When you are buying a home, you will sign several contracts. If you are working with a buyer’s agent, you will sign a buyer agency agreement. When you have found a home you would like to buy, you will sign a buyers contract, or contract to buy and sell real estate.
1. Understand the finances set in your buyers contract.
Your buyers contract will define your purchase price and terms including purchase price, earnest money, loan amount, and cash at closing (down payment). It is important to have an estimate for closing costs, monthly mortgage payments, and possible repairs so that you can budget properly. Closing costs are not included in your Purchase Price and Terms.
Upfront costs: earnest money, inspection fees, buyer closing costs, down payment, immediate/necessary repairs (if any)
Monthly costs: mortgage payment including home owner’s insurance premium and taxes
Work with your agent to make sure that your upfront costs and monthly costs are within your budget. This should have been established in general terms when you first meet your buyer’s agent, but you will work out the details when you are signing your buyers contract.
2. Understand ways to terminate the buyers contract.
The main reasons that you may need to break contract on your home is if the home does not pass the home inspection. If the home inspector finds an issue with the house that is not satisfactory to you for any reason, you can break contract.
Also, if you are unable to find home owners insurance, or a loan with conditions to your satisfaction, you can break contract by the deadline in your contract. You do not have to have home owners insurance by the deadline, but you will lose the right to break contract because of insurance issues by the date set in your contract. The important thing is to shop around to get the best coverage for the price.
There are several other important issues that need to meet yours (or your lenders) satisfaction in order to continue the closing process including a satisfactory appraisal, review of the Title, and CIC documents.
3. Know the dates.
Your buyers contract will set the dates for important events like Loan Application Deadline, Appraisal Deadline, Inspection Objection Deadline, etc. If you use Outlook, or Gmail, iPhone, or maybe a wall calendar, transfer the dates from your contract to your calendar, or keep a copy of the contract with you. Make sure you know the deadlines for each task, and to complete the task by the deadline. This isn’t a good time to try out your favorite “dog ate my homework” excuse. Once you go into contract, there is a whirlwind of events that take place, and you do not want to miss any of them.
4. Understand the types of inspections available.
In addition to a typical home inspection, which examines all major components of your home, you can also have the land surveyed to make sure that the physical boundaries match the legal boundaries. In other words, ensure that your neighbor’s fence is not in your yard.
As with any other legal document, you should read and understand it before you sign it. Your buyer agent should be able to answer all of your questions before you sign. If you wouldd like to meet or talk to a Colorado Exclusive Buyers Agent, click here.
What are buyer closing costs?
Another term I didn’t know before beginning our home search was “closing costs.” Closing costs means more money that you have to scrounge up to buy a home on top of the down payment. This term will come up when you are looking for a loan or making an offer on a home. There are several decisions you can make regarding how you pay your closing costs.
What is included in buyer closing costs?
There are several different fees and charges that make up buyer closing costs. The fees will all be listed on your Buyers/Borrowers Closing Statement, and you can ask any remaining questions during closing. From experience, the closing meeting is kind of a whirlwind because there are so many documents to sign and discuss, so we went through it line by line with our buyer’s agent before the meeting.
- New loan charges
- Appraisal Fees
- Credit Report Fee
- Interest on loan
- Home Owner’s insurance (1 year up front)
- Property Taxes (1 year up front)
- Closing Fee to Title Company
- Title Charges (owner and lenders policy)
- Water Transfer Fees
Our exclusive buyer’s agent was able to give us a rough estimate of the closing costs before we made an offer on the home. That way, we could budget appropriately.
Most of these fees and charges cannot be reduced, but, you can shop around for home insurance and this can make a big difference in you closing costs.
When are buyer closing costs paid?
Buyer closings costs are paid at the closing meeting. They will be included as a lump sum along with your down payment.
There are two different ways to pay your closing costs.
You can pay your own closing costs, or you can ask the seller to pay them. You will make this decision when you make an offer on a home.
If you ask the seller to pay closing costs it generally increases the sale price of the home by the same amount. For example, you could offer $210,000 on a home and pay your own closing costs of approximately $5,000. Or, you can offer $215,000 on the same home, and ask the seller to pay your closing costs.
There are pros and cons to both options.
Seller Pays: The up side to this is that you will not have to have the cash for the closing costs at your closing meeting. The down side is, generally you make a higher offer on the home, and then the seller pays closing costs. This means that basically you will be paying interest on your closing costs.
Buyer Pays: The up side to this option is that if you pay the closing costs yourself in “cash”, you will not pay interest on closing costs. The down side is, you will need to budget for these costs along with costs to move, any repairs that need to be made to the home before moving in, and down payment.
We discussed the ins and outs of our situation with our agent to decide the best course of action for us. In the end, we decided that we would look for homes in a price range that we could pay our own closing costs.
To find out more information about closing costs, get connected with one of our exclusive buyer’s agents.
I am a home owner in Colorado, and I love it! I cannot explain how it felt to walk up to our front door for the first time as the owner, and unlock the door. And then get all of the locks rekeyed. First home improvement and I can’t explain it, but somehow it was fun to write that check. Sigh. I love our new house, on our new street, in beautiful Colorado.
Before I go off about the wonders of being a home owner, let’s talk about closing. What is closing anyway?
Who was there?
The seller and her agent
The buyers and our agent
Representative of the Title Company
What is the process like?
The process takes about an hour and a half and went something like this: the representative from the Title Company sat at the head of the table with a large, and I mean LARGE stack of legal documents. She would briefly explain one document and begin passing copies around the table. Many of the documents needed original signatures from all parties. So unless you’re famous and people want your autograph, you’ll probably never sign so many papers at once.
As each document got passed around, our agent would tactfully re-explain to us what the important parts of the document were. It’s not that I didn’t understand or trust that the Title Company was being honest with us; it’s just that I trust our agent will protect us by explaining the important points and why they are important from our perspective.
The seller’s agent also explained the documents to the seller, and what was important from her perspective.
What kinds of documents do we sign?
Now remember, there was a large, and I mean LARGE stack of documents. I don’t remember them all. Not only that, I don’t want to remember them all. But, here are some examples:
- Loan documents
- Warranty Deeds
- Information about your Escrow accounts
- Final Closing Statement
- Settlement Statements
Basically, we signed how much we are paying; that we understand how much we are paying, who we are paying and where the money is coming from , who we are working with and exactly what we are buying and that we understand what we are buying.
What is closing? It’s when everyone finally gets what they wanted from the transaction.
At the end, we signed over the cashier’s check to the title company (after all that trouble with the wire, I just went with the cashier’s check) and the seller handed us the keys to our new home.
Everyone left smiling. We are home owners, with keys in our hand. The seller has a new future, with money in her pocket, or account. The agents finally will get paid. Everybody wins.
