The Closing Process

You have searched for homes for weeks, visited several open houses and now you have finally found the pefect home.  The final part of the buying process is called closing. For firstime homebuyers, this final step can  be confusing and may leave the buyer with many questions. Below are a few clarifications.

What exactly is closing?

Closing  is an arrangement in which a disinterested third party, called an escrow holder, holds legal documents and funds on behalf of a buyer and selle. They then distribute them according to the buyer’s and seller’s instructions. The escrow becomes the depository for all monies, instructions and documents pertaining to the purchase of your home.

How does the closing process work?

When you close, all monies, instructions and documents necessary for the purchase of the home, including funds for the down payment, lender’s funds and documents for the new loan are held in escrow. The duties of an escrow holder include: following the instructions given by the principals and parties to the transaction in a timely manner; handling the funds and/or documents in accordance with instructions; paying all bills as authorized; closing the escrow only when all terms and conditions have been met; and, distributing the funds in accordance with instructions.

What information will I have to provide?

Typically you will be asked to complete a statement of identity as part of the necessary paperwork. Because many people have the same name, the statement of identity is pucused to identify the specific person in the transaction through such information as date of birth, social security number, etc. This information is kept confidential.

How long is the closing process?

The length of closing is determined by the terms of the purchase agreement and can range from a few days to several months. Typically it can take  an average time of 30 to 45 days.

Who is responsible for the closing costs?

How the charges for the services performed during closing  can vary.  The fees and service charges to be divided might include, the title insurance policy premium, escrow fee, and any transfer taxes. Unless there is some special agreement between the buyer and seller as to how these charges are to be paid, local custom will generally be followed in drafting the instructions to the escrow holder as to how they are to be divided.
 

When does the closing process end?

The closing process ends when all funds are transferred accordingly, when all documents are signed, and when you get the keys to your new home.

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How To Have A Successful Negotiation

When it comes time to sell your home or if you are buying a new home , you will come to a point in the transaction where you will need to have a negotiation.  The negotiation process can be both complex and confusing for both sides. Of course the seller wants to get the highest amount they can and the buyer also needs to feel they have achieved the best deal. If  this is your first  negotiation or even if you are seasoned at this process, below are some tips to help you get the most from the negotiation transaction.

1. The current real estate status is a “buyers” market, where most sellers are very motivated to sell, this can give a buyer the upper hand. On the other side, in a “sellers” market, or a market where housing supply and demand are roughly equal might give the seller an advantage. If possible, you want to be in the market at a time when it favors your position as a buyer or seller. 

2. Always pay attention to the details. Buyers and seller pay a lot of attention to the actual transaction price. Don’t overlook the  other perks or benefits that can add to the overall worth. For example, if you negotiate that the roof be replaced or perhaps having the seller pay some of the closing costs this can sweeten the deal. Don’t be stuck with the idea that the purchase prince is the only financial gain to the transaction.

3. Don’t forget about financing. Keep in mind that there are several factors that can impact the final sale:

 • Has the buyer been pre-qualified or pre-approved by a lender? Having buyers that are “pre-qualified” or “pre-approved” are more likely to pose less risk than a buyer who has never met with a lender. This also shows the seller that they are serious about the offer and will give the seller more confidence. that they are a qualified buyer.

 •If there is a low interest rate, then there will be a larger selection of potential buyers. More buyers equal more potential demand, which is good news for sellers. On the downside, high interest rates will cause buyers to be more selective or cause them to withdrawal from the market all together.

 •The traditional 20% downpayment is not standard anymore. If the buyer has good credit, loans with 5 percent down or less are now widely available. Many loans where 100 percent financing are still available, although not as much as a few years back.

 Negotiation is an important tool of the real estate transaction. To be a successful home seller or buyer you should have a basic understanding of negotiation methods, knowing the motivation of the other party and adapting to their style.

Federal Reserve Stops Mortgage Purchases

A recent article  from the NPR indicated that The Federal Reserve will stop buying mortgage-backed securities on Wednesday March 31. This marks the end to a massive program that’s been helping the housing market recover.

When the economy showed signs of decline over a  year and a half ago, the government wanted to drive down interest rates for homeowners to stimulate the economy by making it cheaper to buy or refinance a house. The problem was that lenders were not issuing loans, even to homeowners with good credit. As a result, interest rates rose. 

The Federal Reserve aimed to solve this problem by buying up a lot of mortgages. Because of this, they became the largest mortgage-backed security investor in the world. In fact the total amount of mortgage-backed securities now totals more than $1.2 trillion worth in all.

The Fed was buying 90 percent of new mortgage-backed securities and now is only buying about 30 percent or less. As of April 1, 2010 they will stop buying altogether. So the question is what happens then? Barry Habib, chairman of the board of Mortgage Success Source, which tracks rates and trends for mortgage brokers, says that when the Fed stops purchasing these securities, it will leave a vacuum in the market that will push up interest rates.

What many people don’t know or understand is that the government actually has been making quite a bit of money on this program. The U.S. Treasury earns about $50 billion a year from interest that homeowners pay on loans the government owns. However, there is the risk that some of the more than $1 trillion worth of home loans that might go bad.