The closing is a critical part of the home selling process.  At the closing, your home will legally be transferred to the buyer.  Be prepared for a lot of paperwork.  You’ll be signing your name on a lot of documents during this process.  Review the following points to help you prepare for your closing.

Prior to the Closing

• Expect the buyer’s lender to send an appraiser and a surveyor to check your home.
• Gather all warranties and instruction books for your home’s appliances or major systems to give to the buyer.
• Once you have a closing date, notify the utility, telephone, water, trash and other services to advise them of your final billing date.  Utility companies should make final meter readings on the day of closing.
• Have repairs and other specifications completed according to the contract so that final inspections may take place.  Prior to closing, your buyer will want to make a final inspection (or walk-through) to see that the home is still in good condition.
• Look over any terms in the contract that state when the buyer will take possession.  If you have not moved out by that date, the contract stipulates what will happen.

Closing Costs

• Ask your REALTOR® for a copy of the closing costs before closing.  This document is known as the closing statement or settlement sheet and will contain most of the charges you may be asked to pay.
• You may pay a loan discount fee or service fee.  This fee – or points – is a percent of the mortgage amount and charged by the lender to adjust yield to reflect current market interest rates.  For VA guaranteed loans, the seller pays the points.  Otherwise, they’re a negotiable item.
• Depending on your area and your negotiations, you might pay for charges related to the title, such as title insurance or attorney’s fees.
• The buyer will likely pay the fee for recording the mortgage, while you as the seller may be asked to pay the transfer fee and the deed recording fee.  Other fees, such as title company fees, document preparation, notary services or warranty coverage, may be charged for preparation of closing.  Your agent should inform you which fees are your responsibility.
• Typically, you as the seller will pay the commission to the listing broker.  If two brokers are involved, the fee is divided between them.  Your listing agreement will spell this out.
• After the balance you owe on your mortgage is subtracted from your proceeds, as well as any early payment penalties (if applicable), you also may pay a small charge to have the title cleared.
• You will typically be responsible for paying your prorated share of property taxes and hazard insurance until the date of settlement.  If these charges have been paid from an escrow account, you may still have money in your account.  Or, if the charges have already been paid in advance, you may receive money back from your lender.

The Closing

• Depending on the agreement, either the buyer or seller will arrange the closing and select the settlement agent.  The person who handles the closing may be a broker, lender, title insurance company, escrow company or attorney.
• The closing will take place at a mutually convenient time and place, usually within a 30 to 60 day period.
• Closing may involve more than one settlement activity: closing the property transaction, the buyer’s loan and possibly your mortgage.
• Any issues or questions should be resolved by this time so that both parties can simply review and sign each document.
• Your REALTOR® or attorney can help you prepare any paperwork that the contract has called for you to supply, such as the title insurance or a survey.
• You will sign over the deed to the buyer to convey the title to the property.  You should also review the final version of the settlement statement to be sure it is in order.

Sold!

The moment you’ve been waiting for – You’ve sold your house!  At the closing or shortly thereafter, you’ll turn over the keys to your house and be given a check you can take straight to the bank!

The home selling process may seem lengthy and complicated at times, but your REALTOR® is here to guide you through the process.

Contact Infinity Realty Guam today for the real estate company that will provide quality service you deserve.  (Click here).

DISCLAIMER: This information is provided for general awareness only and is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind.  Please consult with a professional in their respective expertise for complete details.

An Offer to Buy

When you receive an offer on your house, it is imperative that you review it carefully.  The offer tells you the price the buyer is willing to pay and under what conditions.  You may wish to consult with an attorney to assist you in reviewing the offer – it is the most important document of the sale.  Once you and the buyer sign it, it becomes the contract of sale.

Reviewing a buyer’s offer is an extremely important step in selling your home.  Your REALTOR® should assist you, advise you on the best course of action, and answer any questions you have.

Your Options

Once you and your REALTOR® have thoroughly reviewed the buyer’s offer, you have several choices.

• Accept the terms with no changes and sign the offer.
• Make a counter-offer to the buyer by making some changes.  In some cases, many counter-offers will take place before the final agreement is signed.
• Reject the offer entirely and wait for another.

Once you’ve signed an offer, you may accept a backup offer if that buyer clearly understands the house is under contract.  The backup offer becomes effective only if the first offer falls through and the transaction fails.

Price

• Consult with your REALTOR® to determine a price.  Your REALTOR® can estimate your proceeds – the sale price minus fees, taxes and insurance.
• Don’t be concerned if the offer you receive is exactly your asking price.  It doesn’t mean you under-priced your home, but rather that you priced it accurately.
• If the price is less than you wanted, look at the contract as a whole.  Perhaps the buyer is assuming some of the closing expenses.  Consider possession and financing terms, as well.
• Consider splitting the difference if you and the buyer are within a few thousand dollars of each other.  Remember that time on the market is an additional expense.

Earnest Money

An earnest money deposit will be held by a third party until an agreement is reached or there is a closing between you and the buyer.  At that time, the money is usually credited to the buyer and applied to the down payment.  Until you accept the offer, the buyer may withdraw the offer and get the earnest money back.  On the other hand, if the buyer fails to follow through with the contract once it’s accepted, you may be entitled to the earnest money.  Your REALTOR® can answer any questions you may have regarding earnest money.

Property Title

As part of the real estate contract process, you must prove to the buyer that you have a clear title on the house – that you own the property, and there are no legal claims against it.  Through a title search, proof is provided.

• The insurance company may search the title through the owner’s policy of title insurance.  Either the buyer’s insurance company or your own may conduct this.
• The abstract of title is a condensed history of a title to a property and a certification by the Abstractor or a title company that the history is complete and accurate.
• The certificate of title is reviewed by a title company or an attorney who searches the title and issues an opinion that the title is clear.

Property Deed

Be prepared to transfer ownership of the property with a deed.  A deed is a legal document that transfers the title (or ownership rights) of the property to the new owner.  Most buyers will require a general warranty deed, in which you guarantee that no one will bring a claim against the title.

Conditions and Contingencies

Review the contract for special conditions requested by the buyer.  A common condition is one in which the purchase of your home is contingent on the buyer selling his or her current home.  The conditions may also be more specific, such as asking you to provide a survey of the property.

Provisions

Although it may be dry reading, it is important to carefully read the contract and go over details with your REALTOR®.  Read the fine print in your contract to understand the provisions (or ground rules) of who pays for what in the context of the sale.  For instance, the contract should explain who is responsible if there is damage to the house after the contract is signed.  The responsible party will want to insure the property through the transition.  You or the buyer may add special provisions to the standard ones.

Sale Specifics

Does the refrigerator stay or go?  How about the curtains in the living room?  Double-check that everything you intend to sell with the house is listed accurately in the contract.  This may include items such as fixtures, window blinds, furniture, and appliances.

Contact Infinity Realty Guam today for the real estate company that will provide quality service you deserve.  (Click here).

DISCLAIMER: This information is provided for general awareness only and is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind.  Please consult with a professional in their respective expertise for complete details.

Your REALTOR® should give you as much notice as possible before a bringing a potential buyer to your home for a showing.  However, it’s a good idea to keep your home neat and orderly, and ready to be shown at a moment’s notice.

What to expect when your home is listed and ready to show:

• Your REALTOR® may hang a lock box on your door to allow other REALTORS® to show your home when you’re not there.
• Your REALTOR® may schedule an open house, so that interested buyers can tour the home without an appointment.  Open houses are usually scheduled on a weekend afternoon.  It is preferred that sellers leave their home during an open house.
• If potential buyers (or just curious lookers) “drop by” and want to see your home, take their name and number and refer them to your REALTOR®.  Don’t show them the house yourself without your REALTOR® there to represent you.

When Your Home Is To Be Shown

It is vital in the home selling process to have your home looking its best when an REALTOR® shows it to potential buyers.  Review the following tips to make sure home is ready for a showing.

• Turn on all the lights, including the outside entrance, even during the daytime.  Having the lights on brightens up dim areas and prevents harsh shadows caused by sunlight.
• Turn off the TV.
• Take your pets with you or ask a friend to keep the pets.  This is especially important during an open house.
• Put out fresh flowers, your best towels and a nice tablecloth, if suitable to your decor.
• It is best to leave when an REALTOR® brings a buyer to your house.  This allows the buyer to take his or her time going through the house and to feel more comfortable asking questions.  If you stay, be polite, but let the REALTOR® handle the questions, unless you are asked directly.
• Do not use scented sprays; in addition to being obvious, the scent may cause an allergic reaction in some people.  A potpourri pot gives off a more natural aroma, as does vanilla.  Place a drop of vanilla on a stove burner and turn it on for just a moment, to emit a “freshly baked cookies” aroma.
• Empty your kitchen trash, even if it is stored under the kitchen sink.
• Keep the beds made in all bedrooms.
• Open all draperies and curtains to let in as much natural light as possible.
• Pick up newspapers, magazines, empty glasses and other miscellaneous items that tend to get left behind in the living room or family room.
• Keep the floors swept, mopped or vacuumed.
• Dust daily.

Contact Infinity Realty Guam today for the real estate company that will provide quality service you deserve.  (Click here).

DISCLAIMER: This information is provided for general awareness only and is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind.  Please consult with a professional in their respective expertise for complete details.

Getting your home ready for a showing takes more than just tidying up around the house.  As you prepare your home to be shown to prospective buyers, you must look at it through a buyer’s eyes.  Your REALTOR® should help you spot the little things that buyers will notice – things they might otherwise use to try to negotiate a lower price.

Think about the following when preparing your home to be shown:

Reduce the Clutter!

Remove clutter from all areas of your home to create an impression of spaciousness.  After living in a home for any length of time, stuff begins to collect on shelves, counter tops, in drawers, closets, etc.  A prospective buyer won’t be able to see past your clutter to the beauty of your home.  You want as much open clear space as possible, so find a place for everything, and put everything in its place.

• Arrange clothes neatly in closets.  Limit storage on the floor and overhead shelves.
• Clear off kitchen counter-tops and keep sinks empty and clean.  Remove magnets and pictures from refrigerator for a fresh look. Clean and organize cupboard interiors – potential buyers are always curious about storage space.
• Don’t forget garages, and other storage areas.  These are often the most cluttered spaces in our homes!  A potential buyer will want to look at every room, every closet, and every nook and cranny, so clean and organize these areas for a fresh look.
• Arrange furniture to give an impression of spaciousness in each room.

Clean and Brighten Your Home

• Clean window trims and carpets.
• Replace worn, stained or smelly carpeting or install tiles altogether.
• Replace all lights with higher wattage bulbs and open all drapes.
• Look up – do you need to repair/paint a water stain or other blemish on the ceiling?
• Ask a friend or your REALTOR® to help you assess your efforts.

Remove Odors

If you smoke or have pets, you may not realize it, but your home inevitably has an odor.  An odor that potential buyers will sense immediately. Odor removal (and prevention) is essential when showing and selling your home.

• Consider using an ozone spray that helps to remove odors without creating a masking odor.
• Empty kitty litter boxes daily and use plenty of baking soda.
• Sprinkle carpet freshener on the carpet and vacuum regularly.

Quiet Squeaks; Repair Flaws

Check for signs of wear throughout your home.  They may seem minor, but flaws such as loose screws, worn paint and crooked drawer pulls will be noticed by a potential buyer.

• Check walls for smudges, chipped paint and torn or loose wallpaper.
• Tighten loose doorknobs, switch plates, cabinets, drawer pulls, etc.
• Fix sticking doors and windows, and squeaking floors and steps.
• Fix leaky faucets, and remove water stains and calcium.
• Repair or clean caulking on tubs and sinks.

Neutralize Your Home!

Neutral colors appeal to any decorating scheme.  You may love the yellow walls in your hall bath and red cabinets in the kitchen, but that may seem odd to a potential buyer.  Neutral themes, including floor and wall coverings, appliances and fixtures, offers the broadest appeal to home buyers.

Your REALTOR® can provide helpful tips for neutralizing your home, while still allowing its personality to shine.

Outside the Home

Your yard is a vital part of merchandising your home.  In addition to keeping your lawn well maintained, check the exterior of your home for needed repairs.  Review the following tips to make your home’s exterior as appealing as possible.

• Keep the lawn well-trimmed.  Keep shrubs and trees trimmed.
• Rake up loose leaves.
• Put away lawn equipment, toys and other outdoor items.
• Repair and paint or stain fences.
• Check exterior surfaces.  Make repairs, clean or paint as needed.
• Clean, paint and repair or realign gutters.
• Fix broken windows and screens, then wash.
• Washer blast the exterior of the house, driveways and sidewalks.
• Look at your driveway closely, and repair cracks, chips or holes.
• Make sure the entry light and doorbell work.
• Replace house numbers and welcome mat as needed.
• Paint, stain or clean the front door if needed.
• Brighten your landscaping with moveable, potted flowers.

Contact Infinity Realty Guam today for the real estate company that will provide quality service you deserve.  (Click here).

DISCLAIMER: This information is provided for general awareness only and is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind.  Please consult with a professional in their respective expertise for complete details.

While your REALTOR® will handle the details and legwork of the home selling process, you may find it helpful to review the Six Critical Factors of a Sale.  Arming yourself with some basic real estate knowledge will be helpful as you move through the selling process.

1. Determining the List Price

Before you set an asking price (or list price) for your home, your REALTOR® should complete a Market Analysis.  Your REALTOR® should be experienced to determine the most appropriate sales price for your home by working with you in evaluating several factors.  When setting a realistic fair market value of your home, you’ll want to consider the following:

• Don’t base your asking price simply on what you paid for the home.  You may be asking too little or too much.
• Determine how much time you have in which to sell your home.  If you must sell quickly, your REALTOR® may suggest a more competitive price or offer more favorable terms.
• In order to judge your competition, your REALTOR® will provide you with recent sales of comparable homes in your area, as well as homes currently available in your price range.
• Don’t take a chance by pricing your home too high!  It will just make your competition look better.  You will lose a large pool of eligible buyers who may not even look at your home because it’s out of their price range.
• Consider marketplace trends.  Your REALTOR® will be an excellent resource in this matter.

After evaluating these areas, your REALTOR® should assist you in establishing a realistic listing price.  Once you’ve set the price for your home, your REALTOR® should customize a sales and marketing program that will target exposure to a large segment of potential buyers.

2. Property Location

Another very important factor in selling your home is location.  You’ve heard the cliché a thousand times; “location, location, location.”  The location of your home truly is a big factor when selling.  Buyers may consider any or all of the following when determining where they want to purchase a home:

• Proximity to schools
• Proximity to amenities including hospitals and shopping centers
• Street traffic/neighborhood noise
• Property tax expense

3. Property Condition

Buyers consider the structural and mechanical integrity of your home as well as the upkeep and cosmetic appeal.  Before listing your home, make sure it is in good condition from top to bottom.  Anything that is in disrepair will show up on a home inspection and, depending on the severity, could quite possibly affect the sale of your home.

In addition to getting your house in tiptop shape, you want to do the same with your lot.  Your lawn doesn’t have to be as perfect as a putting green, but it should appear healthy, well maintained.

Your REALTOR® should guide you on what you can do to maximize the value of your home, making it even more appealing to buyers.

4. Market Conditions

Market conditions play a major role in the sale of your home.  Influential factors include:

• Interest rates
• Competition from other properties
• The economy
• Consumer confidence
• Weather

These factors are beyond our control; therefore your REALTOR® should respond to these conditions with the appropriate marketing and price considerations.

You’ve probably heard the term “seller’s market.”  In a seller’s market (also referred to as a “hot” market), homes sell quickly.  Often in a seller’s market, there are fewer homes on the market, meaning less competition.  This also means you have a better chance of receiving your asking price, and in fact, you may even be offered more.

On other side of the coin, in a “buyer’s market” (also referred to as a “flat” or “cold” market), sales lessen, more homes are available, and buyers often find great deals on houses.  If a seller is motivated (perhaps he is paying the mortgage on both the home he is selling and a new home), the selling price may be reduced, resulting in a bargain for the buyer.

5. Contract Terms

In real estate, the terms of the sale can make or break a contract.  House sale contingencies, closing dates and exclusions of accessories or fixtures should always be handled up front, in order to avoid any confusion that could affect the sale.  Your REALTOR® will handle the necessary details of drawing up the contract and confirming facts, figures and details.

Essential terms found on a real estate contract include the following:

• Names of the buyer(s) and seller(s)
• Property description
• The good faith earnest money deposit
• Purchase price and exact terms of sale
• Personal property to be included in home sale (i.e. stove, refrigerator)
• Amount of time acceptable for purchase offer
• Professional inspection
• Seller’s disclosure of known defects

6. Marketing

When marketing and advertising are done correctly, your home will sell more quickly and command a higher price.  Every property is unique, and therefore your REALTOR® should design a marketing plan to target the segment of buyers who would be most interested in your home.

You’re probably familiar with many real estate marketing tactics.  Soon after listing your home with an REALTOR®, a For Sale sign is placed in your front yard, and ads are placed in the newspaper and on social media.  Your REALTOR® may hold an open house to allow interested parties to tour your home and ask questions.  Your house will also be displayed on the Internet.

Beyond this “surface” marketing, your REALTOR® is working behind the scenes to sell your home.  This includes marketing your home to other REALTOR®, in addition to home buyers.

Contact Infinity Realty Guam today for the real estate company that will provide quality service you deserve.  (Click here).

DISCLAIMER: This information is provided for general awareness only and is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind.  Please consult with a professional in their respective expertise for complete details.

Ask anyone that has tried to sell a home on their own knows, selling a home can be complicated, time consuming and sometimes frustrating.  There are many legalities to deal with, numerous paperwork to manage, and from time to time, contentious personal feelings on the part of the potential buyer.  Professional experience, and support staff, makes all of these matters much easier for a REALTOR® to handle than the average home owner.

Selling your home should not be a bad experience.  Your REALTOR® can help you sell your home more quickly and easily by:

• Helping you set the right price on your home to attract the right
• Gathering data that will present your house and neighborhood in the best light
• Targeting the market with the most likely buyers
• Screening calls from people who may be more curious than serious about buying
• Showing your home to the best prospects
• Accessing an established local network
• Representing you during the offer process
• Doing the necessary paperwork and legwork
• Guiding you through closing

Gather the Facts

Buyers want to know details, and having the answers is a powerful sales tool for your REALTOR®.  Your REALTOR® will ask you lots of questions in order to create a customized listing and marketing plan that targets the correct buyer.

A little preparation on your end will make the process go smoothly.  Help your REALTOR® by providing the following information:

• The legal description of the property.
• The number of rooms and their sizes.
• Past utility bills, property taxes and insurance.
• Information about your mortgage including the type of loan, terms and conditions for payoff.
• Any liens against the property.
• If you live in a condominium or townhouse, include a copy of the association’s covenant and conditions, by-laws, monthly common area fees and special assessments.
• Special items or improvements about the house. (Point out things that may not be apparent on a walk-through.)
• The positive points about your neighborhood, such as demographic information and proximity to services, shopping, schools and other areas.
• Any defects that aren’t apparent. (Most areas require sellers to disclose defects.)

Contact Infinity Realty Guam today for the real estate company that will provide quality service you deserve.  (Click here).

DISCLAIMER: This information is provided for general awareness only and is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind.  Please consult with a professional in their respective expertise for complete details.

To sell your home, you’ll need more than just ads and signs.  You’ll need a REALTOR®. With an experienced REALTOR® you’ll should receive top-notch, priority service, in addition to ads and signs.  Your REALTOR® should be your trusted advisor, who is a skilled negotiator and to assist you throughout the selling process.  When working with you to sell your home, the goals of our REALTOR® should be:

• To obtain the best possible price for your home
• Negotiate the most favorable terms
• Secure a buyer in the shortest period of time
• Relieve you of the stress and inconvenience that can occur when selling a home

You can learn more about the home selling process by exploring these topics (click below):

• Services a REALTOR® Provides
• Six Critical Factors of a Sale
• Preparing your Home
• Showing your Home
• Receiving Offers
• Closing and Possession

Contact Infinity Realty Guam today for the real estate company that will provide quality service you deserve.  (Click here).

DISCLAIMER: This information is provided for general awareness only and is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind.  Please consult with a professional in their respective expertise for complete details.

As any Homeowner knows, there’s a subtle difference between owning a house and owning a home, and much of that has to do with changing the house’s character to fit your own.

Moving In

Considering the quantity and value of your possessions, as well as the type of place you’re moving from and to, you must decide the best method to move:

Professional movers: First, ask for estimates from several companies, and base your decision on the costs and reputation of the mover.

Moving yourself: You can probably cut your moving bill in half if you pack your possessions and move them in a rented truck, but the amount of work and worry will increase.  Plus, you’ll want to review your homeowner’s insurance policy to see if it covers your possessions during a move.

Remember to save all your receipts from the move, whether you choose a professional mover or do the job yourself.  If you’re moving in conjunction with a job and you itemize your tax returns, you may be able to write off the moving expenses.

Calling it Your Own

Finding a house is one thing, but making it your home is another.  Consider these ideas to make your home comfortable, welcoming and yours right from the start:

• Set up one room in your home immediately after moving.  Keep all boxes and clutter out of it; arrange familiar furniture and items.  Use this room as a haven as you tackle the entire house.
• If you have children, set up their rooms right away to give them a feeling of being home.
• If necessary, give walls a fresh coat of paint before unpacking items.  Use curtains or throw pillows to adapt your furnishings to an existing color scheme.
• Draw up a floor plan to help you decide where to put furniture before you lug it around.
• Create a focal point in each room by drawing attention to an architectural feature – add artwork above the mantel or use an unusual drapery treatment on a window with a view.

After the sale

The relationship you’ve forged with your REALTOR® shouldn’t end when the sale is over.  Feel free to contact him or her with any questions you might have even after you’re settled.  And, don’t forget to call when you’re ready to make another move – a good REALTOR® will always be ready to provide assistance.

Contact Infinity Realty Guam today for the real estate company that will provide quality service you deserve.  (Click here).

DISCLAIMER: This information is provided for general awareness only and is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind.  Please consult with a professional in their respective expertise for complete details.

As your home buying journey comes to its completion, your agent should help you through the final steps to home ownership – the closing process.

Closing is the formal meeting where ownership of the property is transferred from the seller to the buyer.  Also at this time, the buyer’s loan is finalized, so technically there are two closings.  The meeting is usually attended by the buyer and seller, their respective Real Estate Professionals, the lender’s agent, and the closing agent (if different from the lending agent).

Preparing for Closing costs

Typically, closing costs are three to six percent of the sales price.  There are fees such as insurance on the title to your home, taxes, transfer costs, attorney fees (if necessary) and hazard insurance.

You may also be required to prepay an up-front reserve account of tax and insurance payments to ensure that there are sufficient funds in your account to meet these obligations when they are due.  In some cases, the seller will agree to pay closing costs – that is one of those negotiable details.

Before closing

In the days prior to closing, your REALTOR® should work with you to ensure you understand all of the conditions of the sale and loan, and confirm that they have been met.  Your REALTOR® should also reconfirm the closing date with you and the sellers.

During this time, your REALTOR® should ensure that you have the opportunity to take a final walk-through of the property just before closing to see that everything is as it should be.  If there are any problems or unresolved issues, take care of them before closing.

Closing meeting

The closing agent will review the settlement with you and the seller, along with evidence that any legal requirements, such as insurance and inspections, have been met.

During the meeting you will receive a number of documents, including:

• A HUD-1 Settlement Statement, listing all the services and charges to you and the seller.  You may review this form on the business day before closing.
• A Truth-in-Lending (TIL) statement.  You will receive this within three days of applying for the loan.  It details the actual cost of the mortgage.
• The mortgage note itself.  This is your promise to repay the loan, as agreed.
• The deed. Signed only by the seller at closing, it transfers ownership of the property.  At first, you may only get a copy; when the actual deed is recorded with the local land management listing you as the new owner, it will be mailed to you.
• Any other affidavits.  For example, an affidavit may state that you will use the property as your principal residence.

Once everyone agrees that everything is in order, and the closing costs are paid by the buyer and, if necessary, the seller, the papers are signed and the keys turned over to you.  Once the deed is recorded with your local government agency, you officially become the owner of the property.

Here’s the day you’ve been waiting for.  The papers are in order and money has been exchanged.  You’re handed the keys – the home is now yours!

Contact Infinity Realty today for the real estate company that will provide quality service you deserve.  (Click here).

DISCLAIMER: This information is provided for general awareness only and is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind.  Please consult with a professional in their respective expertise for complete details.

While finding the financing package that best suits your needs can be a complicated process, your REALTOR® can help you find the financing method that works for you.

Home financing is available from mortgage companies, savings and loan associations, banks, credit unions and others.  Each will have its own rules, rates and fees.  When you compare financial institutions, be sure to look for variations in the way mortgages are offered — distinctions that can mean dollars of difference to you.  You will want to research the various lenders in your area to see which best fits your financial situation.

The number and variety of financing options can seem overwhelming at first, but most fit in one of these main categories.  We review some of the different types of loans below.

Conventional Financing: Conventional mortgages are labeled as such to differentiate them from government-backed loans, such as FHA or VA loans.

Federal Government Programs: Programs sponsored by the Federal Government through the Federal Housing Authority, Veterans Administration or Farmers Home Administration.

Alternative Financing: Various alternative arrangements for home financing made by the buyer that can incorporate elements of Conventional financing programs.

Remember that financing options are affected by local and regional real estate and banking practices and in some areas by local and state law.

Questions to ask the lender

Before you make your home financing decision, you should be familiar with your options.  Questions you should ask of your lender include:

• What are the differences between the various types of adjustable-rate loans and fixed rate loans?
• Is the mortgage open-ended?  Can you borrow up to the amount of principal you’ve paid to make home improvements?
• Will mortgage insurance be required for loans other than FHA-insured or VA guaranteed mortgages?
• How much principal must be paid before the insurance requirement is dropped?  What are the premiums and are the premiums refundable if you prepay the mortgage?
• What reserves, such as those for property taxes or hazard insurance, are required?  How long must you pay into these reserves?  At some point, will you pay these costs directly?
• What fees will be charged at closing, including such things as points, loan origination, abstracts, attorney’s fees, appraisals, termite inspection reports or credit reports?

Conventional Financing

Conventional fixed-rate mortgages: This traditional, “tried and true” mortgage option is a loan with a constant interest rate and level, equal payments during a set period of time — most commonly, 30 years.  The biggest selling point of fixed-rate loans is predictability, and they are particularly suited to people with steady incomes.

Adjustable-rate mortgages (ARMs): As the name implies, the interest rate on an adjustable-rate mortgage changes throughout the term to stay current with the present interest rates.  ARMs are most popular when rates are relatively high and appear to be dropping and when the difference between the ARM and the fixed-rate is greater than 2 to 3 percent.  Different lenders offer variations in the front end of their ARM plans, such as the points you pay or discounted initial rates.

To make a useful comparison of an ARM rate, consider the index upon which the rate is based, the margin or spread between that index and the rate paid, and the intervals at which the rate and payments are adjusted.

Note: Always look at the index plus the margin when comparing ARMs.  The larger the margin, the less likely the rate you pay will go down, even if the interest rates drop.

Jumbo loans for bigger homes: Mortgages are called jumbo when they exceed the maximum limit set by the Federal National Mortgage Association (FNMA, or “Fannie Mae”) and the Federal Home Loan Mortgage Corporation (FHLMC, or “Freddie Mac”), the largest national investors in mortgages.  Currently, this limit is $300,700.

Because of the greater risk to the lender by the higher-than-average loan amount, some lenders charge slightly higher interest rates for loans in the jumbo category.

Balloon mortgages: Balloon mortgages are fixed-rate loans.  Although based on a longer term, the mortgage must be paid in full with a balloon payment, usually in five to seven years.  The advantage is that interest rates are generally set well below current market rates.  Many borrowers of balloon mortgages refinance their loan before the balloon payment is due.

Two-step loans: Two-steps are adjustable rate mortgages that have only one adjustment during the loan term.  They let you take advantage of the reduced start rate of an ARM while still enjoying the security of a fixed rate for some time.

Because the adjustment does not usually occur until several years into the loan term, two-step loans are particularly attractive to buyers who do not plan to stay in their new home more than a few years.

Federal government programs:

Federal Housing Administration (FHA) insured loans: Lenders offer FHA mortgages on a new or existing single-family home for as little as 3 percent down.  FHA mortgages are also assumable.  Sometimes a premium is required when the mortgage is assumed, then refunded when the note is paid off.  Down payments are usually low.

Veterans Administration (VA) guaranteed loans: The Veterans Administration guarantees lenders against loss if a property is foreclosed due to default.  These assumable loans are available to eligible veterans and may be used to buy, refinance, construct or repair a house.  If the VA property appraisal is less than the sale price, the borrower pays the difference as a down payment.

Farmers Home Administration (FmHA) loans: The government makes these loans available to persons of moderate to very low income in rural or non-metropolitan areas.

Alternative Financing

Lease/purchase agreements: Borrowers can lock in the price of a house today and postpone financing for 12 to 18 months with these agreements.  The borrower gives the seller a deposit which is applied to the purchase and makes monthly rental payments.  Lease/purchase agreements are used by sellers who want to keep a home occupied and receive rental money after they’ve moved out, and by buyers who are not in a position to commit to a property at a particular time.

Installment contract: Buyers and sellers work out a contract which states a down payment, interest rate and term.  Some contracts have long terms; others are short-term with balloon payments.  Regulations about title transfer in a contract sale vary from state to state.

First mortgages from relatives or others: Sometimes relatives or private investors will purchase a home outright then offer a borrower a first mortgage.  The terms are worked out to the mutual satisfaction of both parties.

Note: The Internal Revenue Service may impute higher rates on the lender for loans arranged below market rates.

Second mortgages: These are used when a borrower needs additional financing to buy a home.  This mortgage may be financed by the seller, another lender, relative or investor, and terms are negotiated between buyer and lender.  Often, second mortgages are used when a borrower assumes a guaranteed first mortgage with a lower interest rate and needs to make up the difference between the loan and the sale price.

Equity financing: An equity plan allows buyers to buy new homes by borrowing against a portion of the equity in their present home.  A six-month “bridge” is secured on which no monthly payments are required and that money is used to purchase the new home.  When the present home sells, the loan is paid off with the proceeds of the sale.  If the home doesn’t sell within six months, the owner may renew the loan or choose from other “back-up” options.

Depending upon your situation, there may be other Financing Options available.  You should rely on the expertise of your REALTOR® and Loan Officer during the critical final stages of the home buying process.  He or she can answer questions, serve as your representative, and attend to the important details that affect your purchase.

Contact Infinity Realty Guam today for the real estate company that will provide quality service you deserve.  (Click here).

DISCLAIMER: This information is provided for general awareness only and is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind.  Please consult with a professional in their respective expertise for complete details.