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"We were nervous and insecure about finding and purchasing our first home, but Nancy's confidence that we would find exactly what we were looking for made the search a genuinely exciting experience."
Letty D. & Brad H.
Chicago, IL
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1. As a BUYER, what expenses can I expect to incur?
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Loan Origination Fee / Appraisal Fee (approximately $250 - $300) |
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Professional Home Inspection (varies based on property. Condos are in the $250 range) |
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Recording and Document Fees |
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Title Charge |
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Balance of Down Payment |
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City Transfer Stamps ($7.50 per $1,000) |
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Attorney Fees (varies but are around $450 - $500) |
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Pre-paid interest and other Loan Charges |
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Paid-Up Homeowners Policy. |
Note: These are usual & customary charges and this list is not necessarily all inclusive
2. Who Represents the Buyer and the Seller?
The law in Illinois is very clear in that the real estate agent represents the interest of the party they bring to the contract. That is, your real estate agent represents your interest in helping you obtain the best possible terms in buying or selling a property. There are some instances when a client may wish to purchase real estate that is listed by their agent. That is considered "dual agency" and can be explained in more detail by your real estate professional. You are also advised to obtain the representation of a competent real estate attorney, who can advise you to the legal matters involved in the sale or purchase of real estate.
3. What should I think about and discuss with my REALTOR before and during the search for my new home?
Besides number of bedrooms & room size or floor plan, determine your "needs" vs "wants". What are the features you absolutely cannot live without? Parking? Outdoor patio space? What building amenities do you require? Is there a particular location or neighborhood that appeals to you? How important is proximity to work? Transportation? Shopping? Restaurants? School? Discussing these issues up front with your Realtor will help eliminate undesirable properties and save you time.
4. You've found your dream home & you want to make an offer, now what?
The Real Estate Contract is a written agreement that conveys the buyer will purchase a particular piece of real estate for a certain price, at a stated time. By accepting the terms offered, the seller agrees to give the buyer clear title to the property. Most contracts require the buyer to include "earnest money" with their initial offer, as a sign of good faith. This money can be between 5%-10% of the purchase price and is held in a special escrow account by the real estate broker who has listed the property for sale. This money is then credited to the buyer at closing as part of the down payment. In the event the buyer defaults under the terms of the contract, the earnest money could be forfeited.
5. What happens if you have made an offer, the sellers accepted, but you can't secure a mortgage?
Most contracts provide that if a buyer cannot secure financing within a certain number of days and so informs the sellers in writing then the buyer is released from the contract and the earnest money is returned. However, also included in most contracts is a clause that allows the seller to make a loan application on behalf of the seller, to another mortgage company or to provide financing themselves. It is extremely important for both buyers and sellers to know the exact terms under which the financing is to be secured, the obligations and possible penalties if they fail to live up to the stated terms.
6. What is a closing? What should I expect?
The closing is the time at which figures are balanced, documents are explained & signed and funds are collected. The remainder of the purchase price is paid and the seller passes title to the property to the buyer by delivery of a deed and other documents. This can take place at a Title Company, a bank or an attorney's office and is generally determined by the seller's attorney.
Well in advance of the closing, your mortgage broker or lender should have discussed what expenses you may be expected to incur and how much money you will need to bring to the closing.
7. What is "Title Insurance" and why do I need it?
A title insurance policy or commitment provides protection to the new owner from unknown defects in the title. The insurance provides a guarantee of ownership of your home.
An error by a clerk in the county recorder's office, an unreported tax payment, an undisclosed lien against the property, forgery 30 years ago: these are just a few of the hidden "title defects" that could cause you to lose your property, or make it impossible for you to sell or even give your property away. Detecting and resolving problems at an early stage will avoid closing delays that occur when the title work is not ordered until shortly before the closing.
Before a transaction involving a loan or sale of property is completed, the title company searches appropriate land records to determine ownership, claims, legal documents and other matters that may affect the property. This search discloses recorded deeds, mortgages, liens, taxes, etc. The results of the record examination will then be summarized in a preliminary document called a "Commitment for Title Insurance" or "Preliminary Title Report". This document states the status of ownership and enables the lender and purchaser to evaluate the legal status of title to the property before it is acquired.
Although the purchase of title insurance tends to be overshadowed by other issues in the transaction, it is a very important element in the real estate sale. It also represents a significant expense in the sale of a home, as the costs can range from $500-$1,000.
Real Estate contracts in Illinois require that the seller provide protection to the buyer for matters regarding title to the real estate and that this protection be given by a title insurance company registered in Illinois. As part of a purchase, the buyer may be required to buy mortgage title insurance which protects the lender's interest in the buyer's property against losses arising through defects in the title.
8. What is possession?
The contract will usually provide that the seller will give possession at a certain date. Keys are delivered and utility readings are taken as of that date. Many contracts also provide that certain appliances, fixtures and other personal property are to be delivered to the buyer and that the premises are to in a clean condition and free of debris. Often the seller will be obligated to maintain the property until the date of possession is surrendered. If the new owner is not able to take possession at closing, many times the seller will have to pay a per diem rent from the date of closing until possession is surrendered.
9. Credit Scores: Myth vs. Reality!!!
It seems there is a lot of misinformation these days as to what does and does not hurt your credit score, so I decided to talk with some of the experts and clear up the four most common misconceptions:
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MYTH: Closing Accounts can Hurt Your Score
FACT: Closing accounts can never help your credit score. In fact, you may do more harm than good. It is true that having too many accounts can hurt your score, but the fact is, once you've opened the account, you've done the damage. You can't repair it by closing the account down.
The credit score looks at the difference between your AVAILABLE CREDIT vs. WHAT YOU ARE USING. When you shut down accounts, your available credit shrinks, making your balance(s) loom larger, which typically hurts your score.
The score also tracks the length of your credit history. Closing older accounts can also make your credit history look younger than it really is, which can also hurt your score.
So, what is the best thing to do?????? Rather than close accounts, pay down your credit card debt. Now that is something that will improve your score!
MYTH: Checking Your Fico Score Can Hurt Your Score
FACT: Applying for NEW credit is generally what hurts your score. Ordering a copy of your personal credit report or score does not count. Those mass inquiries made by credit card lenders, who are trying to determine whether or not to send you a pre-approved card also are not going to hurt you, unless you actually take them up on their offer.
In order to minimize the damage from credit inquiries, be sure to shop for a mortgage in a fairly short period of time. The FICO score treats multiple inquiries in a 14 day period as one inquiry and ignores all inquiries made within 30 days prior to the day the score is computed.
For most people, one inquiry will generally knock no more than 5 points off a score. Since scores range from 300-850, that is not a big percentage.
MYTH: Credit Counseling Will Hurt Your Score As Much As Bankruptcy
FACT: The current FICO formula ignores any reference to credit counseling that may be in your file. That has been true for the past 3 years, after researchers at Fair, Isaac, the company that created the FICO scoring system, noticed that people getting credit counseling did not default on their loans any more that anyone else.
However, your ability to secure a loan could still be hurt by counseling for this reason: Your current lenders may report you as late, because you're not paying what you originally owed or because your credit counselor isn't getting your payment sin on time. Late payment DO hurt your credit score.
Mortgage lenders who do not like credit counseling generally treat its enrollees the same as if they had filed for Chapter 13 bankruptcy, which is the kind of bankruptcy that requires a repayment plan. It is looked at more favorable than Chapter 7 bankruptcy which allows you to erase many of your debts. Of course, you might still be able to qualify for a loan from one of these lenders, but your interest rate will almost certainly be higher than if you had perfect credit.
MYTH: Your Fico Score Is Not The Only Score You Need To Check
FACT: In reality, all three credit bureaus offer FICO credit scores using the formula developed by Fair Isaac, but they each give the scores a different name:
At Equifax, the FICO is known as the Beacon Credit Score.
At TransUnion, it is called Empirica.
And Experian, they call it the Experian/Fair Issac Risk Model ... whew!
Complication things further is that you'll probably have three different scores from three different bureaus, largely because they do not all share the same data. One bureau may list more accounts for you than another. Plus the difference in the types of accounts, payment histories, credit limits and balances will be in the score the bureau computes for you.
So, because of those differences it make sense to pull and examine your credit reports for all three bureaus before you apply for a big loan. Many mortgage lenders take an average of the scores from the three bureaus, or they pick the lowest score when making their decision. So, fixing any errors in all three repots before you shop for a loan is a good idea.
When it comes to comparing scores, however, you may be stuck. Equifax is the only bureau that makes it easy for consumers to get the same FICO score that lenders see. The score typically provided to consumers by Experian and TransUnion are not FICO scores, and they are different from the scores these bureaus provide to lenders.
The bottom line is, the way to improve your credit score are the same in any case: Correct any errors. Pay your bills on time. Pay down your debt and apply for credit sparingly.
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