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Tips for Buyers

Common Closing Costs for Buyers

A Note About Prorations

What to Keep From Your Closing

10 Things a Lender Needs From You

Information About Lead Hazards
(PDF, 676K)

Tips for Buyers

• Find a Realtor and choose a neighborhood

• Choose a lender for pre approval. The lender will help you choose the right mortgage for you

• Review homes list with your Realtor and view selected homes

• Choose a home and make an offer. Your Realtor can help you make the right offer by reviewing recent solds in the area

• You will neet to write two checks to accompany the offer, one made out to the title company for the earnest money and one made out to the seller for the option period

• With your Realtors help, negotiate the terms of the contract

• The contract will be taken to the Title company when the terms are agreed upon by all parties

• Arrange for home inspection and pest inspection. It is a good idea to attend the inspection

• Negotiate any repairs, if needed arrange for home insurance

• You will receive a commitment of title insurance from the title company. Be sure to review this document. The title company can answer questions you may have about this document.

• You will receive the HUD closing statement right before closing. Be sure to review this document with your Realtor to make sure all of the charges are correct before closing

• The day of closing you will need to bring your license and a cashiers check for the amount on the closing statement.

• Congratulations! The house is yours and it's time to move in.

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Common Closing Costs for Buyers

The lender must disclose a good faith estimate of all settlement costs. A check to cover your closing costs will probably have to be a cashier's check. The title company or other entity conducting the closing will tell you the required amount for:

* Downpayment.
* Loan origination fees.
* Points, or loan discount fees you pay to receive a lower interest rate.
* Appraisal fee.
* Credit report.
* Private mortgage insurance premium.
* Insurance escrow for homeowners 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 fees.
* Title insurance policy premiums.
* Survey.
* Inspection fees, building inspection, termites, etc.
* Notary fees.
* Prorations for your share of costs such as utility bills and property taxes.

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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 5 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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What to Keep From Your Closing

* The Real Estate Settlement Procedures Act (RESPA) statement. This form, sometimes called a HUD 1 statement, itemizes all the costs associated with the closing. You'll need for income tax purposes and when you sell the home.

* The Truth in Lending Statement summarizes the terms of your mortgage loan.

* The mortgage and the note (two pieces of paper) spell out the legal terms of your mortgage obligation and the agreed-upon repayment terms.

* The deed transfers ownership of the property to you.

* Affidavits swearing to various statements by either party. For example, the sellers will often sign an affidavit stating that they have not incurred any liens on the property.

* Riders are amendments to the sales contract that affect your rights. For example, if you buy a condominium, you may have a rider outline the condo associationís rules and restrictions.

* Insurance policies provide a record and proof of your coverage.

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10 Things a Lender Needs From You

1. 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.

2. Copies of at least one pay stub for every person signing the loan.

3. Copies of two to four months of bank or credit union statements for both checking and savings accounts.

4. Copies of personal tax forms for the last two to three years.

5. Copies of brokerage account statements for two to four months, as well as a list of any other major assets of value, e.g., a boat, RV, or stocks or bonds not held in a brokerage account.

6. Copies of your most recent 401(k) or other retirement account statement.

7. Documentation to verify additional income, such as child support or a pension.

8. Account numbers of all your credit cards and the amounts of any outstanding balances.

9. Lender, loan number, and amount owed on other installment loans, such as student loans and car loans.

10. Addresses where you have lived for the last five to seven years, with names of landlords if appropriate.

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