Buyer Tips
A Complete Guide to Buying
Real Estate in Minnesota
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Buying a Home
Simplify Your Home Buying Experience
Buying a home can be an enormous undertaking, so be sure to
retain the services of a qualified REALTOR®. You can trust
our REALTORS® to always keep your interests first and foremost.
As qualified professionals, we'll guide you through the entire
home buying experience and assist you in being an educated buyer.
Simplify Your Search
What features would you require in a home to satisfy your lifestyle now
and in the future? Once you know what you can afford, we'll help you explore
your possibilities; from design preferences to neighborhood choices.
Moving Forward
Once you have found the home that is right for you, it's time to
present an offer. This will consist of earnest money to be held in
an escrow account, a loan pre-approval letter if you will be
financing the purchase, and a written purchase agreement. This
agreement will set forth your terms of the purchase and a schedule
of events in order to own the property. This extremely important
document is a legally binding agreement and should be carefully
prepared by knowledgeable REALTORS® who are qualified to cover all
of your interests.
Final Steps
Upon your complete satisfaction, arrangements will be made to attend
a closing. The closing is usually facilitated by a title or escrow
company that holds your earnest money in escrow. After furnishing
the down payment and other applicable fees have been agreed upon
prior to closing, final papers will be signed. The deed and
mortgage will need to be recorded in the state Registry of Deeds,
and you will be a homeowner.
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Rewards
It is highly rewarding to buy, own and maintain your own home.
Whether this is your first home or you have experience with the
home buying process, we can help. When you have the tools at your
fingertips, you can be confident in your ability to search,
finance your home, negotiate terms and be prepared at closing.
Challenges
Purchasing a new home can be overwhelming. Without the right
resources and information, the buy process can be stressful and
frustrating. With our services, you can avoid the pitfalls. We'll
be there to help every step of the way.
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Resources
Money Matters - the most important part of financing is your
knowledge of the options available. Consider the following questions as
a basis for determining your financing needs.
- How much mortgage can I afford?
- What down payment is needed?
- What is the difference between pre-qualification, pre-approval
and approval?
- What interest rates are available?
- What is mortgage insurance and is it required?
- What type of documentation will I need?
- How do 15- vs. 30-year terms compare?
- What are points and do I pay them?
- What is difference between a fixed rate mortgage and adjustable
rate mortgage?
- What closing costs will I incur?
- What is being "locked-in"?
- How long will the mortgage process take?
- What is included in a mortgage payment?
- What would the payments be?
- When would the payments begin?
Make Your Mortgage The Right Fit!
Mortgages to meet
everyone's needs. These summaries will help you narrow your search.
Adjustable Rate Mortgage
A mortgage, which allows the lender to adjust the mortgage's interest
rate periodically on the basis of changes in a specified index.
Interest rates may move up or down, as market conditions change.
The change in interest rate will result in a change in the periodic
payments due under the mortgage. ARMs are attractive when
short-term interest rates are trending lower.
Balloon Mortgage
Usually a short-term fixed-rate loan that involves small payments
for a certain period of time with the balance due in a single,
large payment at a time specified in the contract. Whenever the
balloon mortgage becomes due, the entire unpaid balance is due.
Generally, the homeowner must either refinance or sell the
property.
Buy-Down
The payment of extra money on a loan now so as to provide a lower
interest rate over either a given period or over the life of the
loan. To buy-down a mortgage, the buyer pays additional points to
the lender, which will decrease the interest rate for a specific
period.
Conforming Loan
Conventional home mortgages, first mortgages up to loan amounts
mandated by Congressional directive, which meet the qualifications
for sale or delivery to either the Federal National Mortgage
Association (FNMA) or the Federal Home Loan Mortgage Corporation
(FHLMC).
Construction Loan
A structured, short-term loan to provide funds necessary to begin
construction on buildings or homes.
Conventional Mortgage
A mortgage loan made by an institutional lender without the
inclusion of government guarantees such as VA or FHA loans.
Convertible ARM
The convertible ARM is a combination of both fixed-rate and
adjustable rate mortgages, allowing the best of both options in
one package.
Deferred Interest Mortgage
A mortgage in which the payment is not sufficient to cover the
principal and the interest and the payment portion of the interest
is postponed until a certain date at which time the interest
postponed is added to the principle owing.
Federal Home Loan Mortgage Corporation (FHLMC)
The Federal National Mortgage Association is a congressionally
chartered, shareholder-owned company and is the largest national
supplier of home mortgage funds. It is commonly known as Freddie
Mac. The company buys mortgages from lending institutions, pools
them with other loans, and sells shares to investors. Detailed
information may be found at http://www.freddiemac.com.
Federal Housing Administration (FHA)
An agency of the federal government, the Division of the Department
of Housing and Urban Development, that sets standards for the
underwriting of private mortgages and insures residential mortgages
made by private lenders.
Federal Housing Administration (FHA) Loans
Federal Housing Administration (FHA) low-rate loans are available to
Americans with smaller incomes who are interested in modestly priced
homes. Down payment requirements are usually lower than the prevailing
ones.
Federal National Mortgage Association (FNMA)
The U.S.'s largest supplier of mortgages to home buyers and owners,
a corporation established by Congress and owned by stockholders. It
is commonly referred to as 'Fannie Mae,' this government-sponsored
enterprise is chartered by Congress. This federally chartered
agency buys mortgages from lending institutions, pools them with
other loans, and sells shares to investors. Detailed information
may be found at http://www.fanniemae.com.
Fixed-Rate Mortgage
The interest rate you pay and the monthly principal and interest
payments are agreed upon from the outset and will not change
throughout the entire term of the mortgage.
Government National Mortgage Association (GNMA)
A government-owned corporation within the U.S. Department of Housing
and Urban Development, it is also referred to as 'Ginnie Mae,'.
This government agency guarantees the payment of principal and
interest on all of its pass-through securities, and its guarantee
is backed in turn by the full faith and credit of the U.S.
Government.
Graduated Payment Mortgage (GPM)
A mortgage that usually starts the borrower with low payments that
are gradually increased over five to ten years, before leveling off
for the remainder of the term of the loan until the loan is fully
amortized. Negative amortization usually occurs until the payment
reaches the level payment stage. Usually government insured loans
(VA or FHA).
Growing Equity Mortgage (GEM)
This is a long-term mortgage whereby the borrower agrees to increase
his payment each year by an agreed amount. The added money per
payment is applied directly to the outstanding principal on the
mortgage. The mortgage thereby is paid off in a shorter number of
years.
Renegotiable Rate Mortgage (RRM)
Similar to an Adjustable Rate Mortgage, this type of mortgage allows
the interest rates and payments to be adjusted periodically
according to an index.
Reverse Annuity Mortgage (RAM)
A type of mortgage where the property's equity serves as security
for periodic payments made by the lender to the borrower. Mortgage
is generally paid out upon the sale of the property.
Rollover Mortgage (ROM)
A mortgage where the payments are only guaranteed for three, four,
or five years. The borrower is allowed to refinance at the end of
the term at the interest rate then applicable.
Shared Appreciation Mortgage (SAM)
It is a loan arrangement where two or more parties participate in
the purchase of real estate and share the appreciation and tax
deduction. Similar to shared equity mortgages.
Veterans' Administration Loans
Mortgage loans to veterans by banks, savings and loans, or other
lenders that are guaranteed by the Veterans' Administration,
enabling veterans to buy a residence with little or no money down.
Wraparound Mortgage
A secondary financing option in which a new larger mortgage is
created to encompass the first mortgage. This large second mortgage
is used to preserve the low interest rate on the first mortgage for
a potential buyer.
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Know Your Needs
Drive To Learn
Evaluate as you drive though a community. Consider the following
questions as a basis for determining your location needs:
- Where is the nearest shopping center, bus line, police station
and library?
- What schools are available and school district are you in?
- What types of homes (single family, apartments, condominiums) are
in the neighborhood?
- How far apart are the homes?
- How far is it to your work?
- What community resources are available?
- Generally, where are the cars parked (driveways, garages,
street)?
- Do you notice a lot of noise, traffic or pollution?
- Are the homes in good repair and the landscaping well kept?
Finding the Right Home
Keep your eyes open and your notebook in hand as you walk through a potential
home. Consider the following questions as a basis for determining your
needs as a homeowner:
- How long has the home been on the market?
- Why is the home being sold?
- What is the asking price of the home?
- Has the price been lowered?
- Is the price comparable to other homes in the neighborhood?
- What is the down payment required?
- Is the house structurally sound?
- Is there room enough for the present and the future?
- Do you like the floor plan of the home?
- What condition is the yard in?
- What improvements must be made?
- Will the seller repair or replace any items that need repair or
replacement?
Think carefully about each house you see and don't be in a hurry. Your
REALTOR® can point out the pros and cons of each home from a
professional standpoint.
The Offer
Making an offer to buy a home entails many factors. You and your
REALTOR® will discuss the following factors prior to putting the offer
on the table:
- Amount of earnest money
- Down payment
- Price you are offering
- Details of financing
- Proposed move in date
- Proposed closing date
- Details of the sale
- How long the offer is valid
The seller will either accept the offer as presented, or make a counter
offer and either you will agree to the terms in counter offer or you
will submit another proposal. When all the parties involved have agreed
upon the details, initialed any revisions, and signed the final
agreement, then an offer becomes a contract.
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Contract Review
Sales contracts may differ significantly yet all should clearly set
forth the responsibilities and privileges of all the parties involved.
It is a legally binding document that protects each party. Carefully
review the terms of the contract. The sales contract should include the
following:
- Legal description of the property and the exact street address
- Selling price of the property
- Amount of earnest money and who is holding it - Often it is held in
an escrow account by a third neutral party.
- Amount due at settlement
- Specifics of the mortgage (amount, rate and terms)
- Title or Escrow company - Either a title company, escrow company,
or attorney must be areed upon by buyer and seller
- Details of the closing - when and where
- Home inspection - Recommended to ensure against structural and
unknown defects, and must be completed by a specific date set forth
in the contract and completed by a cerified home inspector
- Inclusions and exclusions - Examples would include washers, dryers,
drapes, etc.
- Pest Inspection - Who is responsible if there is damage or an
infestation
- Warranties - Get the description of any that are included with the
house
- Repairs - Unless you are accepting as-is, state who is responsible
for repairs, with a date for a walk-through inspection
- Well and septic - They must past a test, if applicable
- Date of possession - When you take possession of the property
- Acceptance date - Either an acceptance or counter offer must occur
by a specified date
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Processing the Sale
Once the contract is signed, your REALTOR® will continue to be your
advocate and ensure that your best interests are served. Some of the
details they will be available to handle are:
- Assist with scheduling all necessary pre-closing inspections
- Check finances are deposited according the contract
specifications
- Keep you informed of any unseen problems that may arise and offer
solutions
- Present a list of utility companies available for service
- Schedule and attend the pre-closing walk through
- Prepare for and attend the closing
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