First Home Buying

On the date specified in your contract, you will go through the necessary procedures for the transfer of ownership to take place. The time of closing will be set in advance as a time that is mutually agreeable by you, the seller, the title company, and both real estate agents, if applicable.

The HUD-1

Prior to the closing date you should receive a form from your lender called a HUD-1. This is the standard form issued by the Department of Housing and Urban Development for closings. It itemizes each charge and credit for both buyer and seller, so you can see a complete listing of your total cost at closing. The amount of your down payment, plus fees and closing costs, less any credits or items paid outside of closing (POC), will total the amount you need to bring to the closing table.

The total amount must be provided in certified funds, meaning that the check you bring must be guaranteed by your bank to clear. Your bank can provide you with a certified check for this purpose; simply tell them that you are closing on a home and they will make one up for you, usually as long as you have the ability to withdraw sufficient funds from an account you have with them.

I recommend taking along a zippered bag or other sealable case in which to put the certified check. You’ll essentially be carrying around a slip of paper that is worth large sum of money, so it would be less than wise to simply shove it into your pocket or hold it in hand.

The Home Warranty

It’s always a good idea to have a home warranty. This can either be purchased by you, or you may have to ask the seller to do so if they do not offer. There are a number of companies that provide home warranty plans, so it’s a good idea to do your research and choose the one you think will keep you most heavily covered. Generally, a homeowners warranty keeps you from having to worry about mechanical failures of certain appliances and fixtures within the household for the first year after you purchase the residence. Certain warranty plans may have a deductible amount that you’ll need to pay on each claim, but this is always much better than taking the brunt of any costly repair bills that may come up. Check out different home warranty companies and see what each one offers before you make a decision.

The Walk-Through

Schedule a time in advance of the closing, either on the day-of or in the days preceeding, to visit the property with your real estate agent and do a final check to make sure that everything is as it should be. The closer you do this to the actual title transfer the better, and in fact it is often done immediately before going to the closing table.

You should do your own thorough inspection to make sure that no unexpected changes have been made since the last time you were at the property, that all appliances and fixtures expected to be in working order are indeed functional, and that any repairs or work done on the property that was specified as part of the sales contract have been made. This is meant as a more surface re-checking of many of the things the home inspector looked at earlier, simply to make sure that everything is in proper condition.

If the utilities were not all active during the home inspection, talk to your real estate agent about having them turned on for the walk-through. This will be important for making sure that you have proper running water and water pressure, proper electrical power to fixtures like lights and ceiling fans, and the correct condition for appliances fueled by natural gas such as flame cooktops.

The information below does not constitute an all-encompassing checklist, but you should use it in consideration of the kinds of things to think about as you do your walk-through.

Walk-Through Checklist

Appliances

• Dishwasher
• Washer / Dryer
• Refrigerator / Freezer
• Stove / Cooktop
• Disposal
• Trash Compactor
• Window A/C Unit
• Humidifier / Dehumidifier
• Heating & Cooling System
• Water Softener
• Air Cleaner
• Sump Pump
• Well Pump
• Septic System
• Hot Water Heater

Water

• Sinks / Faucets (Kitchen and Bathrooms)
• Toilets

Structure

• Floors
• Walls
• Windows
• Ceilings
• Closets
• Roof
• Gutters
• Attic
• Foundation
• Deck / Patio / Porch
• Garage
• Basement / Crawl Space
• Shed
• Fireplace

Electrical

• Lights
• Ceiling Fans
• Smoke Detector(s)
• Carbon Monoxide Detector(s)
• Outlets / Jacks

The Closing Table

As long as you are satisfied with the condition of the property, you are ready to go to closing. You’ll meet at the title company’s office and be presented with the HUD-1 and a pile of forms to sign and/or initial. It should be a similar experience to when you made up your sales contract with the realtor, except that it will be the closing agent who explains each page to you before you sign it.

There are a variety of different forms used depending on your state, loan type, and many other factors, so no comprehensive list exists to cover every possible case. Just pay close attention to what the closing agent tells you, try not to be so excited about your new home that you fail to understand each document, and relax so that you can take time to enjoy the experience and absorb what is going on around you. After all, this may not be the only home you ever buy!

After Closing

Make sure to get door keys and any other items necessary for the physical transfer to take place, and thank the seller, your real estate agent, and the closing agent for their time. In certain instances the seller may not be present at closing as they may have chosen to close at the office of a personal attorney, but regardless of the circumstances it is important to let all parties present know that you appreciate it if they’ve been helpful and behaved professionally, and most importantly, thank them for taking your money. Only kidding. Just wanted to see if you were paying attention. Now go enjoy your new home!

Virtually anytime you take out a loan, you’re going to have to pay some kind of closing costs. These fees are things that go toward paying the various professionals who perform services associated with the loan.

In the case of a mortgage loan there are many types of closing costs and fees that you will need to bring to the table in addition to your down payment.

Insurance

Home insurance may be included in your outlay at closing because the policy for your new home must normally be paid in full for a year’s worth of coverage in order for you to be protected if anything goes wrong from here on out.

You may also have to pay part of your mortgage insurance, if applicable.

Title Fees

These include your title search and examination fees, which pays the title company to research the property and make sure the title is free and clear. They will look for any liens, which are obligations placed on a property for things such as unpaid contractor work done to improve the property. The way the law works, liens are put on the property in question rather than its owner, which means that when a title transfers from one party to another, so do any liens currently on the title.

A title insurance fee covers you in the event that there is a lien on the property that was not found during the title search.

Loan Origination Fee

The Loan Origination Fee is a fancy term for how your loan officer gets paid. You may also be charged for the credit report the loan officer had to pull for you before she could pre-approve you for the loan in the first place.

Document Preparation Fees

The title company may charge additional fees to cover their costs in preparing the necessary paperwork to transfer the title, including notes or deeds.

Notary Fee

A notary public is someone who holds a license which allows them to personally vouch for signatures on a legal document. A notary must be present to witness the signing of some or all of the documents involved and thereby make official the fact that each signature belongs to the person it represents. You will be charged a fee for this service as part of your closing costs.

Attorney’s Fees

In cases where there are documents that need to be reviewed by legal professionals, this service is charged a fee as well.

Recording Fees

These are a paid service of the locality in which the property is located, and include the cost of the local clerk’s or government office’s recording the mortgage, the new deed, local and state tax stamps, and transfer taxes on the title.

Taxes

Based on the day of the year the closing date falls on, taxes will be worked out with the seller paying any unpaid amount from the start of the year until now, and you paying the remainder for the year.

POC

Any procedures performed such as the appraisal, the land survey, and the home inspection are noted and their costs included, unless you’ve already paid for them in which case they are marked POC (paid outside closing). You may also have the option to have other tests completed such as a pest inspection, lead-based paint inspection, or asbestos and radon testing.

At some point before your closing date, you should choose a title company to handle the proceedings. A title company is a legal firm that deals specifically with the transfer of title, or ownership, from one party to another. This is something your agent can usually help you with; unless you work in a field where you use title companies frequently, chances are you may not have a particular firm in mind.

Ownership

Before the date of closing, the title company should ask you what type of ownership you wish to take of the property, and may provide you with a list of those most common in your state or jurisdiction. Some of the more common types are listed below.

Sole Ownership

If you are purchasing real estate by yourself and the deed or trust will be in your name alone, you will be taking sole ownership of the property.

Joint Tenancy

The most common type of tenancy agreement between two or more individuals with equal interest in the property. Each individual shares the same rights of use and possession, and if any individual becomes deceased that person’s ownership passes in equal amounts to the remaining owners.

Tenancy in the Entirety

A specific kind of joint tenancy reserved for husbands and wives, where each spouse owns exactly half of the property. Neither spouse may sell or otherwise transfer his or her part of ownership without the other’s permission.

Tenancy in Common

Similar to joint tenancy, where multiple individuals own a piece of property, except that the ownership is not in equal measure; certain people may own a greater share of the real estate than others included in the tenancy.

Community Property

An additional kind of ownership between married people; the difference between community property ownership and tenancy in the entirety is that each spouse has the right to do with his or her half what he or she pleases without the consent of the other.

Many companies who offer auto insurance also provide other types of coverage including home protection plans. Your insurance company if you currently have renter’s insurance or any other type of coverage can tell you if they offer homeowners’ coverage as well.

About the Home

When you speak with a customer service representative from your prospective home insurance provider, they will ask you several questions about the property. As with your mortgage, you should shop around with a few different insurance companies to see who offers the best rates and the amount of coverage you need.

Be prepared to answer some or all of the following questions. The insurance company will apply the answers to an algorithm or formula in order to generate a rate estimate for you. Generally each status or range from something they ask you will be applied to a graduated scale specifying the amount of the coverage charge for that specific aspect of the home. For example, if your home is 32 years old it might cost a base rate of $200 to insure, whereas its base rate may have been only $179 if it were 29 years old.

Homeowners Insurance – Sample Questionnaire

• What is the address?
• In what year was the home built?
• Is the home a single family, townhouse, or condominium?
• What is the approximate square footage of the home?
• What is the approximate acreage of the land?
• How many stories tall is the home?
• How many bedrooms and bathrooms are there?
• What type of construction and foundation does the home have? (concrete slab, siding, wood frame, cinderblock, etc.)
• Are there any separate detached buildings on the property such as a detached garage or storage shed?
• Is there a basement in the home?
• Approximately what percentage of the basement is finished?
• Is there a deck off of the house?
• Is there a swimming pool?
• Does the home have any fireplaces or wood stoves?
• What style and material is the roof made out of?
• Approximately how long ago was the roof last replaced?
• What kinds of heating and cooling systems are installed? (heat pump, furnace, window a/c, etc.)
• What types of flooring is installed throughout the main areas of the home? (tile, carpet, hardwood, etc.)
• Approximately how long ago were the heating and cooling systems replaced?
• Which type(s) of power does the home use? (electric, natural gas, solar, etc.)
• Approximately how long ago were the power and utilities systems updated? (plumbing, electrical, etc.)
• Does the home have fuses or circuit breakers?
• Are deadbolts installed on each of the exterior doors?
• Do you have any pets?
• Are there smoke detectors, fire extinguishers, and/or sprinklers inside the home?
• Is a home security system installed?
• What is the approximate current market value or the sales price?

After you’ve answered all or most of the questions to the satisfaction of the insurance company, the representative will wave their magic wand and provide you with an insurance quote. Jot down this number and thank them for their time. Go look elsewhere to compare this rate with two or three other companies, and then make your decision.

As part of the quote, the representative should talk to you about their levels of coverage, including how much they estimate the cost would be to rebuild the home in the event that it was destroyed by fire, flood or other disaster. Many companies also offer optional coverage for valuables within the home such as jewelry and furs, and you may also be able to have a detached shed or garage covered at a small additional cost.

Questions asked of you may or may not include those on the preceeding list and there may be some questions that are not included above at all. Use this list as a guide and make sure you know many or all of these key facts about your first home buying goal before you talk to an insurance representative.

As part of the transfer of ownership, you’ll usually need to get an up-to-date survey of the subdivided land in the parcel. Surveying only needs to be done in a fee simple or similar transaction where there is subdivided land involved. Condominium ownership typically does not include land for personal use, and therefore measurement of the parcel is not required. A land survey costs a few hundred dollars, and takes anywhere from an hour to several hours depending on the size of the lot and the number of unique features it contains.

Land surveying and development is a skillset that will never go out of style as long as real property is owned by individuals. Since our society no longer ascribes to the belief that all things should be shared by everyone like Native Americans believed, we will always have a reason to “mark our territory,” and that is essentially what the surveying process does. Surveying companies are continually taking advantage of updates in technology, so newer tools used by surveyors are allowing them to take faster and more accurate measurements of a property’s boundary lines and terrain features.

The Plat

The result of a good land survey is a precise plat – a scale, top-down map of the parcel showing its exact placement on the earth; its geographic location, length, width, area, and elevation. Man-made structures must be outlined, described, and measured, so the plat could be used by anyone coming onto the property to do work or find an object. The finished page looks similar to a blueprint, except that it does not go into three-dimensional depth or sideways views of any structure or terrain element.

The plat is also useful when it comes time to make improvements to your property. When you want to put in your white picket fence and the swing set in the backyard, you have to make sure those objects stay on your property and are not placed in your neighbors’ yard or on municipal lands.