Buying a new home | Front Porch Realty Group

Buying a new home

Choose a Lender and Get Pre-Approved for a Home

It is highly recommended to consult with a mortgage broker or lender early in the home buying process and get pre-approved prior to looking for a home. Front Porch Realty Group can assist you in locating mortgage brokers and lenders. The pre-approval process determines what loan programs may be available to you and suggests programs that would be best for your specific scenario. The mortgage broker or lender will also determine what your monthly payments and down payment will be. A pre-approval letter from the mortgage broker or lender which states your approval for the purchase price, loan amount and down payment greatly strengthens your position in the eyes of the seller.

Mortgage brokers and lenders have a specific formula allowing your total monthly housing costs to be a certain percentage of your gross monthly income.

Mortgage brokers and lenders use slightly different formulas for arriving at total monthly house costs. These costs generally include your mortgage principal and interest payment, property taxes as a monthly figure, and hazard insurance as a monthly figure. These four items are referred to as PITI (principal, interest, taxes & insurance). If you're required to pay private mor

1031 Tax Deferred Exchange

A 1031 Tax-deferred Exchange is a transaction in which a taxpayer exchanges investment property for like-kind property and defers the payment of capital gains taxes. The IRS defines like-kind property as all real property held for the productive use of trade or business or for investment purposes. Essentially this means any real estate held for investment except for your primary residence and second family home.

There are some important rules which must be followed to effectuate a valid exchange:

The exchange must be opened before the close of escrow on the relinquished (sale) property.

The taxpayer must identify the replacement (acquired) property within 45 days after the close of the relinquished property.

The taxpayer must close the replacement property within 180 days from the close of the relinquished property or the tax return filing of the relinquished property, whichever comes first.

The taxpayer must reinvest all net proceeds into the replacement property.

The taxpayer must obtain a debt of an equal or greater amount on the replacement property.

By following these requirements, the taxpayer may shelter the capital gains taxes into the replacement property. This creates more buying power for the taxpayer than if the capital gains were paid. Also, by deferring the payment of capital gains taxes, the taxpayer gets to invest the taxes interest free from the IRS.

tgage insurance (PMI) because your down payment is less than 20%, those premium payments will also be included. If you decide to buy a condominium or town house, the (HOA) monthly homeowner's association fees will be included.

The Loan Process

Step 1: The Application

The key to the loan process going smoothly is the initial application interview. At this time the lender obtains all pertinent documentation so unnecessary problems and delays may be avoided. The Realtor opens escrow with the Title company at this time as well.

Step 2: Requesting Documentation

Within 24 hours of application, the lender requests a credit report, an appraisal on the property, verifications of employments and funds to close, mortgage or landlord ratings, a preliminary title report, picture ID, W2s (2 years), Certificate of Eligibility, and any other necessary supporting documentation.

Step 3: Loan Submission
Once all the necessary documentation is in, the loan processor puts the loan package together and submits it to the underwriter for approval.

Step 4: Loan Approval
Loan approval generally takes anywhere from 24 to 72 hours. All parties are notified of the approval and any loan conditions must be received before the loan can close.

Step 5: Documents are Drawn
Within 1 to 3 days after the loan approval, the loan documents (inducing the note and deed of trust) are completed and sent to the escrow company. The escrow officer calls the borrowers to come in when the papers are ready for final signature. AT this time, the borrowers are told how much money they will need to bring in to close the loan.

Step 6: Funding
Once all the parties have signed the loan documents, they are returned to the lender, who reviews the package. If all the forms have been properly executed, the funds are transferred by wire.

Step 7: Recordation
When The escrow company receives the funding check from the lender, they make the lender's security for the loan a matter of public record. They do this by recording the note and deed of trust at the county recorder's office. Escrow is now officially closed.

Step 8: Congratulations
you are the proud owner of a new home!

Pre-Approval Checklist

In order to expedite the mortgage loan pre-approval process, please be sure you bring everything applicable on this list to make sure your appointment and the loan process go as smoothly as possible.

Residence History

1	Past 24 months of residence with complete addresses.
2	Length of time you lived at each residence.
3	Name of landlord and his/her address (if currently renting).

Employment History

1	Employers for the past two years with complete addresses and dates of employment.
2	W-2s of most recent two years.
3	Most recent two year's tax returns (with all schedules).
4	Year-to-date profit and loss statement and current balance sheet (if self-employed).
5	If there have been any gaps in your employment, be prepared to explain

Copies of most recent monthly statements for all loans or credit card balances.

Accounts

1	Copies of most recent three month's bank statements for all accounts, stock brokerages, mutual funds, IRAs, Pensions, etc.

Current Real Estate

1	Property addresses.
2	Estimated market values
3	Outstanding loan balances (bring copy of most recent loan statement)
4	Amount of monthly payment
5	Amount of monthly rental income, if any (copy of any rental agreements).

Personal Property

1	Net cash value of your life insurance
2	Year, make and value of all vehicles
3	Value of your furniture and personal property

If applicable, for the following

1	Copy of divorce papers
2	Copy of driver's license and Social Security Card

The Escrow Process

When opening an escrow, the buyer and seller establish terms and conditions for the transfer of ownership of that property. These terms and conditions are given to a neutral third party known as the escrow holder. The Escrow Officer, in turn has the responsibility of seeing that the terms of the escrow are carried out. The escrow is an independent third party - the vehicle by which the interest of all parties to the transaction is protected.

How does the Escrow Process Work?

The Escrow officer takes instructions based on the terms of your Purchase Agreement and the lender's requirements. The Escrow Officer can hold inspection reports and bills for work performed as required by the Purchase Agreement. Other elements of the escrow include hazard and title insurance, and the grant deed from the seller to you. Escrow cannot be completed until these items have been satisfied and all parties have signed escrow documents.

What Does the Escrow Holder Do?

The Escrow holder is a neutral third party that maintains the escrow and impartially oversees the escrow process, ensuring that all conditions of the sale are properly met.

The Escrow holder's duties include:

	Serve as the neutral agent and the liaison between all parties involved.
	Prepare the escrow instructions.
	Request a Preliminary Title Search to determine the status of title to the property.
	Comply with the lender's requirements as specified in its instructions to escrow.
	Receive and handle purchase funds from the buyer.
	Prepare or secure the deed and documents related to the escrow.
	Prorate taxes, interest, insurance and rents.
	Secure releases of all contingencies or other conditions imposed on the escrow.
	Record the deed and any other documents.
	Request the title insurance policy.
	Close the escrow pursuant to instructions supplied by the seller, buyer and lender, if any.
	Disburse funds as authorized by the instructions, including charges for title insurance, recording fees, real estate commissions and loan payoffs.
	Prepare final statements for all parties involved that account for the disposition of all funds held in the escrow account.

How Do I Open An Escrow?

When your offer is accepted, your Realtor will open escrow. As soon as you execute the Purchase Agreement, your realtor will place you initial deposit (earnest money) into an escrow account.

How Long is an Escrow?

The length of an escrow is determined by the terms of the Purchase Agreement and can range from a few days to several months. The average length of an escrow is usually 30 to 45 days.

When Do I sign Escrow Instructions and Where?

A few days before closing, your Escrow Officer or your Realtor will contact you to make the appointment for you to sign your escrow instructions, grant deed and final papers. At this time, your Escrow Officer will also tell you the amount of money you will need to bring in.

Your Appointment

This is a list of items you will need in preparation for your appointment to sign escrow papers :

	Identification
	All Parties - These are several acceptable forms of identification which may be presented. One of the following forms must be presented at the signing of escrow in order for the signature to be notarized: a current driver's license or passport or State of California Department of Motor Vehicles ID card.
	Cashier's Check
	Buyers - You need a cashier's check or a certified check issued by a California (or your state) financial institution made payable to The escrow company in the amount given to you by your Escrow Officer. A personal check may delay the closing since the escrow company is required by law to have "good funds" before disbursing funds from the escrow.
	Lender's Requirements
	Buyers - Check with your lender to make sure you have satisfied all your lender's requirements before coming to The escrow company.
	Fire and Hazard Insurance
	Buyers - You must have fire and hazard insurance in place before the lender will send money to The escrow company to fund the loan. Whenever you buy a home. you must have insurance. Once you have spoken to your insurance agent, call The escrow company with the insurance agent's name and phone number so they can make sure the policy complies with your lender's requirements.
	Title to your Home
	Buyers - It is recommended you contact your attorney or CPA to determine the way for you to hold title on your home.

After Your Appointment

After all parties have signed all the necessary papers, your Escrow Officer will return the buyers' loan documents to the lender for a final review. This review usually occurs within a few days of execution of the documents. Once the review is completed, the lender will call your Escrow Officer so that the necessary final paperwork can be completed to record the documents and close the escrow.

Final Proceeds Check

The proceeds check is disbursed to the seller upon the close of escrow and your Escrow Officer is able to verify with the Country Recorder that the documents have recorded and legal transfer has occurred.

Parties Participating in an Escrow

The Escrow begins with the acceptance of the offer which was negotiated by the Realtors representing the Buyer and Seller

The Buyer(s)

Offer includes a written offer to purchase or the acceptance of the Seller's counter-offer accompanied by a good faith deposit amount which is usually 1 percent to 3 percent of the purchase price.

Applies for a new loan, completing all required forms and often prepaying certain fees such as credit report and appraisal costs.

Approves the preliminary report and any property disclosure or inspection reports called for by the purchase and sale agreement (Deposit Receipt).

Approves and signs the escrow instruction, new loan documents and other related instruments, required to complete the transaction.

Fulfills any remaining conditions specified in the contract, lender's instructions and/or the escrow instructions.

Approves any final changes by signing amendments to the escrow instructions or contract.

Deposits sufficient funds in the escrow to pay the remaining down payment and closing costs.

The Lender (When applicable)

Accepts the new loan application and other related documents from the Buyer(s) and begins the qualification process.

Orders and reviews the property appraisal, credit report, verification of deposit(s), preliminary report and other related information.

Submits the entire package to the loan committee and/or underwriter for approval.
When approved, loan conditions and title insurance requirements are established.

Informs Buyer(s) of loan approval terms and commitment expiration date and provides a good faith estimate of the closing costs.

Deposits the new loan documents and instruction with the escrow holder for Buyer's approval and signature.

Reviews and approves the executed loan package and coordinates the loan funding with the escrow officer.

The Escrow Officer

Receives an order for the title and escrow services for The Company.

Orders the title search and examination on subject property.

Acts as the impartial "stakeholder" or depository, in a fiduciary capacity, for all documents and monies required to complete the transaction per written instructions of the principals.

With authorization from the real estate agent or principal, orders demands on existing deeds of trust and liens or judgments, if any.

For an assumption or subject to loan, orders the beneficiary's statement or formal assumption package.

Reviews documents received in the escrow: preliminary report, payoff or assumption statements, new loan package and other related instruments. Reviews the conditions in the lender's instructions including the hazard and title insurance requirements.

Prepares the escrow instructions and required documents together with a preliminary estimate of settlement charges, for the Buyer and Seller, in accordance with the terms of the sale.

Presents the instructions, documents, statements, loan package(s) and other related documents to the principal(s), for approval and signature.

Receives the balance of funds required from the Buyer and/or the proceeds of the loan from the lender.

Determines when the transaction will be in the position to close and advises the parties.

Assisted by title personnel, records the deed, deed of trust and other documents required to complete the transaction with the Country Recorder and orders the title insurance policies.

closes the escrow by preparing the final settlement statements disbursing the proceeds to the Seller, paying off the existing encumbrances and other obligations. Delivers the appropriate statements, funds and remaining documents to the principals, agents and/or the lenders.

The Seller(s)

Accepts Buyer's offer to purchase and initial good faith deposit to open escrow.

Submits documents and information to the escrow holder, such as : addresses of lien holders, tax receipts, equipment warranties, home warranty contracts, any leases and/or rental agreements, etc.

Orders inspections, receives clearances and approves final reports and/or repairs to the property as required by the terms of the purchase and sale agreement (Deposit Receipt).

Approves and signs the escrow instructions, payoff demands, grant deed and other related documents required to complete the transactions.

Approves any final changes by signing amendments to the escrow instructions or contracts.

Title Company

Examines the title to the real property and issues a preliminary report.

Determines the requirements and documents needed to complete the transaction and advises the escrow officer and/or agents.

Reviews and approves the signed documents, releases and the order for title insurance, prior to the closing date.

When authorized by the escrow officer, the Title Company records the signed documents with the Country Recorder's office and prepares to issue the title insurance policies.

HOME BUYING TIPS

	Find a Realtor as soon as soon as possible. A full time, professional Realtor can provide valuable insight to the current market and its nuances. Buying a home is not only a large financial commitment, but also an emotional commitment as well. It is imperative that the Realtor you choose is both highly skilled and a good fit with your personality. With Front Porch Realty Group's unique structure, four Realtors combine their skill, knowledge and efforts on every transaction insuring you an efficient, effective and rewarding experience.
	There is no right time to buy, any more than there is a right time to sell. If you find a home now, do not try to second-guess the interest rates or the housing market by waiting. Changes do not usually occur fast enough to make that much difference in price, and an attractive and appealing home may not stay on the market long. If the home is appealing and attractive to you, it may be appealing and attractive to others as well.

	Accept that no house is ever perfect. Focus on the attributes that are most important to you and work thru the attributes that are less appealing.
	Do not strive to squash the seller in negotiations. Negotiation is an integral component of the real estate process, but trying to "win every point" may not be advantageous to your overall goal.
	Consider the home in its totality. Don't get so caught up in the physical aspects of the house itself that you overlook such important concerns as school districts, noise levels, etc. that will have a significant impact on what it's like to live in your new home on a daily basis.
	Get pre-approved with a mortgage broker or lender PRIOR to beginning your home search. This will act as a filter and insure that you are only looking at home that you can afford. Also, presenting an offer contingent on unresolved issues will make your offer significantly less attractive to sellers, especially in a multiple offer situation.
	1031 Tax Deferred Exchange A 1031 Tax-deferred Exchange is a transaction in which a taxpayer exchanges investment property for like-kind property and defers the payment of capital gains taxes. The IRS defines like-kind property as all real property held for the productive use of trade or business or for investment purposes. Essentially this means any real estate held for investment except for your primary residence and second family home. There are some important rules which must be followed to effectuate a valid exchange: The exchange must be opened before the close of escrow on the relinquished (sale) property. The taxpayer must identify the replacement (acquired) property within 45 days after the close of the relinquished property. The taxpayer must close the replacement property within 180 days from the close of the relinquished property or the tax return filing of the relinquished property, whichever comes first. The taxpayer must reinvest all net proceeds into the replacement property. The taxpayer must obtain a debt of an equal or greater amount on the replacement property. By following these requirements, the taxpayer may shelter the capital gains taxes into the replacement property. This creates more buying power for the taxpayer than if the capital gains were paid. Also, by deferring the payment of capital gains taxes, the taxpayer gets to invest the taxes interest free from the IRS.