|Owning your own
home is the American Dream. And that dream is more
alive today than ever before. Yet one of the first
realizations a prospective home buyer often comes to
is that the “dream home” does not always seem
affordable. At Long & Foster-Webber & Associates,
our staff will help you find the ideal Front Royal
VA Real Estate and the surrounding areas in Virginia
and West Virginia.
Buying a home has changed. Before, buyers usually
shopped for the best house they could find, then
“took out” a loan. Today, prospective buyers must
shop as thoroughly as they can for the best
financing as they do for the best house. In today’s
market, both tasks are equally important.
Experience has taught us that the buying process
involves common stages for all home buyers. To help
you understand that process, and make the most of
every day and dollar you spend, Long & Foster-Webber
& Associates has prepared this Home Buyers Guide to
provide an overview from the planning table to the
Of course, this short guide cannot answer all your
questions. For specific answers, we encourage you to
consult a Long & Foster-Webber Sales Associate.
After all, helping you fulfill your homeownership
dream is our business.
How Much House?
House hunting begins at home—with planning. The
first step toward buying a house is to sit down.
Before you grab the road maps and hit the streets,
you need to do a little planning. We call it
“pre-qualifying”. Simply, it’s determining how much
house you can afford to buy. Knowing your affordable
price range will bring your house-hunting into
focus. Many lenders, for a small “up-front” fee,
will send out all required verification and
pre-approve you for a mortgage, allowing you the
opportunity to negotiate as a cash buyer.
How much house you can afford to buy depends on two
things: how much you can afford for the monthly
housing payment, and how much you can invest in the
down payment. Monthly payments include principal and
interest on the mortgage loan, and property taxes
and insurance against fire and other hazards. These
four costs are often abbreviated “P.I.T.I.”. For
some buyers and lenders, monthly housing costs may
also include homeowners association dues,
condominium fees, and mortgage insurance.
In today’s market, an “affordable” home is not so
much determined by sales price as it is by the
financing which translates that price into a monthly
payment. A house hunter’s first step is to set a
housing budget, then go shopping for the house
(price) and payments (P.I.T.I.) that fit that
Even though there are many ways to qualify to buy a
home, make sure the monthly payment makes sense for
you. How large a payment you qualify for will depend
upon a variety of factors. These factors include
credit history, size of down payment, and length of
employment. Everyone’s circumstances are different.
How Much House Can I Afford?
The key items are the size of the down payment,
interest rate, any monthly property fees, and the
amount of the mortgage. The down payment might be
zero in the case of VA-backed mortgages. A down
payment of 20% or more on a conventional loan will
eliminate the need for mortgage insurance. Your Long
& Foster-Webber Sales Associate can be very helpful
to you in determining just how much house you can
Sources For Your Down Payment
The obvious source of money for your down payment is
either your savings or the proceeds from the sale of
a home you already own. But there are some other not
so obvious sources. In recent years, for example
“parent power” has taken some new twists for
HOME EQUITY LOAN. Parents often have considerable
equity built up in their own homes—and many are
tapping that asset through home equity loans to make
a gift to the youngsters. Ask your tax advisor for
current information. Often lenders will require a
“gift letter” to verify that parents don’t expect
SHARED EQUITY/PROFIT-SHARING. In return for
providing a part of the down payment, the parents
(or another investor) share in the “profit” or net
equity of the house when the homeowners eventually
LIFE INSURANCE. If you have built up a cash value on
your life insurance policy over the years, you may
be able to borrow from your insurance company up to
the amount of this accumulated cash value. Often,
they will even ask a more favorable interest rate
than would be asked for other types of loans.
STOCKS AND BONDS. If you feel the market doesn’t
favor selling your stocks or bonds now, you may be
able to secure a bank loan using your portfolio as
Company Profit Sharing or Savings Plan. Look into
the possibility of withdrawing what you have in your
profit sharing or savings plan account or borrowing
against it, if your company has these programs.
Mortgage Insurance Can Reduce Down Payment
If you obtain a conventional loan, you may make a
down payment of 5% or less. Through the lender, you
will be required to buy private mortgage insurance (PMI).
This insurance provides protection for the lender in
case of default, allowing the lender to approve a
larger loan amount.
Mortgage insurance offers a variety of payment
options. You may make an initial payment at closing
and monthly payments with the house payment. You may
make only an initial payment or only monthly
payments. You may even increase your interest rate
and have the lender pay the insurance. Be sure to
ask your lender for a comparison of the benefits of
each of these plans.
The larger the down payment, the less money you need
to borrow. This means a lower monthly payment.
However, remember that in addition to your down
payment and monthly payments, you will need money to
pay for closing costs, moving, appliances, household
setup, a reserve for family emergencies, and other
miscellaneous items. So don’t plan to put your last
penny down on the closing table.
More Mortgage Help
New types of mortgages exist featuring help for
first- time buyers and flexible terms for current
home owners. These help home buyers to “afford more
house” and to buy sooner by expanding qualification
What To Look For
Choosing a place to live can be one of the most
exhilarating experiences of a lifetime. We’ve
learned through the thousands of home seekers we
have helped that the best approach is to be
prepared. Literally, to do some homework. Our
observation is simple. Your move can be an
improvement if you duplicate what you like in your
present community and avoid what you dislike.
House Hunting Begins At Home
The search can begin in your present home so we’ve
developed some questions to stimulate your thinking
and help you identify your needs and preferences.
Once you’ve clarified what you like in your present
community, you will have a better idea of what you
want to find. Plus, you will be able to express your
preferences clearly to your Long & Foster-Webber
Sales Associate who can help you find it.
One hint to keep in mind as you go house hunting is
an old wisdom: “The best time to think about selling
your home is when you’re buying it.” In other words,
what appeals to you as a buyer today will probably
also appeal (or what turns you off will be a turn
off) to buyers tomorrow. A careful house hunter will
benefit years from now when it’s time to sell to an
equally value-conscious buyer. Build your buyer
savvy by reading newspaper classified ads,
homes-for-sale magazines, REALTOR® Web sites and
visiting open houses.
County And City Questions
Would you characterize your present area as urban,
suburban, semi-rural, or rural? Is the population
density low, medium, or high? Is the population
decreasing, stable, or increasing?
What natural features are the most significant?
Woods? Hills? Flat land? River? Ocean shore?
Man-made lakes? Streams and ponds?
How do you commute to work? Do you walk? Drive? Car
pool? Taxi? Bus? Train? How far must you travel and
how long does it take morning and evening? Do you
use available public transportation for local trips
or to visit close-by communities? Can someone reach
your home on public transportation?
Where do you do your shopping? Central commercial
districts? Shopping malls? Supermarket shopping
Community shops or home delivery? Imagine a list of
typical stops in one week . . . how many miles and
how much time would visiting the entire list
require. Do you want greater convenience?
What types of schools does your family attend now?
From grade school to graduate school, and from day
care needs to special vocational training, what
facilities will you require in the next few years?
Are there any special needs or plans? Although it’s
extremely difficult to compare quality of education,
especially when the most important ingredient is the
relationship between teacher and student, some
statistical indicators can be helpful. Average class
size at grade level. Comparative standardized text
scores. Average salary of teachers. Percentage of
high school graduates who go to college.
What does the area offer for recreation and
entertainment? Music? Movies and live stage? Sports
arenas? Museums? Nightlife? What types of indoor and
outdoor sports facilities are available? Are there
public parks, country clubs, athletic clubs,
fraternal groups? Do you require any special
Choosing A Neighborhood
After you take stock of the larger view of the
county and city, this section helps you zero in on
your neighborhood preferences. In real estate, an
old maxim says there are three criteria that
determine market value: “location, location, and
The concept of neighborhood isn’t as precise as
county or city. Some people consider the boundaries
to be the district around a grade school. Others
consider it “walking distance”, more or less within
a half-mile radius. Wherever you draw the line, a
neighborhood is the immediate area around your
Every neighborhood can be described from three
standpoints: its people (your future neighbors),
what it looks like, and where its services are
located. Yet any neighborhood description is highly
subjective, which brings up another observation from
No matter how much hard data one gathers about a
neighborhood, nothing compares with information that
local people provide. Whether it’s fellow workers,
letter carriers, or people at a bus stop . . .
neighbors are the best observers of a neighborhood.
Talk to as many people as you can, and ask them the
Do neighbors socialize regularly, or hold block
parties, picnics, holiday parties, organize sports
teams? What are the ways they have met their
neighbors? Walking a dog, commuting, PTA, parties,
little league, gardening?
What types of dwellings: high-rise or low-rise
apartments, condominiums, multi-family structures,
single-family houses, mobile homes? How much do the
neighbors care for lawns and gardens? Are the houses
maintained “like new”, adequately, poorly? Is there
a Homeowners Association?
Are cars parked mostly in garages, driveways, in the
street? How old are the houses? More than 30 years
old? 15 to 30 years? New? How far apart are the
houses? Are property upgrades common? Swimming
pools, tennis courts, fences, walls, patios,
For convenience, how does the neighborhood rate? Can
you walk to shopping or is a car necessary? List
your five most frequent destinations. Are they
clustered in one stop-and-shop location? Two stops?
How much time is required for fire, police, or
ambulance services to arrive in an emergency? How
close are cultural centers, parks, restaurants,
How do the children routinely reach their schools,
play areas, friends’ homes? By walking, bicycle,
bus, or do parents drive them? Is public
transportation available for commuting or shopping?
Do any local ordinances affect pets, parking, lawn,
What are the disadvantages of the neighborhood?
Freeway, railroad, or airplane noise? Factory
pollution, heavy traffic, exposure to heavy storms,
Area House Styles
The metropolitan area is known for its variety of
housing. This section is designed to introduce some
of the basic styles most frequently found in the
area. Numerous variations and other unique styles
not mentioned here are also available.
CAPE COD. A symmetrical peaked roof often with dormer
windows which creates a one-and-a-half story design
with living space upstairs in an “expansion attic”.
COLONIAL. A two-story design with center hall or
side entry, often with basement. Variations often
feature double or single wings with garage. Numerous
styles include New England, Federal, Plantation,
Dutch Colonial, Georgian, French Colonial.
CONTEMPORARY. Modern and non-traditional creation of
living spaces using a spectrum of shapes, materials,
and designs. An “open” use of space is
characteristic. May be single or multiple stories.
HI-RISE CONDOMINIUM. Multi-story building with
elevator access to owned apartments; monthly fee
usually pays for use of recreation facilities,
maintenance and utilities.
CONDOMINIUM. A cluster of attached units,
four stories or less ranging from converted garden
apartments to ramblers and two-story townhouses.
Resident owns title to living space while jointly
owning public areas; condominium fee often covers
maintenance, amenities, sometimes water; other
utilities may be individually billed.
RAMBLER. A single-story house with all living areas
on same level. Variations include L-shape or U-shape
plan, perhaps with basement. Sometime called
“ranch”; if it is small, a “bungalow” or “cottage”.
FOYER. Entry is between floors. Makes use of
slope by placing basement partially above ground
level on uphill side, thus basement becomes livable
space. Also called “split entry”.
SPLIT LEVEL. Side wing has two levels off main
ground floor; designed for maximum living space
while occupying the least land. Garage and
sub-basement are frequent options.
TOWNHOUSE. A row of two-or-three-story dwellings
sharing common walls, also called “row houses”. Wide
range of styles from contemporary to colonial. The
term “semi-detached” describes a pair of townhouse
end units; similar in function to a duplex.
Choosing A House
We’ve saved the best for last. In many ways, finding
a home is easier than choosing a county and a
neighborhood, because you are considering tangible
details. Yet our experience suggests that many
people “decide” with emotion and “justify” with
facts. This section will help you find a better
First, one should realize that thousands of houses
are sold in the area every year. Inspecting the
thousands of houses on the market is obviously
impossible. But you can turn this overwhelming
selection to your advantage. If you can clearly
describe the features you require, your Long &
Foster-Webber Sales Associate can make a preliminary
screening for you. After you select the best houses,
you can concentrate on inspecting your top choices.
The key is knowing what you need.
How many people will be living in the house? Do you
prefer a new or resale home? What is your preferred
housing style? Townhouse, colonial, contemporary,
split level, split foyer, Cape Cod, rambler, or
How many total rooms do you need? Bedrooms,
bathrooms? How strongly do you require features such
as: separate living room, dining room, laundry room,
basement or attic, family room, fireplace, workshop
area, garage? How much property do you require? Do
you have preferences for any particular natural
Many of our customers find it helpful to keep a
record of the houses they inspect. A notebook is
handy with pages large enough to record vital
information, as well as hold stapled pictures of
attractive houses and neighborhoods or clipped
Is the asking price comparable to other houses in
the neighborhood? Higher or lower? However, when
carefully comparing properties, be sure to take into
account unique features and improvements that vary
house-to-house, and consult your Long &
Foster-Webber Sales Associate who can provide a
Comparative Market Analysis (CMA).
Is the existing mortgage assumable? Required down
payment amount? What financing method is acceptable
to the seller?
What are the annual property taxes? Will the taxes
increase with the transfer of deed and a new market
price? Any local bonds or assessments?
Outside. Address of property? House style? Lot size?
Landscaping details? Degree of grounds maintenance
required? Age of house? Structural condition? Are
any major repairs or improvements necessary?
Maintenance of building?
INSIDE. Make a sketch of floor plans. Total number
of rooms and baths on each floor? Any extras such as
intercom, fireplaces, phone jacks? Built-in
appliances: dishwasher, garbage disposal, trash
compactor? Adequate storage space?
CONSTRUCTION. Inspect quality of materials, present
condition, craftsmanship both inside and outside.
Insulation? Weather stripping or storm windows?
SYSTEMS. Plumbing, electrical, heating and
cooling. What type of fuel does the heating system
use? Approximate annual cost? A professional
inspection of the major systems is recommended for a
house that you are interested in purchasing.
House Hunting on the Web
At any moment a complete description of homes you
would like to visit is available through Long &
Foster-Webber & Associates’ Web site,
www.webberrealty.com. Here’s how it works.
When a house is listed for sale by any area broker,
the home’s vital statistics are fed into the
computer: the lot size; the age and kind of home
(condo, townhouse, single family); style (colonial,
contemporary, Cape Cod, etc.); material (brick,
stone, wood); the number, size, and use of rooms (4
bedrooms, 2 1/2 baths, kitchen, living and dining
rooms, family room, finished basement and attic,
foyer, utility room, garage).
Also included are features (fireplace, walkout deck,
patio, wooded lot); equipment (stove, dishwasher,
carpeting, etc.); the heating and/or cooling
systems; the water and sewage systems; the annual
taxes; the mortgage balance, monthly payments and
the amount of cash a buyer would need to assume the
existing mortgage (if it’s assumable), or the amount
of cash required if the seller offers to take a
second mortgage; and, finally, the price.
Finger-Tip Home Search
A buyer’s requirements can be fed into the computer
by a Long & Foster-Webber Sales Associate:
particular neighborhoods, styles of homes; the
number and kinds of rooms, and the price range. In
minutes, the computer makes a quick search among the
houses listed, and prints out all the houses that
meet the buyer’s criteria.
The computer also helps buyers determine which home
sellers will offer seller financing. It can
calculate the amount of mortgage payments at various
interest rates, under various financing plans. It
can also help evaluate the investment and the
financing that is right for the buyer. Plus, it’s
updated each morning, as hundreds of houses enter
and leave the market. In short, it’s the only way a
buyer can check out almost everything that’s “out
there”. (In any area without a computer, this market
search is done personally using listing books.)
OFFER TO BUY
Negotiating The Purchase
You’ve found it—your “dream house”! You want to buy
it. Now what? You make an offer by submitting a
signed real estate offer to purchase with the type
of financing you desire.
This will be the sales contract once the seller
accepts. When you and the seller sign, you are
agreeing to the contract conditions. Before you sign
it, read it carefully and make sure you understand
every detail. Ask questions. Verbal agreements
should be written into the contract. If you plan to
have a lawyer represent or advise you, retain one as
early as possible. This is where your Long &
Foster-Webber Sales Associate and an attorney can
give you the assistance you need.
Offers And Counter Offers
Your Long & Foster-Webber Sales Associate will take
the offer to a “contract presentation” with the home
seller and the listing broker. In some areas, the
three of them will discuss the offer, and the seller
will accept it as written, or make “counter offers”
on unacceptable aspects, or reject it. The selling
broker will then bring back the offer to buy to the
home buyer, who can accept it, counter-the-counter
offer, or reject it. The offer to buy becomes a
contract when all parties have initialed every
counter and signed the offer.
When you sign the offer to buy, you also will have
to submit a deposit to show that you are earnest
about your desire to buy—appropriately called
Making Sure Your Contract Is Complete
Sales contracts differ, depending on circumstances,
but there are several provisions you may want to
include in a contract for the purchase of real
- Deposit. The
amount of “earnest money” should be clearly
stated, plus the amount of money you will be
paying at settlement and your sources of
financing. A common purchase deposit in many
areas is 1-2% of the purchase price, deposited
- Contingency on
Financing. Be specific about the total loan
amount, the date a second or third mortgage is
due, and the exact financing terms. Many
contracts have an “alternative financing clause”
that allows buyers to accept different financing
than that which is written in the contract, as
long as it doesn’t affect seller’s net proceeds.
- Contingency on
Inspection. You may make the contract contingent
on a building inspection report. You will
usually have to pay for this inspection, but the
peace of mind or detection of a problem is well
worth the cost of inspecting.
- Termites. The
contract may require the seller or buyer,
depending upon the area, to pay for a termite
inspection. The results of this inspection may
further require payment for removal of the
infestation and repair of any damages from the
infestation. You should get a written report at
settlement indicating that the property is free
and clear of any active termite infestation. In
some areas, well and septic certificates are
Property. Light fixtures, drapery rods,
chandeliers, washers, dryers, refrigerators,
heating oil in the tank, storm windows and
doors, firewood, even swimming pool chemicals,
and other items not physically attached should
be specified in writing if they’re to be
conveyed to the buyer. Misunderstandings based
on verbal agreements can delay settlement as
well as cause friction.
- Repair Work.
Standard contracts of sale require sellers to be
responsible for plumbing, heating, mechanical,
and electrical systems to be in working order at
time of settlement. You should conduct a
“pre-settlement walk-through inspection” which
should be made several days before or not later
than the day of settlement.
- Title Attorney
or Insurance Company. The buyer has the right to
select a title attorney or insurance company.
You should shop and compare prices before
deciding what attorney or title company will
conduct your settlement. Also, be sure to clear
the title company with the lender, whose
interests are also involved. Ask your Long &
Foster-Webber Sales Associate for a list of our
Prestige Partners®, who provide settlement and
insurance services throughout our seven states
and the District of Columbia.
- Closing and
Occupancy Date. Include an arrangement with the
seller in the event you can’t secure possession
on the agreed date, such as a daily rent-back
agreement for “post-settlement occupancy”.
Locating The Right Loan
You have the option of shopping around for the best
terms you can obtain. Generally, a mortgage
acceptance requires 15-30 days for conventional,
30-45 days for VA and FHA from application to
approval. In some cases, loans may be approved more
quickly. Prosperity Mortgage® Company is a Long &
Foster and Wells Fargo Home Mortgage Company.
Shop Smart For Mortgage Money
It used to be that qualified home buyers simply went
to their nearest bank or savings and loan for the
standard, fixed-rate, 30-year mortgage or the VA/FHA
backed loan. Interest rates were not highly
Now, of course, things have changed. Competition
among lenders is lively, and smart borrowers shop
carefully to find the financing that best suits
their circumstances and needs. Here’s where to shop:
LENDERS. Mortgage lenders issue mortgages
to borrowers. They then process and sell the
mortgages to large investors or into the secondary
LOAN BROKERS. Some individuals or groups
charge a fee (usually to the borrower) to match
borrowers with lenders. Sometimes they make direct
loans. An advantage of working with mortgage brokers
is that they often represent many investors and can
provide you with many more financing alternatives,
usually at the same price as the mortgage banker.
FINANCIAL INSTITUTIONS. Mutual savings banks,
savings and loan associations, insurance companies,
and some commercial banks are the traditional
sources of mortgage loans. Savings and Loans often
grant favorable terms to their own account holder.
LENDERS. Individuals (often home sellers)
and groups (sometimes seller’s employers—if the
seller is being transferred) lend money. This source
is especially helpful in arranging second mortgages,
but can also assist with first trusts, wrap-arounds,
and other mortgage plans.
UNIONS. Federal credit unions can write
30-year conventional and government insured
mortgages. Some will make loans; others may not.
This may be a good source for credit union members.
COMPANIES. To compete with the more
traditional lenders, some finance companies promise
quick service and some do not charge mortgage
“points” or “pre-payment penalties”.
Ten Questions Most Lenders Will Ask You
Here’s the information most lenders will need:
- The amount of
money you wish to borrow and the length of time
you will need the money.
- Your current
address and any other addresses covering the
previous 24 months.
- Your social
- Your current
employer’s name, address and phone number and
the same information for any other employers in
the previous 24 months.
- Your gross
monthly income including documentation: most
recent pay stub, final pay stub for any job you
may have left in the current year and previous
year’s W-2 form(s).
account statements (all pages) for any bank,
credit union, retirement, or brokerage accounts.
- Your assets
(real estate, personal property, stocks and
bonds, life insurance with cash value, etc.).
- A complete
list of your debts including account numbers,
balances and minimum payments.
- A copy of the
- An account, in
writing, of any problems concerning your
application and any documentation of the
circumstances of those problems.
information in hand, here are the steps the lender
will take to process your application:
- Verify the
- Get a credit
- Make a
- Review your
- Decide whether
or not to make the loan.
You Should Ask Most Lenders
Here’s how to shop; a few of the questions to ask a
- Are both
fixed-rate and adjustable mortgage loans
- What is the
- What are the
- How long can I
“lock-in” the financing at the current interest
- What are the
other fees a lender may charge me in conjunction
with my loan?
- Are funds for
a second mortgage available?
- On adjustable
loans: How often will the interested rate be
adjusted? Is there a maximum limit on each rate
change? How often will the monthly payment be
adjusted? Is there a ceiling on payment
adjustments? Can the term of the loan be
- Is there a
pre-payment penalty clause? This involves extra
charges for paying off the loan before maturity.
About 80% of all loans in the United States are
paid off early.
- Is there an
open-end clause? This clause in a mortgage
allows you to borrow in the future for home
improvements or other purposes, up to the amount
of principal you’ve paid off.
- What is the
“grace” period? How late can a monthly payment
be made before a late charge is assessed? What
will happen if a payment is missed?
- If you sell
your house, will the new buyer be able to assume
your mortgage at the same interest rate?
- Do you have to
pay “points” to get your new mortgage? Usually
lenders charge points for the cost of giving you
a mortgage loan. A “point” is 1% of the loan.
- Will the
lender require mortgage insurance?
It is important to keep the tax advantage in mind
when considering whether to rent or buy. A mortgage
payment of $1,500 could result in a lower overall
cost than an $1,200 rent amount after you consider
Remember a buyer may not realize this “tax break”
until tax time comes around unless withholding taxes
are decreased in anticipation of increased interest
payment deductions. Please contact your tax advisor
for more information.
Fire And Hazard Insurance
Most lenders require a home buyer to provide a
one-year paid receipt at settlement for a fire and
hazard insurance policy, often called homeowner’s
insurance. These policies are available from several
leading insurance companies through Long & Foster
Insurance Agency, Inc., or the insurance company of
your choice. Fire and hazard insurance provides
protection for fire and other perils to your home
and its contents.
What To Expect From A Home Inspector
What can home buyers expect from a home inspector
—besides a bill for $225 and up (depending on the
size of property and/or complexity of the
First of all, require proof of membership in the
American Society of Home Inspectors. Next, expect a
quickly-delivered (one or two-day) written report.
Expect practical returns. While you can see for
yourself many flaws in a house, the practiced eye of
a professional inspector can probably spot more,
especially in areas not easily accessible to a home
buyer. Specific information could even reduce the
price of a house if the seller will agree the price
has not already been discounted for defects.
problems (heating, roofing, plumbing)
problems (insulation, paint)
- Minor problems
(electrical outlets, kitchen sink)
If no serious
problems are found, inspection can pay off
indirectly in assurance that you are making a sound
Many states now require that sellers provide buyers
with either a residential property disclosure or
Title insurance provides protection in the event any
of a number of past actions threaten the title to
your property. Most lenders will require title
insurance to protect their interests. Be sure to ask
about an “owner’s” policy as well, to protect your
title. You may save money if you buy owner’s title
insurance at the same time as mortgage title
insurance, rather than buying it separately later.
As a home buyer, you may be able to save money with
a “re-issue rate” for title insurance, if the
property changed hands within the last several
years. The title insurance may allow a lower
“re-issue rate” premium because the recent title
search is still valid. Consult your title attorney
and insurance company.
After Loan Approval
After the lender approves the mortgage, the buyer
will receive a “loan commitment letter” stating the
mortgage amount, interest rate, and length of loan
term. The buyer should check it carefully, and
return a signed copy to the lender or follow other
Next, the selling and listing brokers will
coordinate a settlement date. You should be sent a
letter confirming the date, place, time, and a
checklist of everything you, as the home buyer, need
The purpose of the walk-through inspection on the
day of settlement or several days prior to
settlement is to determine if all conditions in the
contract are satisfied. The time for the buyer to
inspect and note defects for correction by the
seller is during the contract negotiations and prior
to signing the sales agreement. Repair or
replacement items should be noted in the contract or
contingent on a house inspection, otherwise, most
resale homes are sold in “as is” condition.
It is up to the buyer to perform the walk-through
inspection, not the seller, who may or may not be
present. The buyer should be accompanied by the
selling agent. The home seller should be sure
utilities are on so that equipment can be operated.
Room By Room
The buyer should try all lights and switches; turn
all faucets on and off, run shower, flush toilets;
turn on the furnace and central air conditioning (in
the off-season, buyer should hire a professional to
certify proper functioning of both heating and air
conditioning); test all stove burners, oven at bake
and broil; run some ice cubes through disposal to
test blades; run dishwasher, washer, dryer through
complete cycles; open and close all windows and
doors. In short, try everything, even keys and the
All deficiencies should be noted, and funds may be
withheld from the home seller by the settlement
attorney for repairs, if seller does not correct
problems prior to settlement. The selling broker
will coordinate with the listing broker and seller
to make repairs before settlement, if possible. Upon
receipt of bills and notification that repairs are
complete, the attorney will release balance of funds
to the seller, if money is escrowed for needed
The Big Day!
The big day is here! Tonight you can pop open the
champagne, but today there will be a lot of paper
signing and a poignant passing of the keys (don’t
forget the garage keys and electric door opener,
At the settlement will be an attorney or title
company representative (chosen by the buyers), all
buyers, listing and selling brokers, and all owners.
The home seller should bring all warranties on
equipment and any instructions on equipment
maintenance or operation.
The attorney will have searched the title, provided
title insurance, and obtained old and new lender
instructions. First, all unresolved walk-through
deficiencies are resolved.
With the buyer, the attorney explains the deed of
trust or mortgage; the deed of trust note or
mortgage note; VA, FHA, or lender forms; and
settlement sheets. Buyer signs all these and pays
the balance of the down payment and buyer’s closing
costs with cashier or certified check.
Open Look At Closing Costs
“Closing costs” have lost much of their mystery in
Under the Real Estate Settlement Procedure Act (RESPA),
the home buyer is furnished an estimate of closing
costs by the lender, in advance of the closing. In
some cases, some of the closing costs may be paid by
the seller; this is particularly true for new
housing, where the seller is the builder.
Settlement fees vary widely depending on price,
location, and other factors, but overall the buyer’s
costs usually average between 3% and 7% of the sales
price. Items that are usually included in the
settlement fees are the loan origination fee,
mortgage insurance premium (M.I.P.), attorney fees,
owner and lender title insurance, recording fees,
county tax stamps, state tax stamps, and the survey
fee. In addition, the lender will require an
appraisal fee and a credit report fee in advance of
A few other items, not required to be listed under
the law, may also have to be paid at a closing.
These include advance deposits held in escrow for
real estate property taxes and insurance. The lender
collects a portion of these every month and then
pays the insurance and taxes when they are due.
Because specific closing costs vary from area to
area, and transaction to transaction, we encourage
you to consult with your Long & Foster-Webber Sales
Associate. Sometimes closing costs can amount to a
sizable sum. Remember that some of the items are tax
deductible. The loan origination fee, prepaid
interest, and property tax adjustments may be such
Signing On The Dotted Line
With the seller, the attorney explains the
settlement sheets and gets the home seller’s
signature on them and the deed. Seller pays
appropriate closing costs.
If the seller’s taxes or insurance have been
escrowed, the seller will receive any money
accumulated in the account for bills not yet due.
Additionally, the seller will be reimbursed for any
money paid in advance and not used, such as property
taxes. The seller will receive these refunds at or
after settlement, depending on the area. Taxes and
homeowners association dues or condominium fees will
be prorated on a daily basis. Seller, buyer, and
brokers are supplied a copy of settlement sheets for
The house keys are passed. You are now the proud
Different Mortgage Strategies
When it comes to paying for a home buyers today have
numerous financing options. This is a summary of the
primary alternatives. Information about rates and
programs is available from your Long & Foster-Webber
Sales Associate or your Prosperity Mortgage® Company
Loan Originator. Prosperity Mortgage is a Long &
Foster and Wells Fargo Home Mortgage company.
Interest rates are for illustration only.
CONVENTIONAL MORTGAGE. A conventional loan is a
mortgage made between a lender and a borrower with
no other parties involved (such as VA or FHA).
Conventional loans customarily require a 20% down
payment. Down payments may be as low as 5% with
mortgage insurance; there may be no down payment
when using secondary financing to make up the
Example: A buyer purchases a $400,000 home. The
lender requires a 20% down payment ($80,000). At 7%
the $320,000 balance has a monthly P&I payment of
$2,391 over 30 years. Mortgage insurance could lower
the down payment requirement to 5%, or $20,000,
which increases the monthly payment.
Advantage: Conventional mortgages are
straightforward and easy to understand. Conventional
loans offer the largest variety of financing
Fixed Rate conventional loans feature equal monthly
payments that are made over the term of the
mortgage. The standard time period is 30 years or
less. The interest rate remains the same which keeps
the principal and interest payments the same over
the term. Payments can vary if taxes or insurance
escrow payments change.
Adjustable Rate loans are mortgages that allow for
payments which change periodically over the life of
term of the mortgage. An ARM loan has a set interest
rate and payment for a period of time and then
adjusts to the market rate at a predetermined point.
ARM loans feature lower rates over the initial loan
Balloon Loans are also conventional mortgages. They
include a provision for amortization over the
typical 30 year period but call for payment in full
at an earlier date. Balloon loans offer a lower
interest rate and payment over the period covered
but may require either refinancing or a large
payment at the end of the term.
Interest Only is a feature allowing for payments to
be applied to just the interest over a period of
time. Initially the loan does not amortize; the
principal does not decrease each month. Later
payments amortize the principal over the remaining
loan term. An assumption is made that rising
property values will increase borrower property
letters ‘VA’ stand for Veteran’s Administration – a
branch of the US government. VA is not a lender but
rather guarantees mortgages for lenders to help
eligible veterans. VA loans require no down payment
up to the VA maximum loan limit. VA loans can be
assumed by qualified borrowers.
Example: A veteran purchases a $235,000 home. With
no down payment the loan amount is $239,700
including the VA Funding Fee. At 7% interest over 30
years the monthly P&I payment is $1,595.
Advantage: VA requires no down payment. The seller
can (but is not required to) pay all closing costs
for a veteran.
LOAN. FHA is
the Federal Housing Administration, a division of
the US Department of Housing and Urban Development.
FHA does not lend money; instead, like VA, it
guarantees mortgages allowing lenders to make loans
that might not be eligible for conventional
financing. Down payments are as low as 2.25%. Both
fixed-rate and ARM mortgages are available. FHA
loans are assumable by qualified borrowers. FHA
mortgages have credit standards and other rules that
are more flexible than typical conventional
Example: A buyer of a $200,000 home makes a down
payment of $4,500. The loan amount including
up-front MIP would be $198,432. At 7% interest over
30 years the monthly P&I payment is $1,320.
Advantage: FHA offers a low down payment and is
designed for first-time buyers.
Long & Foster-Webber & Associates is not a mortgage
lender. These figures are provided by Prosperity
Mortgage® Company. Prosperity Mortgage is a Long &
Foster and Wells Fargo Home Mortgage company. The
actual terms of any financing are subject to the
requirements of each individual case. Choosing the
“best” mortgage depends upon the circumstances of
the individual borrower. Your Long & Foster-Webber
Sales Associate will be happy to explain the options
available to each buyer for mortgage financing.
Words To The Wise
AGENT. A person acting on behalf of another, called
Agreement of Sale. Known by various names, such as
“contract of purchase”, “purchase agreement”, “sales
agreement”, or “binder”, according to location or
jurisdiction. A contract in which a seller agrees to
sell and a buyer agrees to buy, under certain
specific terms and conditions spelled out in writing
and signed by both parties.
PERCENTAGE RATE (APR). Includes quoted
interest rate on the loan plus all additional
service and finance charges associated with the
loan. Includes all costs of financing; those paid at
the time of closing and those paid over the term of
the loan. The APR is usually slightly higher than
the note rate.
APPRAISAL. An expert judgment or estimate of the
quality or value of real estate as of a given date.
VALUE. The valuation placed upon property
by a public tax assessor as the basis for taxes.
SALE. An instrument which transfers title to
personal property (chattels); a “Deed” transfers
CERTIFICATE OF TITLE. A document signed by a title
examiner or attorney, stating that the seller has a
good marketable and insurable title.
STATEMENT (SETTLEMENT). The computation of
financial adjustments between the buyer and seller
as of the day of closing a sale to determine the net
amount of money which the buyer must pay to the
seller to complete the purchase of the real estate
and seller’s net proceeds. Also, “Settlement
COMMISSION. Payment to a real estate broker for
CONVEY. To deed or transfer title of property from
one person to another.
DEED. A formal written instrument by which title to
real property is transferred from one owner to
another. Also, “conveyance”.
TRUST. Like a mortgage, a security
instrument whereby real property is given as
security for a debt. However, in a deed of trust
there are three parties to the instrument: the
borrower, the trustee, and the lender (or
MONEY. The money given to the seller by the
potential buyer (usually held in escrow) upon the
signing of the agreement of sale to show that buyer
is serious about buying the house. Also, “Deposit”.
EQUITY. The interest or value which the owner has in
real estate over and above the debts against it.
(Sales Price – Mortgage Balance = Equity.)
ESCROW. Funds, property, or other things of value
left in trust to a third party. The escrow may be
released upon the fulfillment of certain conditions
or by agreement of the parties.
FIXTURE. What was formerly personal property which
is now permanently attached to real property and
goes with the property when it is sold.
INSURANCE. Protects against damages caused to
property by fire, windstorms, and other common
CONTRACT. Between a homeowner (as principal)
and a licensed real estate broker (as agent) by
which the broker is employed to market the real
estate within a given time for which service the
owner agrees to pay a commission. Also, “listing
VALUE. The highest price which a buyer,
ready, willing and able but not compelled to buy,
would pay, and the lowest price a seller, ready,
willing and able but not compelled to sell, would
accept. Basis for “listing price”, or “asking
Market Price. The actual amount for which a piece of
property is sold. Also, “Sales Price”, “Purchase
MORTGAGE. A lien or claim against real property
given by the buyer to the lender as security for
NOTE. A written agreement to repay a loan.
The agreement is secured by a mortgage, serves as
proof of an indebtedness, and states the manner in
which it shall be paid. Also, “Deed Of Trust Note”.
(PRINCIPAL, INTEREST, TAXES AND INSURANCE).
Most residential mortgage payments include the above
and are therefore referred to as P.I.T.I. Also,
POINTS. Sometimes called “Discount Points”, a point
is one percent of the amount of the mortgage loan.
Penalty for the payment of a
mortgage note or deed of trust note before it
actually becomes due.
PRINCIPAL. This word has several meanings:
- to denote the
- a capital sum
lent on interest;
- one who
appoints an agent to act on their behalf;
- either party
to a contract.
PROPERTY MANAGEMENT. The operation of real property,
including the leasing of space, collection of rents,
selection of tenants, and the repair and renovation
of the buildings and grounds.
PRORATE. To allocate between the seller and buyer
their proportionate share of an obligation paid or
due. For example, a prorate of real property taxes,
fire insurance, or condominium fee.
SALES ASSOCIATE. A person with a real estate license
and associated with a specific real estate broker.
SURVEY. A map or plat made by a licensed surveyor
showing the results of measuring the land with its
elevations, improvements, boundaries, and its
relationship to surrounding tracts of land. A survey
is often required by the lender to assure a building
is actually sited on the land according to its legal
TITLE. As generally used, a document that indicates
rights of ownership and possession of a particular
TITLE ABSTRACT. A summary of the public records
relating to the title to a particular piece of land.
An attorney or title company reviews an abstract or
title to determine whether there are any title
TITLE INSURANCE. Protects lenders and homeowners
against loss of their interest in property due to
legal defects in title.
TITLE SEARCH OR EXAMINATION. A check of the title
records, generally at the local courthouse, to make
sure the buyer is purchasing a house from the legal
owner and there are no liens, overdue special
assessments, or other claims.
TRANSFER TAX. State tax, local tax (where
applicable), and tax stamps (in some areas) required
by law when title passes from one owner to another.
Ask your Long & Foster-Webber Sales Associate for a
copy of the “Understanding the Role of the Real
Estate Agent” (LF1192, for use in the state of
Maryland only); “A REALTORS® ROLE” (LF1193, for use
in the state of Virginia only); or “The Agency
Disclosure Brochure” (LF1195, for use in the
District of Columbia only).
© 2006 The Long & Foster® Companies. All Rights
Webber & Associates is a licensee of Long & Foster®
Real Estate, Inc.