Articles   Things to know when buying a home by the members of the Real Estate Team This article is designed to help new home buyers understand the steps involved and the terms associated with the purchase of a new home. Whenever you have a question it is best to discuss issues with your realtor or attorney. Pre-qualification for a mortgage A mortgage lender can pre-qualify or pre-approve a potential buyer for a mortgage up to a specific amount based on the buyer’s financial information. A potential buyer who can show the seller and/or the realtor that he/she has been pre-qualified for financing might be preferred. It should be noted that a pre-qualification or pre-approval are not final mortgage commitments. Binder (or Memorandum of Sale) A Binder, also referred to as Memorandum of Sale, is a document presented by the buyers’ realtor to outline an offer. It customarily includes information like the names of the sellers and the buyers, their attorneys, the purchase price, proposed closing date, any contingencies, including mortgage contingency date, if applicable, inclusions and exclusions, and any inspections required. The general purpose of a Binder or Memorandum is to confirm the agreed terms and provide information to all parties including the sellers’ attorney who will prepare a contract for delivery to buyers’ attorney. Please be aware that a Binder or Memorandum of Sale may be considered a legally binding contract. Contract The contract is a formal agreement describing the terms and conditions of a sale in greater specificity with protections for the buyers’ and the sellers’ legal rights. It is typically drawn up by the sellers’ attorney and revised by the purchasers’ attorney. The final contract should include any negotiated items. Mortgage Contingency A mortgage contingency clause in the contract allows the purchasers to terminate the deal without penalty if they cannot secure a mortgage commitment by a specific date. There may be a small fee of $250 to $350 payable by the purchasers for the sellers’ preparation of the contract. Down payment It is customary in this area of the country to pay 1% of the purchase price when making the offer and to pay an additional 9% at signing of the contract. Generally, the deposit checks can be personal. The disposition of the down payment should be discussed with your attorney. Timing Once an offer is made there are no specific requirements as to when a seller must respond, though it may be spelled out in the binder or memorandum. Once an offer is accepted, a contract is drawn up and signed by both parties. The date for closing is mutually agreed upon between buyers and sellers. Scheduling building inspection Building inspections, including but not limited to radon, septic, pest, lead, potable water, and mold, should be completed before the final contract is signed. If significant problems are found, the parties will need to resolve appropriate remedies or a contingency for satisfactory results should be included in the contract. Wetlands and coastal area issues Special regulatory restrictions may apply to property located near wetlands and coastal areas. It is beneficial to obtain copies of any property survey the seller might have in his/her possession. Zoning regulations Considering that many buyers plan to make improvements to their newly acquired home, information about the zoning regulations that apply to the property should be obtained. Your attorney can provide additional information. Additional adjustments at closing Adjustments for real estate taxes, sewer assessments and service, water, oil and propane are included in closing costs. Title insurance The buyers and mortgage lenders protect their investment through Title Insurance. The premium is based on the purchase price of the home. The buyers’ attorney acts as agent for the title insurance company and prepares the appropriate policy for the property. All lenders require that borrowers provide them with a Loan Policy of Title Insurance covering the amount of the mortgage. Before closing Before closing the buyers will need to set up homeowners insurance (and flood insurance, if appropriate) and obtain an official bank check for the balance of the purchase price not covered by the mortgage and down-payment. The buyers’ attorney will receive the final mortgage proceeds from the lender. Check with your attorney on whether other closing costs can be paid with a personal check. Buyers should also call the electric company and other utilities in advance to start service on the day of closing. Final Walk-Through After the sellers vacate the premises, the buyers will conduct a final walk-through before the closing with the realtor to make sure that the property is in the same condition as it was when the offer to purchase was made or building inspection was completed. The Closing The closing customarily takes place at the sellers’ attorney’s office on the date agreed to in the contract. The mortgage documents, if any, are signed, the balance of the purchase price and closing costs are paid and the deed is transferred. The deed will be recorded at the town clerk’s office by the purchaser’s attorney. ENJOY YOUR NEW HOME! ___________________________________________________ This pamphlet is not intended as legal advice. We encourage you to consult with your attorney in connection with any real estate decision.