {closing costs, housing loan} include down payment, loan amount, document fees, loan broker fees, title insurance, tax settlements, and other adjustments.
fees
Fees can be for loans, prorated taxes, credit reports, title reports, and title searches.
If an authorized agent finds a person that is ready, willing, and able to buy a house, seller must pay a fee or percentage {commission}.
House liens {mortgage} can be security for loans to buy houses. House buyers {mortgagor} pay moneylenders {mortgagee}. Mortgages have an indebtedness note and a property lien for debt security. Not making payments {default} cancels mortgage. Lenders have right to dispose of property by foreclosure, under court supervision, to recover lent money. Foreclosure proceedings have statutes.
types
Liens can have primacy {first mortgage}. Mortgages {open-end mortgage} can allow borrowing money in future without rewriting mortgage. Mortgages {packaged mortgage} can include household appliances, furniture, carpeting, and finance charges. Mortgages {construction mortgage} {home improvement mortgage} can require lender to pay costs to builder as construction stages complete. Mortgages {purchase money mortgage} {vendor's lien} can require purchaser to pay seller directly over a number of years.
title
States can give mortgagee title to property, but title cannot transfer until mortgagor completes payments and gains title {common law title theory of mortgage}. Most states give mortgagor title. For defaults, mortgagee has a property lien and right of foreclosure {lien theory}.
time
Loan length is typically 15 or 30 years.
insurance
Lender can require private mortgage insurance (PMI), to repay loan in case of job loss or other problem. Federal Housing Authority (FHA) and Veterans Administration (VA) can guarantee mortgages.
taxes
Mortgage interest payments are deductible from federal and state income tax.
Fixed or increasing monthly or semi-monthly payments reduce principal owed {amortization}|. If payments are constant, people pay off principal slowly at first, because payment is mostly interest.
Houses have value {equity, house}| above remaining principal owed on loan.
Lenders can pay real-estate taxes from accounts {escrow account}|. Lenders can pay monthly insurance fees {private mortgage insurance} (PMI), to insure loan payments, from escrow accounts. Monthly payments to lenders include these extra fees.
Lenders have right to dispose of property {foreclosure, house}|, under court supervision, to get back lent money. Foreclosure proceedings have statute laws.
Mortgages typically have a fee {point, mortgage}| to lender, which can be 1% or more, for originating mortgage and paper work, charged at closing.
Mortgages can allow paying off mortgage early {prepayment clause}.
Buyers can obtain second loans {second mortgage} on real property. Second mortgages are risky to lender, because first-mortgage mortgagee has first right to money. People can obtain second mortgages if borrower's credit is excellent or real-property value is more than both mortgages together. Second mortgages have higher interest rates.
County governments record that house and property real estate belong to someone {title} {deed to property}. Loan companies hold deeds until people pay off loans. Land ownership means having marketable certificate of ownership to land. Marketable title has value, which can have a guarantee {title insurance} that title has no legal defects and that requires company to go to court to defend title against unfounded claims. Real-estate transfers require title insurance. Title has a clear succession of landowners.
Before title transfer, people check official land records {title search} to find previous title owners, transactions involving the land, and unpaid taxes, to establish marketable title and to obtain needed releases. Independent abstract companies make title searches and write abstracts or digests of property histories. Title searches state opinion on title marketability, with releases and other legal proceedings.
Previous or apparent real property owners can relinquish all interest in property {release of property} {property release}.
Recording property history {abstract, title} {title abstract} ensures property ownership, location, and nature.
Title searches check past property ownership, to ensure that seller has full title {clear title} to land and house.
full ownership {fee simple}|.
Seller or owner can abandon rights to real property {quitclaim deed}.
States can give title {trust deed} {deed of trust} to trustee, who has no interest in the land or in either party. Trustee holds title for lender's benefit and forecloses if default.
Deeds {warranty deed} can say seller will defend title against other claims.
7-Legal Affairs-Property-Housing
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Date Modified: 2022.0225