Step 3: Preparing for Ownership
Just prior to settlement, you will have a final walk-through of the home. This is simply to ensure that there are no unforeseen issues or damages from the time of the inspections. You will check that any requested repairs were completed and that all of the included personal property is still with the home. You will sign that the property is as expected and you are willing to move forward with your purchase.
It can be quite shocking to see the home without furniture for the first time. Be prepared to see holes in the walls, stains in the carpets and scuff marks that were previously unintentionally covered by belongings or furniture. The owner of the property lived in the home just as you will. They are not required to have the home repainted or carpets cleaned prior to you taking possession. Once you move in, this normal wear and tear will become part of the home that you love.
If there are items missing or damages that have occurred since your inspections or repairs have not been completed, you can ask the seller to provide a credit to you at settlement, if your lender allows, or make other arrangements. Be aware that once you take ownership of the home, any unresolved issues become your issues.
WHAT IS A REAL ESTATE CLOSING?
A “closing” is where you and I meet with some or all of the following individuals: the Seller, the Seller’s agent, a representative from the lending institution and a representative from the title company, in order to transfer the property title to you. The purchase agreement or contract you signed describes the property, states the purchase price and terms, sets forth the method of payment, and usually names the date and place where the closing or actual transfer of the property title and keys will occur.
If financing the property, your lender will require you to sign a document, usually a promissory note, as evidence that you are personally responsible for repaying the loan. You will also sign a mortgage or deed of trust on the property as security to the lender for the loan. The mortgage or deed of trust gives the lender the right to sell the property if you fail to make the payments. Before you exchange these papers, the property may be surveyed, appraised, or inspected, and the ownership of title will be checked in county and court records.
At closing, you will be required to pay all fees and closing costs in the form of “guaranteed funds” such as a Cashier’s Check. Your agent or escrow officer will notify you of the exact amount.
WHAT IS AN ESCROW ACCOUNT?
An escrow account is a neutral depository held by your lender for funds that will be used to pay expenses incurred by the property, such as taxes, assessments, property insurance, or mortgage insurance premiums which fall due in the future. You will pay one-twelfth of the annual amount of these bills each month with your regular mortgage payment. When the bill is due, the lender pays them from the escrow account. At closing, it may be necessary to pay enough into the account to cover these amounts for several months so that funds will be available to pay the bills as they are due.
UTILITIES & MOVING
Keep detailed records of all moving expenses if your move is job related. Many expenses, including house-hunting trips, are tax deductible. If your move is 35 miles or more from your home, you can deduct your family’s travel expenses, including meals and lodging; the cost of transporting furniture, other household goods and personal belongings; food and hotel bills for up to 30 days in the new city if you have to wait to move into your new home; and the costs associated with selling your old home or leasing your new home.
If you are choosing to schedule movers, do your due diligence when researching companies. Only use movers who come recommended or have a significant number of positive reviews online. Be sure to get everything in writing and have a full understanding of the insurance coverage for your personal belongings.
Note: There is a ceiling on deductions which is outlined in detail in the IRS’s Publication 521, “Tax Information on Moving Expenses,” available free from the IRS offices. Consult a CPA for more information.
You will need to contact your local utility companies prior to your settlement date and let them know when you are taking ownership of the home. The utility service will be transferred to your name on the day of settlement. You can find the names and numbers of the utility services in your county in the next section.
Some utilities, such as cable and internet, may need to come to your new home to install the service. Usually these appointments are scheduled a week in advance, so plan accordingly.
Your water and sewer service will be transferred automatically via settlement. But don’t forget to contact USPS to provide them your new address! You can do this on the USPS website.
HELPFUL PHONE NUMBERS
Make arrangements to cancel your utilities in your current home and transfer the utilities at your new home into your name as of the settlement date. Request return of your deposit if applicable and arrange for immediate service at your new address.
Potomac Edison (First Energy): (800) 255-3443
BG&E: (800) 685-0123
Frederick County: (301) 600-2508
Washington County: (240) 313-2600
Montgomery County: (240) 777-0311
Carroll County: (410) 386-2164
Washington Gas: (800) 752-7520
Comcast Xfinity: (800) 266-2278
DirecTV: (800) 531-5000
Dish Network: (855) 318-0572
Verizon Fios: (800) 837-4966
Antietam: (301) 797-5000
REAL ESTATE GLOSSARY
Acceptance: the date when both parties, seller and buyer, have agreed to and completed signing and/or initialing the contract.
Adjustable Rate Mortgage: a mortgage that permits the lender to adjust the mortgage's interest rate periodically on the basis of changes in a specified index. Interest rates may move up or down, as market conditions change.
Amortized Loan: a loan that is paid in equal installments during its term.
Appraisal: an estimate of real estate value, usually issued to standards of FHA, VA and FHMA. Recent comparable sales in the neighborhood is the most important factor in determining value Appreciation: an increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.
Assumable Mortgage: purchaser takes ownership to real estate encumbered by an existing mortgage and assumes responsibility as the guarantor for the unpaid balance of the mortgage.
Bill of Sale: document used to transfer title (ownership) of PERSONAL property.
Cloud on Title: any condition that affects the clear title to real property.
Consideration: anything of value to induce another to enter into a contract, i.e., money, services, a promise.
Deed: a written instrument, which when properly executed and delivered, conveys title to real property.
Discount Points: a loan fee charged by a lender of FHA, VA or conventional loans to increase the yield on the investment. One point = 1% of the loan amount.
Easement: the right to use the land of another.
Encumbrance: anything that burdens (limits) the title to property, such as a lien, easement, or restriction of any kind.
Equity: the value of real estate over and above the liens against it. It is obtained by subtracting the total liens from the value.
Escrow Payment: that portion of a mortgagor’s monthly payment held in trust by the lender to pay for taxes, hazard insurance and other items as they become due.
Fannie Mae: nickname for Federal National Mortgage Corporation (FNMA), a tax-paying corporation created by congress to support the secondary mortgages insured by FHA or guaranteed by VA, as well as conventional loans.
Federal Housing Administration (FHA): an agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.
FHA Insured Mortgage: a mortgage under which the Federal Housing Administration insures loans made, according to its regulations.
Fixed Rate Mortgage: a loan that fixes the interest rate at a prescribed rate for the duration of the loan.
Foreclosure: procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default.
Freddie Mac: nickname for Federal Home Loan Mortgage Corporation (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market. It purchases and sells residential conventional home mortgages.
Graduated Payment Mortgage: any loan where the borrower pays a portion of the interest due each month during the first few years of the loan. The payment increases gradually during the first few years to the amount necessary to fully amortize the loan during its life.
Lease Purchase Agreement: buyer makes a deposit for future purchases of a property with the right to lease property in the interim.
Lease with Option: a contract, which gives one the right to lease property at a certain sum with the option to purchase at a future date.
Loan to Value Ratio (LTV): the ratio of the mortgage loan principal (amount borrowed) to the property’s appraised value (selling price). Example – on a $100,000 home, with a mortgage loan principal of $80,000 the loan to value ratio is 80%.
Mortgage: a legal document that pledges a property to the lender as security for payment of a debt.
Mortgage Insurance Premium (MIP): the amount paid by a mortgagor for mortgage insurance. This insurance protects the investor from possible loss in the event of a borrower’s default on a loan.
Note: a written promise to pay a certain amount of money.
Origination Fee: a fee paid to a lender for services provided when granting a loan, usually a percentage of the face amount of the loan.
Private Mortgage Insurance (PMI): see Mortgage Insurance Premium.
Second Mortgage / Second Deed of Trust / Junior Mortgage / Junior Lien: an additional loan imposed on a property with a first mortgage. Generally, a higher interest rate and shorter term than a “first” mortgage.
Settlement Statement (HUD-1): a financial statement rendered to the buyer and seller at the time of transfer of ownership, giving an account of all funds received or expended. Severalty
Ownership: ownership by one person only. Sole ownership.
Tenancy In Common: ownership by two or more persons who hold an undivided interest without right of survivorship. (In event of the death of one owner, his/her share will pass to his/her heirs.
Title Insurance: an insurance policy that protects the insured (buyer or lender) against loss rising from defects in the title.
You have successfully navigated your home purchase! I hope that your experience working with me and my team was pleasant, informative, and stress free.
I love to stay in touch with my clients and have created a Client Appreciation Program to do just that. There are many fun perks that come with being a part of this program. We host appreciation events, give anniversary gifts, do periodic check-ins and much more! Feel free to follow Amanda Addington, eXp Realty on Facebook, Instagram, or Twitter to see what we are up to in the future!
Please remember that if you have a friend or family member who would appreciate the service I provide, do not hesitate to call. I would be delighted to follow up with anyone whom you refer.
Thank you again for choosing Amanda Addington to represent and support you during this monumental change in your life. Congratulations on your new home, we wish you the very best!