Offer to purchase – You’ve found a home you’d like to buy – to ‘hold’ it, sign an Offer To Purchase and put approximately $1,000 down.
Home Inspection – It’s a wise idea to have the home inspected (approximately $500. Both inside and outside is checked for any issues that need repair: insulation, heating/AC, roof, appliances, plumbing, etc,… You’re informed of anything that may be a cost issue for you. If repairs will be costly, now is the time to back out, or have – in writing – that the owner will pay for the repairs. If you back out, your Offer to Purchase money is returned in full.
Down Payment – This along with the Offer to Purchase money, totaling (usually 20%), is now your Down Payment….It cannot be refunded. If you are at this step, you’re buying the home. If you back out, the seller gets the down payment to keep.
Closing Costs – Depending on the cost of the home, closing costs usually run around $5,000. more or less. These are costs for Registry of Deeds, R.E. Lawyer, Title Search and incidentals related to the closing of the property.
Homestead Act – Important to get at the time of closing. The cost is $35. for $300,000. coverage in the event that you are sued up to that amount. Let your lawyer know beforehand, and remind him/her again before the closing, that you want to get it, and have the $35. to give the lawyer at that time, It’s also done at the Registry of Deeds, and is more than worth the charge. It’s an important document, keep it safe.
Interest Rate – Choose a fixed over a variable. Fixed stays the same, and you know what your paying all along. A varied changes, sometimes dramatically, and can raise the mortgage payments. If your Credit Score is high, you can get a lower (1/4 – 1/2%) rate.
PITI – Principal, Interest, R.E. Taxes, Insurance – Your mortgage will equal these four items… Principal and Interest is the part of the figure which is the actual mortgage figure reducing your loan. Real Estate Taxes and Insurance are a part of the total figure, but held by the lender and they pay the taxes and insurance from the money held (escrow), when these bills become due. Taxes and Insurance may change occasionally. The principal and interest figure remain the same, and each payment reduces the loan.
Mortgage Insurance – protects the lender if you default on your mortgage payments…it does not protect you. If you put a down payment of 20% or more, you don’t have to buy/pay for this. But… any less than 20% down, means you must get Mortgage Insurance and make payments to it, until 20% of the cost of your home is paid. Try not to do this. Put 20% or more down. The more money you put down, the less the mortgage payment each month.
Condo Fees – If you purchased a free standing home, you don’t have condo fees. If you purchased a condo, the condo association charges fees for maintenance and upkeep of the building and land. These are in addition to and separate from any mortgage related costs
Equity – principal and interest are paid either monthly or bi-weekly. In the beginning of the loan, you’re paying almost all interest, and very little principal. Each month, a bit more of the principal is paid and a bit less of the interest — over time, the principal outweighs the interest. When the loan is paid in full, and the home is sold, the amount of principal is yours, if it’s sold for more than you paid, the difference is yours too minus closing costs. Equity is sort of a savings account for you. It’s the best reason over renting (with rent, you pay it, it’s all gone). with buying, the principal paid comes back to you when sold.
Escrow – The ‘name’ of the account held by the lender holding the taxes and insurance part of your mortgage payment until the payments are due – they’re paid from that account by the lender, who will let you know the taxes and insurance have been paid.
