Home Buyers Guide
Owning your own home is the American Dream. And that dream is more alive today
than ever before. Yet one of the first realizations a prospective home buyer often
comes to is that the "dream home" does not always seem affordable.
Buying a home has changed. Before, buyers usually shopped for the best house
they could find, then "took out" a loan. Today, prospective buyers must shop as
thoroughly as they can for the best financing as they do for the best house. In
today's market, both tasks are equally important.
Experience has taught us that the buying process involves common stages for all
home buyers. To help you understand that process, and make the most of every day
and dollar you spend, Long & Foster® Companies, Inc. has prepared this Home
Buyers Guide to provide an overview from the planning table to the closing table.
How Much House?
House hunting begins at home with planning. The first step toward buying a house
is to sit down. Before you grab the road maps and hit the streets, you need to do
a little planning. We call it "pre-qualifying". Simply, it's determining how much
house you can afford to buy. Knowing your affordable price range will bring your
house-hunting into focus. Many lenders, for a small "up-front" fee, will send out
all required verification and pre-approve you for a mortgage, allowing you the opportunity
to negotiate as a cash buyer.
How much house you can afford to buy depends on two things: how much you can afford
for the monthly housing payment, and how much you can invest in the down payment.
Monthly payments include principal and interest on the mortgage loan, and property
taxes and insurance against fire and other hazards. These four costs are often abbreviated
"P.I.T.I.". For some buyers and lenders, monthly housing costs may also include
homeowners association dues, condominium fees, and mortgage insurance.
What To Look For
Choosing a place to live can be one of the most exhilarating experiences of a lifetime.
We've learned through the thousands of home seekers we have helped that the best
approach is to be prepared. Literally, to do some homework. Our observation is simple.
Your move can be an improvement if you duplicate what you like in your present community
and avoid what you dislike.
House Hunting Begins At Home
The search can begin in your present home so we've developed some questions to stimulate
your thinking and help you identify your needs and preferences. Once you've clarified
what you like in your present community, you will have a better idea of what you
want to find. Plus, you will be able to express your preferences clearly to your
Long & Foster Sales Associate who can help you find it.
time to think about selling your home is when you're buying it. In other words,
what appeals to you as a buyer today will probably also appeal (or what turns you
off will be a turn off) to buyers tomorrow. A careful house hunter will benefit
years from now when it's time to sell to an equally value-conscious buyer. Build
your buyer savvy by reading newspaper classified ads, homes-for-sale magazines,
REALTOR® Web sites and visiting open houses.
Negotiating The Purchase
You've found it - your "dream house"! You want to buy it. Now what You make an
offer by submitting a signed real estate offer to purchase with the type of financing
This will be the sales contract once the seller accepts. When you and the seller
sign, you are agreeing to the contract conditions. Before you sign it, read it carefully
and make sure you understand every detail. Ask questions. Verbal agreements should
be written into the contract. If you plan to have a lawyer represent or advise you,
retain one as early as possible. This is where your Long & Foster Sales Associate
and an attorney can give you the assistance you need.
Locating The Right Loan
You have the option of shopping around for the best terms you can obtain. Generally,
a mortgage acceptance requires 15-30 days for conventional, 30-45 days for VA and
FHA from application to approval. In some cases, loans may be approved more quickly.
Long & Foster has an affiliated mortgage company Prosperity Mortgage® Company.
Fire And Hazard Insurance
Most lenders require a home buyer to provide at settlement a one-year paid receipt
for a fire and hazard insurance policy, often called homeowner's insurance. These
policies are available from several leading insurance companies through Long & Foster's Insurance Agency, Inc., or the insurance
company of your choice. Fire and hazard insurance provides protection for fire and
other perils to your home and its contents.
The big day is here!
Tonight you can pop open the champagne, but today there will be a lot of paper signing
and a poignant passing of the keys (don't forget the garage keys and electric door
At the settlement will be an attorney or title company representative (chosen by
the buyers), all buyers, listing and selling brokers, and all owners. The home seller
should bring all warranties on equipment and any instructions on equipment maintenance
The attorney will have searched the title, provided title insurance, and obtained
old and new lender instructions. First, all unresolved walk-through deficiencies
With the buyer, the attorney explains the deed of trust or mortgage; the deed of
trust note or mortgage note; VA, FHA, or lender forms; and settlement sheets. Buyer
signs all these and pays the balance of the down payment and buyer's closing costs
with cashier or certified check.
Different Mortgage Strategies
When it comes to paying for a home, buyers today have an almost unlimited number
of financing options from which to choose.
Here's a run-down on the main types of financing every home buyer should know today.
Interest rates are intended for illustration only; ask your Long & Foster Sales
Associate or loan officer from Prosperity Mortgage Company, a Long & Foster affiliated company, for
current market rates.
Words To The Wise
Below is a handy guide of terms that buyers need to know.
A person acting on behalf of another, called the principal.
Agreement of Sale
Known by various names, such as "contract of purchase", "purchase agreement", "sales
agreement", or "binder", according to location or jurisdiction. A contract in which
a seller agrees to sell and a buyer agrees to buy, under certain specific terms
and conditions spelled out in writing and signed by both parties.
Annual Percentage Rate (APR)
Includes quoted interest rate on the loan plus all additional service and finance
charges associated with the loan. Includes all costs of financing; those paid at
the time of closing and those paid over the term of the loan. The APR is usually
slightly higher than the note rate.
An expert judgment or estimate of the quality or value of real estate as of a given
The valuation placed upon property by a public tax assessor as the basis for taxes.
Bill of Sale
An instrument which transfers title to personal property (chattels); a "Deed" transfers
Certificate of Title
A document signed by a title examiner or attorney, stating that the seller has a
good marketable and insurable title.
Closing Statement (Settlement)
The computation of financial adjustments between buyer and seller as of the day
of closing a sale to determine the net amount of money which buyer must pay to seller
to complete purchase of the real estate and seller's net proceeds. Also, "settlement
Payment to a real estate broker for services performed.
To deed or transfer title of property from one person to another.
A formal written instrument by which title to real property is transferred from
one owner to another. Also, "conveyance".
Deed of Trust
Like a mortgage, a security instrument whereby real property is given as security
for a debt. However, in a deed of trust there are three parties to the instrument:
the borrower, the trustee, and the lender (or beneficiary).
The money given to the seller by the potential buyer (usually held in escrow) upon
the signing of the agreement of sale to show that buyer is serious about buying
the house. Also, "deposit".
The interest or value which owner has in real estate over and above the debts against
it. (Sales Price - Mortgage Balance = Equity.)
Funds, property, or other things of value left in trust to a third party. The escrow
may be released upon the fulfillment of certain conditions or by agreement of the
What was formerly personal property which is now permanently attached to real property
and goes with the property when it is sold.
Protects against damages caused to property by fire, windstorms, and other common
Between a homeowner (as principal) and a licensed real estate broker (as agent)
by which the broker is employed to market the real estate within a given time for
which service the owner agrees to pay a commission. Also, "listing agreement".
The highest price which a buyer, ready, willing and able but not compelled to buy,
would pay, and the lowest price a seller, ready, willing and able but not compelled
to sell, would accept. Basis for "listing price", or "asking price".
The actual amount for which a piece of property is sold. Also, "sales price", "purchase
A lien or claim against real property given by the buyer to the lender as security
for money borrowed.
A written agreement to repay a loan. The agreement is secured by a mortgage, serves
as proof of an indebtedness, and states the manner in which it shall be paid. Also,
"deed of trust note".
Principal, interest, taxes, and insurance. Most residential mortgage payments include
the above and are therefore referred to as P.I.T.I. Also, "carrying charges".
Sometimes called "discount points", a point is one percent of the amount of the
Penalty for the payment of a mortgage note or deed of trust note before it actually
This word has several meanings:
(A) to denote the most important;
(B) a capital sum lent on interest;
(C) one who appoints an agent to act on their behalf;
(D) either party to a contract.
The operation of real property, including the leasing of space, collection of rents,
selection of tenants, and the repair and renovation of the buildings and grounds.
To allocate between seller and buyer their proportionate share of an obligation
paid or due. For example, a prorate of real property taxes, fire insurance, or condominium
A person with a real estate license and associated with a specific real estate broker.
A map or plat made by a licensed surveyor showing the results of measuring the land
with its elevations, improvements, boundaries, and its relationship to surrounding
tracts of land. A survey is often required by the lender to assure a building is
actually sited on the land according to its legal description.
As generally used, a document that indicates rights of ownership and possession
of a particular property.
A summary of the public records relating to the title to a particular piece of land.
An attorney or title company reviews an abstract or title to determine whether there
are any title defects.
Protects lenders and homeowners against loss of their interest in property due to
legal defects in title.
Title Search or Examination
A check of the title records, generally at the local courthouse, to make sure the
buyer is purchasing a house from the legal owner and there are no liens, overdue
special assessments, or other claims.
State tax, local tax (where applicable), and tax stamps (in some areas) required
by law when title passes from one owner to another.
Ask your Long & Foster Sales Associate for a copy of the "Understanding the
Role of the Real Estate Agent" (LF1192, for use in the state of Maryland only); A
REALTORS® ROLE (LF1193, for use in the state of Virginia only); or The Agency
Disclosure Brochure (LF1195, for use in the District of Columbia only).