The Real Loan ApplicationThe Offer to Purchase and Contract will require you to begin the loan application within a certain number of days of reaching contract. Your mortgage lender and the closing attorney will both need a copy of the contract to do their work. Your mortgage lender will usually give you a checklist of information that you will need to take by the office. Here is a list of the most commonly required information for a loan application:
· Each buyer's social security number
· Signed contract (preferably an original)
· Last 3 months bank statements
· Most recent pay stub
· Name, address and phone # of employer for last 2 years
· W-2 statements for past 2 years
· Tax-returns for last 2 years if self-employed
· Residential address for past 2 years
· Bank name, account name & # of checking, savings, stock, 401ks
· Name, address, account name & amount of open loans
· Information on other real estate loans and leases
· Credit Report and personal check (Lender will order it for you)
· Certificate of Eligibility or DD-214 (VA loans only)Most lenders expect you to initially pay for a credit report ($30-50) and the loan application fee if there is one ($250-350). These costs will show up on the HUD Settlement Statement at the closing with (POC) beside them, which means, "paid outside of closing". Every buyer wants to know how much the monthly payment will be and about how much the closing costs will be. Your mortgage lender will be able to provide you with that information.
Your lender will give you the option of "locking into" the current rate or "floating" in case rates drop. Some programs allow you to "lock-in" to the current rate but drop down if the rates go down. An experienced lender will be able to advise you on which of their programs will best work in your situation. They will also have the experience to work through problems that could possibly delay closing.
The Inspections
In North Carolina the inspections are customarily done on or before a certain date as specified in the Offer to Purchase and Contract. Your buyer agent can recommend the names of several companies to perform the pest inspection and the home inspection and arrange for an inspection time with the sellers' agent. It is in the buyer's interest to attend the inspection to see the condition of the structure first hand and to ask questions about any serious problems right there on the spot.
If it is impossible for the buyers to accompany the inspectors, you may want to speak to them by phone after reading the report. Your buyer agent will help you write a letter to the sellers' agent requesting which items you would like to have addressed and which ones you might eventually handle. A good common sense guide is to address those problems that affect structure (especially water damage), health, safety and the operation of systems.
Also in the Contract the sellers are given a certain number of days to respond back to the buyers as to which items they are willing to address and which ones they choose not to do. The sellers may respond by either repairing the item prior to closing, offering money toward repairing the item, or refusing to fix the item period. Resolving the repair list is a second round of negotiation. Skilled buyer agents will invariably help their clients find a fair resolution to the inspection reports.
Closely associated with Home Inspections are various environmental and land use concerns that your buyer agent should help you to address if they occur. The more common concerns appear at the end of this guide.
Homeowners Insurance
Fewer than 10 insurance companies are writing homeowners' insurance policies in coastal North Carolina at this time. This is due to the higher risk of property loses associated with hurricanes. For this reason it is important that you contact your insurance agent immediately after you apply for your loan. The companies that are still writing homeowners' policies in Wilmington are:
Flood Insurance
If the property you intend to purchase is in a special hazard zone classified as an "A" or "V" zone, your lender will likely require that you purchase flood insurance. If your property is outside the special hazard zone and you suspect that your home might be remotely susceptible to flooding from surface water originating off-site from your property, you should still consider flood insurance. Always ask neighbors if their neighborhood has ever flooded.
Taxes
LOCAL GOVERNMENTS YEARS 2001/2002 New Hanover County .6900 Unincorporated Fire District .0500 City of Wilmington .4700 Town of Wrightsville Beach .1430 Town of Carolina Beach .3950 Town of Kure Beach .2950 Brunswick County .5925 Pender County .6680 Village of Bald Head Island .6350 Local governments set their tax rates as part of their budgetary process prior to 1 July each year. The tax year goes from 1 July through 30 June. Your actual property tax is determined by multiplying the tax rate(s) that apply to your property times the tax valuation divided by $100.
Your tax valuation is determined by a tax appraisal that is different from a market appraisal used for loan purposes. In both Brunswick and New Hanover counties, 100% of the tax valuation is used when figuring your property taxes. New Hanover County's last tax valuation was for fiscal year 1999. It is North Carolina law that local governments revalue property at least every 8 years.
Example:
If you live in the City of Wilmington and the tax value of your property is $150,000, your property tax would be:
JURISDICTION TAX RATE TAX VALUE/$100 New Hanover .69 $150,000/$100 Wilmington .47 $150,000/$100
Homeowners' Association Dues and By-laws
The amount of the Homeowner Association dues can be found on the MLS property report. If you are concerned about the financial condition of the Association ask your agent to find out the name and phone number of the Association treasurer. Your buyer agent should be able to get a copy of the Neighborhood Association By-laws from the seller's agent or from the Association's officers or management company. The By-laws will explain how the Association is supposed to be operated.
Neighborhood Covenants and Restrictions should also be read before you make an offer, especially if you are concerned about such things as pets, out buildings, fences, outside boat storage, conducting a business from your home, etc. Not all properties are located in a neighborhood governed by an association. Such properties tend to be located in the older parts of the city or towns or in the rural parts of the counties.
Utilities and Other Services
After all of the contingencies are lifted and the closing seems imminent, it is time to arrange for your utilities and services. You can actually save money by coordinating the switchover of water/sewer and electrical services with the seller so that the Service Company only has to make one reading during one trip.
Power Water Sewer Gas Trash Pick-up Telephone Postal Service Cable/DSL Service Newspapers/Magazines
The Closing
The buyers, buyer agent and closing attorney attend the closing at the closing attorney's office. Sellers seldom attend as long as they have signed over the new deed to the buyers. Sometimes the sellers' agent attends the first part of the closing to make sure the HUD Settlement Statement is correct, all papers are signed on behalf of the seller and that all concerns of the buyers have been satisfactorily addressed. Once the closing attorney begins to lead the buyers through the paperwork of the loan, the seller agent's work is complete.
The meeting usually begins with the explanation of the buyers' portion of the HUD Settlement Statement. Each line item will be clearly explained and the buyers will be able to ask questions about how taxes and homeowners' dues are pro-rated, why taxes and insurance are placed in escrow, the purpose of title insurance, etc. The property does not actually change hands until after the closing when the closing attorney goes to the registrar of deeds and records your deed. Most routine closings are completed in a half-hour.
The HUD Settlement Statement
The HUD Settlement Statement is a form used by the closing attorney to account for how all monies are dispersed at the closing. It is a form that you should keep with your tax information long after the sale. As a matter of fact, your accountant will probably ask you to supply it with this year's tax information so he can complete your return.
Sellers can expect to pay the sales commission, the cost of preparing the deed, the revenue stamps to pay for recording the deed, pro-rated taxes and homeowner dues for the year of the sale, and the cost to express mail the paperwork to the sellers' mortgage company. If the seller offered home warranty coverage that cost could be reduced from the proceeds of the sale at closing.
The Buyer can expect to pay for all costs associated with the loan from the origination fee, credit report (POC), loan application fee (POC), appraisal, floodplain certification fee, and any other "loan" fees. The buyer will also pay for the home inspection, the pest control inspection, and a survey if ordered. Since the buyer selects the closing attorney, the attorney's fee is charged to the buyer. It covers the administrative tasks associated with collecting and dispersing the monies, guiding the buyer through the loan package, researching the title and ordering the title insurance, and recording the deed. The cost of the title insurance policy is in addition.
The buyer will be credited the sellers' share of the property taxes for the year, but will be expected to pay the entire year's property tax bill that he/she will receive in September and due in early January. Your mortgage lender will more than likely pay that tax bill when due with money that will come from the buyer's escrow account. A portion of each monthly mortgage payment will go into your escrow account so that enough money will be available to pay both your property taxes and annual insurance premium when they are due.
Buyers should expect their first year's insurance premium to be charged at closing, plus several additional months to bankroll the escrow account. If flood insurance is required, it will be handled in the same manner.
The above costs are typical for a buyer who must borrow to purchase property. Obviously there are other possible costs that if charged will appear on the HUD Settlement Statement.
A day or two before the closing, the attorney's office will send a draft of the HUD Settlement Statement to both agents to review with their clients. An easy way to make sense of this Statement is to turn to the back page and if you are the buyer, look for the section that pertains just to buyers. Each cost will be described and summed up at the bottom. That figure is brought forward to the front page under the buyers' section. If something is unclear or if you find a mistake, call your agent or the closing attorney's office for an explanation.
The Move
Most moving companies prefer at least 10 days notice for scheduling your move. A representative will stop by well ahead of time to estimate the size of your move and to let you know what to expect from the movers. If you decide to have your movers perform a full service move, you will still be expected to make decisions about art pieces, fine jewelry, liquids and gases, fire arms, prescription drugs and computers. If there is a chance that your things will go into storage make sure your important papers/disks are accessible. Also perform an inventory with video tape or digital camera in case of loss or damage.
Warranties
Most new appliances carry manufacturer specific warranties. Builders of new homes and owners of existing homes should collect and give documentation of coverage to the buyers.
Home warranty protection can be purchased by the seller to cover existing appliances while the home is being sold and continues to offer protection for the buyer one year after the closing. Even if the seller does not offer such coverage, the buyer can purchase coverage at or after closing. While it does not make sense for a new home with manufacturer warranties in place, it is certainly worth considering for homes with older appliances and mechanical systems.
A builder's warranty on a new home is only as good as the builder's character and the solvency of his/her business. It is in the best interest of owners of new homes to get as many repairs completed prior to closing as possible and to follow-up on any other repairs as soon after closing as possible.
Land Use and Environmental Issues
ASBESTOS
Asbestos is a naturally occurring mineral made of tiny easy to inhale fibers that can increase the risk of certain cancers when disturbed into the air and inhaled. It was used in a number of home construction products prior to 1980. Places where you may find asbestos products include insulation of old steam pipes and furnaces, old vinyl asbestos floor tile, and asbestos cement roof, shingles and siding. A general rule is to have asbestos removed by professionals if it is likely to become airborne. Asbestos products such as vinyl asbestos floor tile that can be covered without disturbing it is another option. As long as asbestos cement siding is not broken and is painted, it can be left in place. For more information on this material go to http://www.schs.state.nc.us/epi/asbestos.html.FLOODS
Every property located within the 100-Year Flood Plain is supposed to be identified on the property report form in the MLS. Buyers should also have a survey performed on which the 100-Year Flood Plain boundary is drawn on the plat or else it is stated that the property is not within the 100 year flood plain. There is some peace of mind in knowing the first floor elevation of an existing house. If you want this information, ask your surveyor to provide you with a Certificate of Elevation for the first floor living area. It will be written on the survey plat.RADON
If you are moving from a part of the country where radon gas is sometimes detected in basements you can relax. Not only do we have few basements, we do not have the geological formations that contain radon gas. You do not need to test for radon gas if you live in coastal North Carolina.
If you have any further questions at all, feel free to contact me.
Bob Jamieson, Broker
CRS, ABR, GRI
Intracoastal Realty Corporation
1900 Eastwood Road at Lumina Station
Wilmington, North Carolina 28403
Toll Free 877.505.5272
Business 910.232.1893
Fax 910.397.2825email bob@bobjamieson.com
web www.bobjamieson.com