In real estate, a “contingency” refers to a condition of the Purchase Agreement that needs to occur in order for the transaction to keep moving forward. As the buyer, there are many contingencies that you can choose to include in your contract. Here are five most common.
Inspections are for the benefit of the buyer. The home inspection covers a general examination of the interior and exterior of the home, as well as its systems. However, there are several other inspections that fall under this contingency, such as ones for mold or damage from wood-destroying insects. Once you’ve completed all your inspections, you’ll receive reports for all the inspections you’ve elected, as well as recommendations on how to remediate the home’s problems. You’ll then have the opportunity to negotiate with the seller on repairs. If you can’t reach an agreement, or if you simply feel that the home needs too much work for you to handle, you can walk away from the sale.
This contingency gives you time to apply for and receive a loan in order to purchase the home. It says that, if for some reason you’re unable to receive financing, you have the right to look for alternative sources or to back out of the sale. Your financing is not set in stone, a pre-approval is not a guarantee of a loan. From there, you still have to go through the underwriting process.
The appraisal contingency goes hand-in-hand with the financing contingency. In fact, receiving a satisfactory appraisal is usually one of the conditions that the mortgage company has for granting you a loan. An appraisal determines the fair market value of the home. The appraisal contingency ensures that you’re protected if the sale price doesn’t fall in line with whatever the fair market value is determined to be. If there’s a difference you’ll be able to renegotiate the sale price with the seller or to find additional financing. However, if both those options fall through, the appraisal contingency allows you to back away from the deal, unscathed.
In real estate, the title to a home is the record of its ownership. It’s a legal document that shows who has owned the home, past and present. It’s also a record of any liens or judgments that have been made against the property. In a typical scenario, a title company or your attorney will review the title on your new home before closing and resolve any issues so that the title can be transferred to you free and clear.
Home Sale Contingency
As a buyer this contingency allows you a specified amount of time to find a buyer for your current home. If you can’t find a buyer within that time, you have the freedom to walk away from the sale with your earnest money still intact.
Depending on your unique situation, there are several documents you’ll need when you apply for a home loan. The exact forms you need for a home loan depend on your situation. For example, someone who is self-employed will likely have to provide different forms than someone who is employed by a company.
Although the exact forms might vary, a lender can get a good sense of your approval odds by reviewing the following and running a credit check.
- 2 years of tax returns and W2’s
- Most recent bank statements, all accounts
- Most recent pay stub (minimum 30 days)
- If self-employed, 1099s and copy of business license
- Rental history or mortgage statement
- Divorce Decree or separation agreement
- Explanation of any inquires on credit report
- Drivers License
Outdated kitchen. Overrun backyard. Unusable basement space. If you have a home renovation project on the mind, the first thing you have to consider is how you are going to finance it. Here are the most common options to make your dreams become a reality.
Cash. Paying in cash is the most straightforward financing option, just save until you have enough money to cover the expenses. This will help eliminate spending outside your budget; however, it can also extend your timeline.
Mortgage Refinance. If you’ve been making payments on your home for a few years and your interest rate is higher than current market rates, you may be eligible for a mortgage refinance, reducing your payments and freeing up some money.
Cash-Out Refinance. You can tap into your home equity and borrow up to 80 percent of your home’s value to pay off your current mortgage plus take out more cash to cover the renovations. This option is encouraged only when you’re making improvements that will increase the value of your home, as it can add a lot of interest and fees.
Home Equity. Getting a home equity line of credit allows you to borrow money against the value of your home. You receive usually up to 80 percent of your home’s value, minus the amount of your loan.
Retirement Funds. Homeowners can consider pulling money from a 401K or IRA account, even though they aren’t specifically meant to cover a home renovation. This option might incur additional penalties or tax payments, but may be worth it when making improvements that will benefit them financially in the long run.
The costs of the home purchase is more than just the sale price. For example, closing costs, which make up about 2% to 5% of the home’s purchase price, are an added expense.
Your Lenders provide a Closing Disclosure (CD) at least three business days prior to closing on a mortgage. But as a buyer you’ll need to budget for these added costs ahead of time.
Origination fees. This is the fee charged by lenders for processing the application and underwriting it. The fee typically ranges from about 0.5% to 1% of the borrower’s mortgage.
Service charges. These include items such as the appraisal, credit report, flood determination and certificate, tax status, pest inspection, title search and insurance, and survey fees. Appraisals and surveys can cost anywhere between $300 to $500 each.
Transfer taxes and recording fees. Transfer taxes vary by state. It does not matter if the buyer or seller pays, as long as the transfer tax is paid to the government, so transfer taxes can be negotiated between the buyer and seller.
Escrow items. Homeowners insurance, property taxes, and primary mortgage insurance (if applicable) also are added fees. Buyers moving into a homeowners association may need to pay monthly dues for the upkeep of the community.
Example: A buyer purchasing a $275,100 home with a 5% down payment makes the loan amount $261,345. Closing costs are estimated at 2.5% of the loan value, so $6,533. The buyer made a $2,000 earnest money deposit at the time of the initial purchase offer so the remainder needed is $4,533 in cash at the time of closing. A Total of approximately $20,288.00 in cash to pay for the down payment and closing cost.
You’ve found your dream home and now it’s time to cross all your T’s and dot all your I’s before it’s all your own. And one of the first items on your closing checklist the home appraisal. So, what exactly is that?
The home appraisal is essentially a value assessment of the home and property. It is conducted by a certified third party and is used to determine whether the home is priced appropriately.
During a home appraisal, the appraiser conducts a complete visual inspection of the interior and exterior of the home. He or she factors in a variety of things, including the home’s floor plan functionality, condition, location, school district, fixtures, lot size, and more. An upward adjustment is generally made if the home has a deck, a view, or a large yard. The appraiser will also compare the home to several similar homes that were sold within the last six months in the area.
The final report must include a street map showing the property and the ones’ compared, photographs of the interior and exterior, an explanation on how the square footage was calculated, market sales data, public land records, and more.
After it is complete, the lender uses the information found to ensure that the property is worth the amount they are investing. This is a safe-guard for the lender as the home acts as collateral for the mortgage. If the buyer defaults on the mortgage and goes into foreclosure, the lender generally sells the home to recover the money borrowed.
TOWNHOUSE VS. CONDO: WHICH SHOULD YOU BUY?
Whether it’s your first time buying or you just want to purchase something smaller, townhouses and condos are both great options. Check out the differences between the two to help aid you in your search!
Condominiums are similar to apartments in that you purchase an individual unit inside of a larger building, but not the property it sits on. This generally includes access to the building’s amenities, such as the clubhouse, pool, and gym. However, condo owners are not responsible for the upkeep and repair of these common areas. Because of the number of shared spaces, living in a condo often allows for meeting new people and building a strong sense of community. There is a fairly similar vetting process for loan approval as for a full-sized home; however, the lender will also look at the health of the condo association.
Those who purchase a townhome are generally purchasing the complete unit, both inside and out, including the land it sits on. This might also include the driveway, yard, or roof. Traditionally, these units are two- or three-stories tall and may also include common areas like pools and parks. Townhome owners pay a fee to a homeowners association every month and the loan process is the same as buying a full-sized home.
Which is the best choice?
Both townhomes and condos offer less maintenance than a traditional home and generally offer great shared areas. Your decision ultimately comes down to you and your family’s needs and wants. Things you’ll want to take into consideration include location, lifestyle, family growth, and price.
How much homeowners actually see in savings largely depends on where they live. Sunny areas of the U.S. stand to benefit. For example, homeowners in Utah and California tend to gain the most from their solar investment. Utah residents are able to offset 84% of their utility bill with solar power, while California residents offset nearly 75% of their bill.
The following Northeast states found some of the highest offsets to their utility bills: New Hampshire (76%); Vermont (70%); Massachusetts, New York, and Pennsylvania (67%). These Northeast states even beat out sunny Arizona, where owners were able to offset 66% of their average utility bill by using solar power.
Many states pay residents for the solar power they generate at the same rate as what they charge. This approach is called net metering. In states with net metering, residents won’t need to worry as much about timing their usable. The rest of the states use a variety of pricing methods that effectively reduce the payback on solar for their customers.
Homeowners considering solar will want to find out how much their utility will payback to them for the solar power they don’t use that ends up returning into the grid.
Researchers found that most homeowners use less than half of their solar power directly and then feed it back to the grid or invest in battery storage to use it later
When you own your home, things are going to break and, unless you want to spend your money on visits from a neighborhood handyman, you’re going to need to fix them yourself. Luckily, you don’t need an arsenal of tools to handle most home maintenance fixes. These five tools will cover most of your basic projects.
Cordless drill. A cordless drill is a must-have for installing cabinets, drawer pulls, hinges, picture frames, shelves and hooks, and more. Whether it’s for do-it-yourself projects or repairs, you’ll use your cordless drill just about every month.
Drain cleaners. Shower and bathroom sink drains are susceptible to clogs because of the daily buildup of hair and whisker clippings. You can use chemical clog removers like Drano, but they’re expensive and the lingering chemical scent is unpleasant. Instead, buy some plastic drain cleaners that can reach into the drain to pull out the clog of hair and gunk. You can purchase them on Amazon or at a local hardware store for a low price.
Shop-vac. No matter how careful you are, spills and accidents will happen and there are some tasks that just can’t be handled with paper towels or a standard vacuum, like pet messes or broken glass.
Loppers. Even the minimum amount of care for your landscaping will require some loppers to remove damaged branches, vines, thick weeds, and any other unruly plants in your yard.
Flashlight. You’re going to want something a little more powerful than your iPhone flashlight when you’re in the crawlspace!
Always take measures to protect your online life. Here are a few ways to prevent, or at least minimize your risk of, being exposed while online: Following these steps will help mitigate your risk of fraud and will help protect your online data.
If you have used the same passwords on several accounts for a while, it might be time for new ones. Cyber Security experts advise people to use complex passwords featuring numbers, symbols and letters. Passwords are like toothbrushes: you should never share them, and they should be changed often!
Update the security software on all your devices., like cell phones and tablets. Be sure to set automatic updates to your operating system and applications and install update fixes and patches to protect yourself.
Be careful when shopping online. Many sites, such as those from departments stores, encourage you to save your personal and financial information after making a purchase. Do not it! Even sites that are secure can be hacked.
If someone offers you money in exchange for your personal or financial information, it is most likely a scam. Cybercriminals pretend to be a legitimate source to get personal information. They might use emails or text messages to try and trick you into clicking on a link or opening an attachment. Examples include: “We’ve noticed some suspicious activity on your account” or “There’s a problem with your payment information, please click here to make this month’s payment.” They may also offer you free things or say you’re eligible to register for a government refund. If it sounds too good to be true, it probably is. If you are unsure whether a text or email is legitimate, contact the company. Go to the company’s website and use the contact information found there. Financial institutions will never ask for your personal information, and it should never be shared with anyone.
If you lose your debit/credit card, ID, phone with the mobile banking app, or if you compromise your personal/financial information online or over the phone, inform your financial institution as soon as possible. They will help you take steps to protect your accounts.
If you have been a victim of online banking fraud or a scam, contact IC3.gov and file a complaint.
Starting. Takes. Forever.
Waiting to break ground is the most frustrating part. It involved three major hurdles: Getting the floor plans approved by the development’s architectural-review committee. Getting the final contract from the builder. Getting a construction loan from the bank. Be sure your working with a reputable company with a team to industry professionals.
Lots of expenses aren’t included in the price of the house.
The land, not including property taxes and property-owners association fees are purchased before construction can begin. Also, some preliminary steps are required by the builder and the county where you purchase are required, such as, topographical map and architectural review; the development’s road-maintenance fund for wear and tear; septic-system permit, and test for the septic system. These expenses can’t be included in a loan—because you don’t have a loan yet.
Construction Loans Short-Term Loan
If you haven’t already purchased the land a construction loan is specific designed to finance the cost to build a home, 12 months or less with a strict approval condition and required a detailed schedule of your construction plans.
There are more cost-effective ways to design a house.
Ask questions about cost-savings upfront instead of just pursuing your dream design. Ask how much you we save if we choose a floor plan with a smaller footprint, but the same square footage? The cost of site prep, cement and roofing could be far less.
The same is true for the materials. Instead of stonework, should you go with stucco? Instead of a long, curved driveway leading to the garage, would the topography have allowed for a shorter driveway?
In the end, you may have spent about $100,000 more than you wanted, and while it may be your “forever home,” do your best to be well informed.