When purchasing a home, there are many things that come into consideration, however, some of the most common things that you might hear about purchasing a home might not tell you everything you need to know about purchasing a home. Here are some common myths you may hear about when purchasing a home and the real story behind them.
You need to put down a 20% down payment.
While it is true that a larger down payment can sometimes lead to a lower mortgage rate, it is not always necessary to put down a large amount of money. There are several programs available that allow homebuyers to put down as little as 3% or even 0% of the purchase price. In fact, the average first-time homebuyer puts down 7% on their home.
You need high credit to qualify for a mortgage.
Credit scores are a vital part of getting approved for a loan to buy a home. The better your credit score, the better your loan terms will be, although, you can get a mortgage with a lower credit score as low as 580.
You need a 20% down payment to avoid private mortgage insurance (PMI).
PMI is insurance that protects a lender if the borrower defaults on their mortgage. While it is true that a down payment of 20% or more will typically allow you to avoid PMI, it is not the only way. Some lenders offer programs that allow homebuyers to avoid PMI with a smaller down payment, or even with no down payment at all. Make sure to shop around for a loan, and ask them about PMI.
Closing costs are a one time payment that is made on your home on the day the sale closes. However, not all closing costs are created equal. Some are negotiable, while others are set in stone. Here is what you need to know about them.
Overview of Closing Costs
Closing costs, in short, is the money you must pay when you buy a house. These fees for a home can vary depending on the price and type of home you are purchasing. They cover every expense associated with buying a house — from legal fees to property taxes to an inspection.
There are several costs that you should budget for if you’re planning on buying a home.
Common Closing Costs
Loan Application Fee
Appraisal Costs
Attorney Fee
Closing Fee
Credit Reporting Fee
Escrow Funds
Homeowner’s Insurance
Loan Origination Fee
Title Insurance
Property Taxes
Transfer Tax
Underwriting Fee
Depending on how much money you’re putting toward a down payment, the type of mortgage, the type of home, the location of the home and other considerations, you may end up having to other additional fees.
Budgeting for Closing Costs
In general, closing costs are typically between 2% and 5% of the property’s purchase price. For example, if you are purchasing a home for $300,000, your costs could range from $6,000 to $15,000. However, it is important to keep in mind that this is just a rough estimate, and the actual amount you pay could be higher or lower depending on a variety of factors.
To determine how much you will have to pay, you should work closely with your lender and REALTOR®. They can help you understand the various fees associated with purchasing a home and provide you with a detailed list of anticipated costs. You can ask your lender for a loan estimate, which provides a similar breakdown of costs but also includes information about the terms of the mortgage.
Budgeting for closing costs is an important part of the homebuying process. To prepare for these costs, you may want to set aside a specific amount of money in a savings account. You may also be able to negotiate with the seller or lender to reduce the closing costs, although this may not be possible in all cases.
Ensure that you review all costs before signing the final purchase agreement to understand all the fees involved. By being prepared and budgeting for these fees, you can make the homebuying process as smooth and stress-free as possible.
https://buysellownchicago.com/wp-content/uploads/2023/04/Credit-Repair-page-assets-1.png10801920Katie Howellhttps://buysellownchicago.com/wp-content/uploads/2021/07/BSOC-Logo-300x102.pngKatie Howell2023-04-05 14:32:312023-04-05 14:32:32A Closer Look At Closing Costs
Congratulations! You’ve made it to your home inspection, which means you’re within reach of closing on your home. Unsure of what to expect? We (and your REALTOR®) here to help.
Why should you have a home inspection done?
Purchasing a home is a big commitment, and a home inspection is your way of knowing you’re making the right fiscal choice. An inspection will spot any current or potential problems within a home, providing safety and peace of mind in the purchasing decision. During the process, your inspector will identify problem areas, suggest solutions and write a report with all of the findings.
Also, many mortgage lenders require an inspection to be performed before financing a home, so it’s best to cover all of your bases by having an inspection completed.
How do I find an inspector?
It is the homebuyer’s responsibility to find an inspector to perform the home inspection. Typically, your REALTOR® will be able to recommend a professional. If you’re interested in looking for one on your own, you can search for a local inspector using the American Society of Home Inspectors’ (ASHI) Find a Home Inspector tool.
When talking with an inspector, here are some things you should look for:
They should have a home inspector license.
Ideally, hire someone who has at least five years of experience.
Make sure they can turn your report around within your required timeframe, as an inspection typically needs to take place within five to seven days of your offer being accepted.
What will, and won’t, an inspection cover?
As a rule of thumb, most inspectors will check a home’s:
Exterior, including walls, foundation, grading, roof and garage
Interior, including plumbing, electrical, heating, air conditioning, appliances and all rooms
And they will not check:
Swimming pools
Wells
Chimneys
Inside pipes or sewer lines
Inside walls
What happens on the day of the home inspection?
Both you and your REALTOR® should be in attendance on the day of your inspection. Depending on the size of the home, most inspections take between two and three hours to complete.
Yes, you can ask questions! The inspector will give you firsthand explanations of their findings, point out problem areas and answer any questions that may arise. Everything that is discussed in person will then be written up in their report.
What happens after an inspection?
Once the inspection is complete and you’ve received the report, discuss the findings with your REALTOR®.
Legally, the seller must fix structural issues, building code violations and safety issues. Beyond that, you are able to negotiate with the seller what other issues you would like fixed before purchasing the house. Your REALTOR® will submit a request for repairs that the seller will either agree to or counteroffer.
If the problems that arise from the inspection are too significant or expensive, you always have the right to step away from the purchase if your purchase contract has an inspection contingency. Usually, you have about seven days to make that decision.
While a home inspection may cost money upfront, it will also help you save money, and move forward with a greater peace of mind in the long run.
https://buysellownchicago.com/wp-content/uploads/2021/11/GettyImages-83590749-scaled.jpg17072560Katie Howellhttps://buysellownchicago.com/wp-content/uploads/2021/07/BSOC-Logo-300x102.pngKatie Howell2022-09-06 13:08:002022-08-29 13:09:03Your Home Inspection Questions, Answered!
If you’re interested in buying a condo, here are some helpful terms and things to consider.
No matter what, future condo homeowners should ask a few important questions when considering a unit:
Who runs the condo association?
What are the rules and restrictions for living in the building?
How much are the monthly fees and what do they cover?
Condominiums, aka condos, are a common building type in major urban areas, and Chicago is no exception. Living in a condo might not be for everyone, but they’re often an excellent choice for first-time homebuyers or for those who wish to live in a more urban setting!
KNOW WHAT MAKES A CONDO A CONDO
A condominium is an individually owned unit in a complex or building of units. You own the space inside your individual unit and share an ownership interest in the common property. This can be as extensive as roads and courtyards and as confined as a shared stairwell and roof.
What’s the difference between a condo and an apartment? The former is owned while the latter is rented. What about a condo versus a co-op? In a co-op, you buy shares in a corporation that owns the entire building and get a stake-hold to a specific unit.
MEET YOUR CONDO ASSOCIATION
Maintaining and managing the common areas of the condominium are run by an entity called a Condo Association. The whole condominium is governed by a set of rules called Covenants, Conditions, & Restrictions (CC&R’s), which operate much like bylaws.
A board runs the condo association and has the power to regulate and monetarily penalize owners for violations as decreed in the CC&R’s. Who sits on the board? Depends on the condo building. Some associations hire a third-party management company, which typically increases the cost of living in the building, and some are managed directly by the owners. Usually, buildings with fewer units are self-managed while large buildings with more units are managed by a company.
REVIEW YOUR CONDO DOCUMENTS
The Illinois Condominium Property Act requires the condo’s seller to provide a number of important documents to the prospective buyer prior to close. These include the declarations, the CC&R’s, the financials and more.
When you’re buying a condo, review these before making a final decision on your purchase! What should you look for in these documents? Here are a few questions to get started:
What are the rules about pets, remodeling projects, leasing units and use of common amenities?
Are there reserves, and if so, how much is in the reserves?
What were the most recent major purchases or renovations? Are there any upcoming special assessments to cover these maintenance projects?
What are the individual owners responsible for versus the condominium association as a whole?
Don’t hesitate to go over these documents with your REALTOR® and your attorney. They can supply additional expertise and advice!
UNDERSTAND THE HOMEOWNER’S ASSOCIATION FEES
Most people who know about condos know about HOA fees. As intimidating as they may seem, they serve a very specific purpose!
Homeowners Association fees, sometimes called monthly assessments or nicknamed “HOA fees,” are an additional cost beyond your mortgage or escrow payments that go directly to the condo association. They include several maintenance costs like water, trash, landscaping and beyond.
Why are some HOA fees so much more than others? Here’s an overview of HOA fees. In the end, you should ask about the included services in your monthly HOA fees and the portion that is sent to reserves.
If you’re buying a condo with many shared amenities like pools, gyms, rooftops, elevators, and movie theaters, anticipate higher monthly fees to maintain these features.
KEY TERMS TO HELP YOUR SEARCH
As you move forward with looking for your future condo, keep these key term definitions in mind. You’ll hear them a lot during the transaction!
CC&R’s: stands for Covenants, Conditions, & Restrictions which regulate living in the condo association.
Condo Association Board: the governing body which makes executive decisions about shared amenity renovations and repairs, monitors the reserves and determine if special assessments are required, and enforce the CC&R’s. They meet monthly.
HOA Fees: the monthly assessments or costs for living in the association.
Amenities: the shared features available to all association owners and residents.
Special Assessments: additional fees billed to the condo owners outside of the monthly HOA fees. They’re typically passed if a large repair is needed for a shared amenity that cannot be covered by the reserves.
Reserves: the condo association’s savings! These cover emergency repairs or regular maintenance costs for the shared amenities.
Property Insurance: this is the association’s insurance for the shared amenities and common spaces, but it does not insure each individual unit or their contents.
https://buysellownchicago.com/wp-content/uploads/2021/06/GettyImages-171582800-scaled.jpg17072560Cory Hallhttps://buysellownchicago.com/wp-content/uploads/2021/07/BSOC-Logo-300x102.pngCory Hall2021-09-21 04:30:002021-08-30 16:57:47What You Should Know Before Buying A Condo
Buying your first home can be a daunting task. But don’t fret, options are available to help you save money in the process! There are thousands of dollars available for first-time homebuyers through loans and programs in the Chicago area.
Find the right one to save you money on your home purchase.
First-time homeowners, veterans or those who haven’t owned a home in the past three years and are looking to purchase a home in Cook, Marion, St. Clair or Winnebago county can apply for this grant. This grant provides a 30 year, fixed rate mortgage with a $7,500 grant towards down payment or closing costs.
This credit is available to first-time homebuyers or those purchasing a home in an economically troubled census tract. The Mortgage Credit Certificate allows homebuyers to claim a tax credit for a portion of the mortgage interest paid per year. Currently, annual savings are 25% for a purchased home or 50% for a home improvement or rehab loan, and savings are capped at $2,000.
This grant offers 4% (up to $6,000) of the purchase price in assistance for a down payment and closing costs for a home being purchased in any county in Illinois. In addition, the loan is forgiven over 10 years, so it doesn’t need to be repaid with a 30-year, fixed-rate mortgage.
This grant offers 5% (up to $7,500) of the purchase price in assistance for a down payment or closing costs that is interest-free for the life of the mortgage. However, the loan must be repaid when the house is sold, refinanced or paid off.
Keep in mind that most mortgage lending companies have specific homeowner grants and loans to apply for. Make sure to talk to your lender to see what’s available!
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If you’re thinking about buying or selling your home, make sure you know about transfer taxes. These taxes are part of your cost when your home is sold and the title goes from one individual (you, the seller) to another individual (the new homebuyer).
The state or city charges transfer taxes to complete a sale and title transfer. Your property’s assessed value and classification determine the total cost of your these taxes.
Chicago follows the Real Property Transfer Tax law. This law states that the transfer tax costs $5.25 per $500 of the transfer price. Three dollars and 50 cents of the $5.25 goes to the city, while the other $1.50 provides financial assistance to the Chicago Transit Authority (CTA). In Chicago, the buyer is responsible for paying $3.75 and the seller is responsible for $1.50.
Certain circumstances may lead to exemptions or credits on transfer taxes. Check out the city’s website to see if you fall into one of these categories.
You will pay these taxes during the closing of the property’s sale, so make sure to figure in the price when buying or selling a home! Make sure to talk to your REALTOR® if you have any questions or concerns about your transfer taxes.
https://buysellownchicago.com/wp-content/uploads/2021/06/GettyImages-1305948749-scaled.jpg17072560Katie Howellhttps://buysellownchicago.com/wp-content/uploads/2021/07/BSOC-Logo-300x102.pngKatie Howell2021-08-11 14:01:392021-08-11 14:01:40Transfer Taxes: What You Need to Know
A closing is when you, the buyer, sign the final ownership paperwork and officially, legally become the owner of your home! You will leave your closing with the home’s keys.
Your closing date will likely be listed on the purchase and sale agreement you will sign after your offer is accepted. On average, closings are scheduled within a month or two of signing this document.
LEADING UP TO THE CLOSING
As the buyer, the days leading up to the closing will include reviewing lots and lots of paperwork. Try not to stress! Your REALTOR®, your lender and your attorney are there to assist you.
One of these documents is the Closing Disclosure (also called the CD) which lays out your final loan terms and closing costs. You will get your CD from your lender at least three days before closing for you to review.
The CD will ensure there are no surprise costs for you at the closing table. Compare this with your initial Loan Estimate when you applied for the loan, and if you see significant discrepancies, contact your lender at once.
Lender costs such as underwriting, credit report and origination fees
Commission for both the buyer’s and the seller’s agent
Property taxes
If you’re nervous about how to accurately anticipate the closing costs, consult your loan estimate. It includes estimates for each of these line items. Also, Nerdwallet has a free, online calculator.
WHAT TO EXPECT DAY-OF
You will attend the final walkthrough of your home within 24 hours or the day-of your closing. Typically, you, your REALTOR® and the seller’s agent will attend as you make sure any and all request repair work was completed.
What are you looking for? You’re ensuring everything is functioning properly and that nothing has broken or been damaged since the inspection. Ask your REALTOR® for a list of what to look for during the final walkthrough. If everything is as it should be, you’re ready to close! If you see anything amiss, you and your REALTOR® will contact your attorney and the seller’s agent to negotiate potential compensation for the problems at the closing table.
What should you bring to the closing table? A pen, a government-issued photo ID and a cashier’s check or proof of wire transfer to cover the closing costs and any remainders of the down payment. Ask your attorney how much you should pad for potential closing costs increases such as prepaid interest.
Note: bringing “cash to close” does not mean you should bring cash!
Depending on your state or personal circumstances, ask your attorney if you need to bring any other documentation such as proof of homeowner’s insurance.
AT THE CLOSING TABLE
Prepare yourself to sign a large stack of paperwork! Your attorney will go through each one of these documents, although you will also receive them the night before to review them in greater detail.
Who is there? At minimum, you can expect it to be you, your attorney and the lender. Depending on the circumstance, the seller may attend if they haven’t already signed their necessary documents. No matter what, you are not alone. Your attorney and your REALTOR® are available to answer questions or address concerns.
WHAT’S NEXT?
You have your keys! You have officially purchased your home! Here are a few best practices to kick off your first hours/days as a homeowner on a strong note:
Take your copies of the closing documents you signed and save them in a secure place.
If you negotiated a same-day move with the seller, keep track of each key! Confirm you’re receiving one for any and all doors, mailboxes or entries.
Prepare a list of authorities or organizations (like the U.S. Postal Service) you need to notify of your change of address, as it applies.
With constant communication and intentional preparation, your closing can feel like an exciting culmination of all your hard work, research and exploration. Utilize the team of professionals at your back so you can save on stress and celebrate this exciting milestone.
https://buysellownchicago.com/wp-content/uploads/2021/07/GettyImages-1212754341-scaled.jpg17072560Cory Hallhttps://buysellownchicago.com/wp-content/uploads/2021/07/BSOC-Logo-300x102.pngCory Hall2021-08-11 11:07:582021-08-11 11:07:59What to Expect During A Closing: Buyers
https://buysellownchicago.com/wp-content/uploads/2021/07/buyers-open-house-checklist-blog-header.png18752400Cory Hallhttps://buysellownchicago.com/wp-content/uploads/2021/07/BSOC-Logo-300x102.pngCory Hall2021-08-11 11:02:372021-08-11 11:06:04Every Buyer’s Go-To Open House Checklist
This group of professionals will help you throughout the homebuying process. As you assemble your homebuying squad, consider working with all of these experts to make your home purchase confidently and with minimal stress.
Like an athletic team, each member of the homebuying squad plays a crucial role in helping you achieve homeownership.
MEET YOUR REALTOR®
On this team, you are the captain, and this is your head coach. Your REALTOR® not only represents you, but also advocates for you and your interests during the transaction from start to finish.
Whenever you feel lost, confused, worried, stressed or curious, this person is your go-to resource. If they don’t have the answer, they will know how to get it for you! Sit down with your REALTOR® to build a homebuying game plan. Communicate your goals and priorities and establish a communication system you both are comfortable with.
Also, your REALTOR® may have lenders, attorneys and inspectors they can refer you to, though you are not required to use the people they recommend.
Best Practice Tip: CC or keep your REALTOR® in the loop whenever you communicate with someone on your homebuying team.
MEET YOUR LENDER
Your lender is like your athletic trainer. This is the person who can help you determine your buying power based on your financial health.
Great questions to ask your lender include:
What types of loans am I eligible for?
How can I work on my financial health to qualify for each kind of loan?
When should I get prequalified or preapproved? (And what’s the difference between the two!?)
And more!
Connect with a lender as early as possible in the homebuying process. That way, there are no disappointing surprises down the road based on your financial limitations.
MEET YOUR ATTORNEY
Your attorney is like your defense. This is the person who will review all the paperwork and contracts during the transaction. They will communicate your requests and advocate for your interests with the other party’s attorney.
Your attorney will become more involved in the transaction as soon as you’re ready to make an offer on a property. Once the offer is accepted and you move through attorney review and the inspection, you and your REALTOR® will be regularly communicating with your attorney and the seller’s attorney.
On closing day, they will also sit down with you at the closing table to take you through each document.
Buyer Best Practice: Use an attorney who specializes in real estate. It can be tempting to use a friend, family member or acquaintance who is a practicing attorney in another specialty, however, real estate attorneys are well-versed in the intricacies of the real estate transaction.
MEET YOUR INSPECTOR
Your inspector is like your special teammate. They have a very specific, yet very important, purpose in the transaction: inspecting your future home for damage, financial or physical risk, or code violations.
While inspections are not mandatory, they are highly encouraged as they allow you to proceed with your home purchase as informed as possible.
Once the inspection is complete, they will send an inspection report. Don’t be afraid to ask your REALTOR® questions about the contents of it! If you have a list of requested repairs or credits, this is what you’ll communicate to your attorney.
BONUS: YOUR FAMILY & FRIENDS
We can’t leave out your fans and supporters! It’s up to you how involved you would like your friends and family to be in the homebuying process. Whether they’re actively on the homebuying squad or simply on the guestlist for your eventual housewarming party, friends and family can provide helpful perspectives or advice.
No matter what, you are not going through the homebuying process alone. You have a whole squad of experts who have your back!
https://buysellownchicago.com/wp-content/uploads/2021/08/BuySellOwn-Blog-Headers-12.png10801920Cory Hallhttps://buysellownchicago.com/wp-content/uploads/2021/07/BSOC-Logo-300x102.pngCory Hall2021-08-11 09:20:532021-09-20 14:18:52Meet Your Homebuying Squad
