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Info for Home Buyers
Buying a home can be a fun and exciting experience. We hope the following tools will assist you in this wonderful step!- Contact Us to Discuss Your Home Buying Preferences
- The Pre-Closing Checklist
- The Perfect Post-Closing Checklist
- All About PMI
The Pre-Closing Checklist
Working through the mortgage process doesn't have to be stressful. Simply follow this checklist to guide you in your preparations. Use it in combination with the background information on this site and the guidance your loan officer provides, and you should feel knowledgeable and comfortable in all stages of your purchase.
□ Choose a lawyer or notary (if not already done) and send him/her the signed purchase offer as soon as possible. Review the fees and disbursements, anticipated adjustments, property transfer tax, mortgage deductions and other closing costs. Talk to your attorney about how you plan to be registered on title.
□ Satisfy any outstanding conditions, such as financing or a home inspection, within the time frame set by the offer. Be sure you fully understand how to keep the contract alive, and how to cancel it if the conditions can't be satisfied.
□ Once your mortgage application has been approved, make sure you receive a mortgage commitment and send a copy to your attorney.
□ Any tenants must either cancel their leases or sublease their current premises, if permitted. How much prior written notice is needed will vary, so check it out with your lawyer.
□ Arrange insurance coverage to take effect on closing. Be sure the insurance agent provides your lawyer with written confirmation before closing, showing the name of the insuring company, the amount of coverage, its expiration date and the name of any lenders in the loss payable clause. Coverage should be for the full insurable value of the building only (not the land), on a replacement cost basis.
□ Contact the water, electric and gas departments to have the meters read on closing, new accounts set up in your name and final bills sent to the seller. Many buyers do a "double-check" a few days before closing, just to be sure. Contacting the telephone and cable TV companies is also your responsibility.
□ Plan to meet your lawyer a day or two before closing to review and sign all closing documents. Don't wait for the actual closing date, when so many other things must be done. At that time you should deliver the money needed for closing, in certified funds, payable to your lawyer in trust. Be sure to get information about any payments due right after closing - the mortgage, property taxes or condominium maintenance.
The Perfect Post-Closing Checklist
You've just closed your house purchase--now what? Of course, there's the packing, unpacking and decorating. This checklist will help you stay on track.
□ Determine your moving needs, including:
- Movers or a van (donate items you will not take with you in the move prior to obtaining an estimate)
- Boxes (include a variety of sizes and divided containers for glassware)
- Packing paper, tape and markers to identify boxes
- Consider moving special breakables yourself, if possible
- Have paper towel, bathroom tissue, plastic cups and other necessities available for use on moving day
- Measure doors, hallways and stairways prior to moving day to be sure they will accommodate your possessions
- Save your receipts - you may be able to deduct some moving expenses
□ Get the names and addresses, payment dates, account numbers and amounts you have to pay for your mortgage, taxes, condo maintenance and utility charges.
□ Create your change of address notification list, including:
- The post office
- Employers
- Doctor and dentist offices
- Benefit providers
- Magazine subscriptions
- Auto and home insurance
□ Change your driver's license and your registration information with the Department of Motor Vehicles. Failing to do so could incur a fine.
□ Get to know your neighborhood: the closest grocery stores, pharmacies, police and fire stations, hospital. Ask your realtor or loan officer for recommendations for veterinarians and other professionals.
□ Call your local government office to identify garbage and recycling days.
□ Change the locks, or at least the tumblers, on all doors.
□ Consider upgrading the locks to deadbolts for greater home security.
All About PMI
Private Mortgage Insurance (PMI) is required on all loan transactions where the loan-to-value ratio is 80 percent or greater. (Some cash-out refinance transactions require PMI at 75% loan-to-value.) This means that if you bought your house for $100,000 and had a down payment of less than $20,000, you pay PMI.
PMI insures the lender - not you - against your default on the loan. Because statistics show that borrowers who put down less than 20 percent are more likely to default on the loan, lenders require PMI so that they'll recoup their investment in case of default. Under normal circumstances, the lender would not make the loan, but they're willing to take the risk as long as you pay PMI.
How do you get rid of PMI?
PMI is of concern to the borrower because, unlike mortgage interest, PMI is sometimes not tax deductible.
When can you stop paying PMI?
The lender cannot force you to keep the PMI once the loan-to-value has gone below 80 percent. However, your phone will not ring the moment you've paid the balance below the level requiring PMI. So what you want to do first is to take a look at your most recent mortgage statement and divide the remaining principal balance by the original purchase price of your home. If that number is below 80 percent, call the lender and find out their procedure for removing PMI.
If you haven't been paying on the loan for very long, you still may qualify for having PMI removed by virtue of appreciation. The lender probably will require a full appraisal, which will cost you approximately $300. But you will quickly recover this cost by not having to pay the PMI. After the cost is recovered, the amount you were spending on PMI goes in your pocket. You can pay a little extra each month toward the principal to reduce your loan balance and shorten the time you must pay PMI.
How can you avoid paying PMI?
There are ways of both avoiding PMI and achieving a smaller than 20 percent down payment. Many lenders offer a loan called an "80/10/10." Instead of one loan, you get two. You'll have a first mortgage of 80 percent of the home's value, a second mortgage of 10 percent of the home's value, and you'll make a 10 percent down payment. Some lenders may even offer an 80/15/5. This may seem bizarre, since you're still borrowing the same amount of money, but the lender in the "first position" is only on the hook for 80 percent, which is less of a risk than a higher amount. You get the small down payment and the tax-deductible interest. In addition, the total monthly payments are often smaller than one larger loan with PMI.
The other way out is to get a loan that builds the PMI into the interest rate. In this case, you agree to pay a higher interest rate in exchange for the lender loaning you more money than they normally would. It can be a nice compromise, because the interest is still tax deductible and it's simpler than doing two loan transactions. The key here is comparison. Ask your loan agent to run some numbers for you on an 80/10/10 and a loan with built-in PMI. Then see which one will cost less.
Note that these principles apply only to conventional loans. FHA loans have a Mortgage Insurance Premium (MIP), which is required for the life of the loan.
