value: $50.00 us

Value: $50.00 US

105 West Park Dr. Suite100 (Harpeth Three) • Brentwood, TN 37027 Each office independently owned and operated

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BUYER PROFILE YOUR HOME BUYING GOALS

Why did you decide to move now? How do you feel about the move?

_________________________________________________________________________

When would you like to move into your new home?

_________________________________________________________________________

If I found you a home today, could you make a decision on it? Is there anyone else in the decision-making process?

_________________________________________________________________________

Is there a specific area that you like?

_________________________________________________________________________

Is there a particular school system you want? Why?

_________________________________________________________________________

Have you seen any homes that you like?

_________________________________________________________________________

What could you do without if you had to?

_________________________________________________________________________

What are the features of an area or subdivision that are important to you?

_________________________________________________________________________

What features are you looking for in your new home?

_________________________________________________________________________

Do you have special furniture I need to keep in mind?

_________________________________________________________________________


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THE HOME BUYING PROCESS Agent meets with buyer for a one hour consultation. I discuss specific real estate needs i.e.

geographical areas, price range, special features, amenities, buyer representation. At this meeting, The Stress Free Buying Process is reviewed.

Buyer will then be qualified by a mortgage company to determine loan amount, monthly mortgage payments, review loan processing steps, cash down payment, various loan programs, etc. When the application is approved, the Lender will provide Buyer an approval letter and a Good Faith Estimate of down payment required, closing costs, etc.

Agent researches properties that meet client’s criteria. IF YOU WANT NEW CONSTRUCTION, GET THE BENEFIT OF HAVING A PROFESSIONAL TO REPRESENT YOUR INTEREST!

Appointments are scheduled for buyer to tour homes with agent. NEW CONSTRUCTION, MEET WITH AGENT OR BUILDER.

When Buyer selects a home on which they wish to make an offer, buyers meets with Agent to review all the specifics of the Purchase Agreement. A written Purchase Agreement offer is made and agent presents it to the Listing Agent. NEW CONSTRUCTION, I WILL REQUEST BUILDERS FORMS TO REVIEW WITH BUYER.

The Purchase Agreement is reviewed by the Listing Agent and the Seller. It is either accepted, rejected or countered. If a counter offer is made, then the negotiating process begins and continues until an agreement is reached or rejected. MANY TIMES ON NEW CONSTRUCTION THE SELLER WILL NOT BUDGE ON THE PRICE, HOWEVER MAY PROVIDE UPGRADES OTHER CONCESSIONS THAT I WILL NEGOTIATE FOR YOU.

If the Purchase Agreement is agreed upon, according to the terms of the Purchase Agreement, an inspection of the property will be performed and a list of any repairs will be presented to the Listing Agent and Seller. These items may require negotiation. The inspection is at Buyers expense. Agreed upon repairs plus the Termite Inspection Report are typically at the sellers expense. However, the buyer may elect to have his or her own termite inspection performed at a nominal cost. If repairs for defects are not agreed upon by the Buyer and Seller, then Contract is terminated and the buyer receives a full refund of earnest money, provided the inspections were performed timely.

Agent will notify the Buyer of closing requirements. Lender will confirm with Buyer the amount of money required for closing.

Buyer is given a checklist for moving to make it a smooth one.

Agent provides services to the Buyer even after closing by providing useful information on a regular basis.


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PERSONAL PERFORMANCE GUARANTEE As a Real Estate professional dedicated to providing a level of service that is unsurpassed in the

Middle Tennessee market, I am offering you, the BUYER, a Personal Performance Guarantee outlining what you can expect from me.

You may exercise your right to cancel your Buyer Agency agreement at any time you are not 100% satisfied with my services. This Easy Exit guarantee keeps you in control of the purchase of your new home.

You will be contacted at least once a week with a status report on homes that are currently available and meet your requirements (if applicable).

The service you receive will be caring and compassionate at all times. I will listen to your needs and concerns and will treat them as if they were my own.

Finally, but most importantly, you will not be forgotten after the closing. You will hear from me on a regular basis. I will always be available to you, your family, friends and associates for assistance with their Real Estate needs and questions.

You have my word that your Real Estate Experience will be professional, thorough and as enjoyable as possible. You can expect prompt quality information before, during and after the purchase of your new home. As you know, many Real Estate agents are unable or unwilling to offer this level of service. I choose to perform this way because I truly believe that when someone receives this type of personal service they will feel compelled to refer the people they care about to such a professional.

___________________________________

John W. Lenderman


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EXPECTATIONS OF YOU AS A BUYER That you will continuously communicate with me about your priorities so that my activities on

your behalf can be productively focused.

That should you perceive that I have not interpreted your needs correctly or should they change for any reason, you will notify me immediately.

That you are willing and ready to buy within a reasonable time frame.

That you already have the financial resources, or are willing to initiate steps to obtain lender qualification prior to placing any offer on a property.

That you will allow us to show you property on the market that you feel meets your criteria, whether it is new construction or resale. Further, should you visit an open house or new construction sales office, that you will immediately identify me as your agent.

That you will respect my integrity and that of my company during the negotiating process. I will always act in a highly professional and ethical manner.

That you will refer your friends, neighbors, relatives or business associates WHEN I earn the right to ask for these referrals because you are pleased with the outcome of my efforts on your behalf.


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WHY EVERY HOMEBUYER NEEDS AN AGENT

AS YOUR BUYERS AGENT, I WILL: 1. Provide confidential representation - No buyer should buy a home, new or existing,

without being represented.

2. Show you only homes that meet your criteria, thereby saving you countless hours of hit and miss searching.

3. Call Sellers/builders for showing appointments and provide easy access to all homes via lockbox key or builder’s keys.

4. Point out the property’s features and potential concerns that most buyers do not see. In new construciton numerous issues can be hidden during construction.

5. Advise Buyer during inspection process and negotiate repairs.

6. Advise buyer regarding home warranties, insurance, etc.

7. Providing financing resources.

8. Advise and assist you in setting your offer price, and structuring the terms of the offer including closing costs, special stipulations in contract to protect your interests.

9. Deliver the offer to the listing agent or builder and attempt to be present when the offer is presented to the Seller.

10. Negotiate on your behalf at all times. Many times things that were supposed to be included get forgotten or changed assuming the Buyer will not call the issue to the Seller’s attention. This is true in New Construcion as well as existing.

11. Help you avoid costly home buying mistakes. Loss prevention is one of the main reasons to hire me as your agent.

12. Coordinate all the numerous requirements for closing.


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CUSTOMER PROFILE AND SERVICE

CUSTOMER PROFILE

1. A prospective buyer may best be served as a CUSTOMER when he or she:

• Wants freedom to work with several agents • Merely needs exposure to properties • Is familiar with real estate practices/procedures for this area • Knows how to structure an offer to purchase • Desires to negotiate for himself/herself (just needs agent to present offers) • Desires to analyze the property and the legal forms (or engage the services of someone

who can)

2. Real Estate Agents work WITH a CUSTOMER in a non-agency, or facilitator, relationship

CUSTOMER LEVEL SERVICE 1. Locate properties from my inventory and from the multiple listing services and show

properties that meet buyer’s expressed needs.

2. Provide factual information regarding property values, property specifications, neighborhoods, city and county services, schools, shopping facilities, places of worship, medical facilities and all such similar services so that buyer customer can make an informed buying decision.

3. Disclose all material adverse facts actually known by seller and/or broker pertaining to the physical condition of the property, including but not limited to material defects in property, environmental contamination and any facts required by stature or regulation.

4. Locate lenders, inspectors, attorneys, appraisers, surveyors and insurance services.

5. Prepare an offer at buyer customer direction, and convey it to the seller.

6. Bring the transaction to a successful close.


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BUYER AGENCY CLIENT PROFILE & SERVICE

CLIENT PROFILE 1. A prospective buyer may be best served as a CLIENT when he or she:

• Wants/needs advice and counsel on real estate purchases • Is a person who relies on input from the salesperson (“What would YOU suggest?”) • Desires professional assistance in negotiating • May have special financing needs • Is a cautious analytical buyer • May be a corporate or out of town buyer or first time home buyer

2. A prospective buyer MUST be a CLIENT when he or she:

• Has a material relationship with the Agent (relative, close friend, business associate) • Has confidential information that needs to be kept confidential • Wants anonymity • Wants representation

3. Real Estate Agents work FOR a CLIENT as a Buyer’s Agent

CLIENT LEVEL SERVICE

1. Be honest with Seller, but owe greater responsibility to Buyer using reasonable skill and care

to promote Buyer interest.

2. Disclose to Buyer client any pertinent facts that could help Buyer client buy at the best price and terms such as:

• Property overpriced • Other properties available at a better buy • Negative features - busy street, steep drive, etc. • Other situations that may affect the property value such as rezoning, proposed shopping

center, etc. • Seller near bankruptcy, foreclosure

3. Refrain from disclosing, without client’s written consent, any information regarding Buyer client’s position that would weaken Buyer’s ability to obtain best price unless said information is required by law.

4. Advise and strategize with Buyer client concerning offers, counter offers.

5. Negotiate in buyer client’s behalf to secure best price and terms.


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6. To keep confidential, even after expiration, all information received during the course the brokerage engagement, unless the Buyer Client permits by writing, the law requires, or information becomes public from source other than broker.

7. To promote the interests of the Buyer Client by placing those interests before all others in the negotiation, including the agent’s own interests.


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FOR SALE BY OWNERS AS A BUYER WHAT SHOULD I DO?

What if I see an attractive home that is “For Sale By Owner?”

Call your agent first! I can help and agent representation is more important than ever. The typical seller attempting to sell “by owner” either knows too little about the challenges of selling a home and is naïve or has a professional background in real estate and is very savvy. In either circumstance, buyer beware!! Most transactions that end up in litigation (in court) are the result of poorly written and executed contracts. REALTORS® use time tested and state approved contracts that cover all of the important issues. And because I write and negotiate contracts every single day, I’m very equipped to explain all aspects in easy to understand terms so that all parties reach closing without a hitch! And if something does go wrong or falls apart, I’m there to keep all parties working together insuring a positive outcome.

How does an agent get paid with a home “For Sale By Owner”?

Not surprisingly, many “For Sale By Owners” are open to the idea of paying a partial commission once they understand how valuable a REALTOR® is to all parties. Many even advertise up front that they will pay a partial “co-op” commission. In almost every circumstance I am able to negotiate an excellent purchase price for my client while including a reasonable commission paid by the seller. The key is to CALL ME BEFORE CONTACTING THE SELLER so that I can make first contact in order to establish a professional relationship and strategy that will best work to your advantage.

In the extreme rare instance where a seller refuses to pay any commission, I will still present you with all aspects of the purchase for a modest fee. If the seller turns out to be truly difficult to deal with, I can assure you that the modest fee I charge usually turns out to be the best money you have ever spent.

The bottom line is that my sincere desire is for you to get the best home, in the best condition, and at the best price.


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PRE-QUALIFYING AND PRE-APPROVAL In the beginning of the home buying process you’ll need to think about obtaining a loan. It is

essential to know in advance how much you will be able to borrow before you start looking at homes. It is the basis upon which you can determine the feasibility of buying a particular home and will allow us to only show you homes in your price range.

You can address this part of the home buying process by getting pre-qualified or pre-approved. While these terms sound the same, there are some important differences between them.

PRE-QUALIFICATION

Pre-qualification is a non-binding estimate of your ability to borrow based on informal questions about your income, job stability, credit history and current monthly expenditures. As an experienced real estate agent, I refer you to lenders who will offer these informal preliminary estimates. There are no fees involved to be pre-qualified. Your estimate will not be guaranteed and you are not obligated to choose the services of the lender who pre-qualified you. Pre-qualification will allow me to tell prospective sellers that your chances of loan approval are good when formal application is made. This will be to your advantage when you enter into negotiations for the home as the seller can be reasonably assured you will qualify.

Lenders are very accommodating and will answer any questions you may have. Remember, however, that your loan is not guaranteed, and your pre-qualification is based on the accuracy of the information you provide to the lender

PRE-APPROVAL

While pre-qualification is a non-binding verbal exchange between the buyer and the lender, pre-approval goes one step further in that it does represent a formal loan commitment. Pre-approval is available from most lenders and affords the homebuyer the benefit of processing your loan application while shopping for a home. Choose your lender carefully as this will be a time consuming and documentation intensive process. It can take seven to ten days to get pre-approved depending on the documentation required for your individual situation. Most lenders will charge a fee with the understanding that the money will be applied to your closing costs if you are approved. If you choose a different lender for your loan, the fee is non-refundable. Once the loan is approved, the lender will issue a formal credit approval up to a specified dollar amount in writing. With this written approval in hand, your bargaining position will be greatly enhanced when making an offer. Prospective sellers will be motivated as they realize you are a qualified buyer and can close in a very short period of time.


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PURCHASE PRICE GUIDELINES When you begin to look for a home, a commonly used rule of thumb says you can afford a house

that costs up to two and one-half times your annual gross income - the 2.5 Rule*.

According to this rule, with an annual combined gross income of $40,000 you can spend up to $100,000 on a home.

This is the maximum you should consider for a home. If you have existing debt, it will reduce the amount of monthly income available for housing expenses, and you will need to adjust your maximum home price accordingly.

Gross Yearly Income

$30,000 $40,000 $50,000 $60,000 $75,000 $100,000

x 2.5

Highest Possible Cost of Home $75,000 $100,000 $125,000 $150,000 $187,500 $250,000

Some books use the 2.5 Rule as a predictor of the maximum mortgage amount. However, it is

probably wiser to use the 2.5 Rule to calculate the maximum amount you can pay for the house. Then, subtract the amount or percentage of your down payment to find out the maximum mortgage you should consider.

To find out your maximum house price, simply multiply your combined gross yearly income by 2.5. Remember, this is just a rough gauge and it is a maximum. Don’t make the mistake of getting into a home that takes every available penny.

People are called “house poor” when they have spent so much on a house that they have nothing left for vacations and other discretionary spending.

*This rule is only applicable if interest rates are in single digits. Use only as a guideline.


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STANDARD CONVENTIONAL QUALIFYING WORKSHEET According to standard Conventional guidelines, for a 95% loan*, you can afford to spend approximately 28% of your Gross Monthly Income (GMI) for your TOTAL HOUSE PAYMENT (including principal, interest, taxes, homeowners insurance, mortgage insurance and any association fees). You are allowed 36% of your Gross Monthly Income for your TOTAL DEBT OBLIGATION (all-inclusive). Your debt load will definitely affect how much house you can afford. If you have no monthly debt and/or open credit lines, your monthly payment can be equal to but not more than 28% of your GMI. With debt, your already committed monthly obligations and/or open credit lines will determine how much of the total allowable 36% debt you will have left over for a house payment. Use the worksheet to help determine your maximum monthly payment, loan and house price.* COMBINED GROSS ANNUAL INCOME = _______________ (1) G A I (before taxes) GROSS ANNUAL INCOME ÷ 12 (line 2) = _______________ (2) G M I (before taxes) GROSS MONTHLY INCOME x .28 (line2) = _______________ (3) Max TOTAL MONTHLY PAYMENT ALLOWED* (Principal,Interest,Insurance,MIP,AssocFee) GROSS MONTHLY INCOME x .36 (line 2) = _______________ (4) Maximum Total Debt Allowed (House, Installment, Charges) INDICATE YOUR OWN TOTAL MONTHLY DEBT = _______________ (5) (Installments, charges, etc.) SUBTRACT line 5 from line 4 = _______________ (6) Amount Left for TOTAL MONTHLY PAYMENT (must not exceed line 3) SUBTRACT $200 (for Taxes, Insurance) from line 2 or 6, whichever is lesser = _______________ (7) Amount left for PRINCIPAL/INTEREST DIVIDE LINE 7 by the appropriate interest factor = _______________ (8) Maximum LOAN AMOUNT DIVIDE LINE 8 by .95 = _______________ (9) Approximate HOUSE PRICE


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CHOOSING YOUR LENDER

There’s more to choosing your lender than interest rates . . .

Choosing a lender for your mortgage loan can be a stressful experience. Every lending institution is different. Some mortgage Brokers have access to a variety of loan programs while mortgage Bankers each have their own, specialty programs that they only do in-house. Getting the right loan for your home is critical to your long term financial success. Getting the wrong loan could cost you thousands of dollars. There are numerous factors to consider.

In order to be able to compare apples to apples, ask each lender to send you a "good faith estimate". This is a breakdown of all of the costs associated with the loan, the interest rate, monthly payment structure, and general terms. You may find that one company has a lower interest rate, but higher closing costs and my not be such a bargain after all. Ask for the Annual Percentage Rate Charge and not just the Interest rate. The APR takes into account all the fees associated with the loan.

The most common way a mortgage lender is chosen is by comparing interest rates and closing costs. While these items are very important, most people forget that service is equally or more important. The term service is often over-used and nebulous. In the mortgage industry, service represents certain standards that I would demand for my clients. I will recommend several mortgage lenders that have these qualifications. These standards are such things as competency, reputation, responsiveness and knowledge. The lender will consult with you about the best product/program for your individual needs, expedite the process and make it as enjoyable for you as possible. You, your loan officer, and your REALTOR® are a team in your home buying process. All of us have the same goal…helping you purchase a home under conditions most favorable to you, not just for the short term, but the long term as well.

The mortgage lenders I will recommend will also have current market services such as in-house underwriting, quick loan approval, wide selection of programs, and will often attend closings. Consistent communication is also a standard that is expected. Obviously, it is important for the loan officer to provide this high quality service so that we can work together to make this a “WOW” experience for you and so that you will then feel compelled to recommend your friends and family members to us for similar “WOW” service!

PREFERRED LENDER LIST

Shannon Pellatiro – Commerce Union Mortgage Cell: (615) 373-0470 105 West Park Drive, Suite 195 Fax: (615) 376-5449 Brentwood, TN 37027

Chip Clark – Sellers Financial Group Office: (615) 777-5626 2323 21st Avenue South, Suite 500 Fax: (615) 777-5632 Nashville, TN 37212


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QUESTIONS TO ASK A LENDER 1. Do you have a list of references?

2. What is your rate with “0” Discount Points?

3. How long can I lock in the rate at no cost?

4. What are your Closing Costs (quoted as a dollar amount)?

5. Do those closing costs include the following? a. Appraisal b. Credit Report c. Recording Fees d. Survey e. Origination Fee f. Attorney Fee & Title Search g. Lender’s Title Insurance h. Intangible Tax i. Underwriting/Processing Fee j. Document Preparation Fee k. Tax Service

6. Can you fax me a good faith estimate of closing costs?

7. How much will the optional Homeowner’s Title Insurance Cost should I purchase vs seller?

8. What is the fee for an extended lock in term?

9. Do you have an interest rate float down policy?

10. How long will it take to process my loan and receive a commitment for loan approval?

11. Do you require escrow accounts?

12. Do you have in-house underwriting - why is this important?

13. Will you be present at the closing of the loan?

14. Will the property require 12 month seasoning by the Seller to allow you to finance?

15. How much is my up front PMI (Private Mortgage Insurance)?

16. May it be financed into my loan amount?

17. How much is my monthly PMI payment going to be (quoted as % to loan amount)?

18. Do you have an alternative loan program to PMI?

IF YOU ARE PUTTING DOWN 20% OR MORE, DISREGARD QUESTIONS 15 - 18.


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LOAN APPLICATION CHECKLIST Having the following information with you when you apply for a loan will significantly speed the processing of your mortgage loan:

1. Social Security Numbers for all borrowers.

2. Your annual gross salary. List overtime and/or bonus separately.

3. If you are in sales or marketing, or a commission income position, or claiming any interest income or bonus income, please provide two years tax returns.

4. If you receive social security disability or pension income, bring a copy of a check or award certificate from that agency.

5. If you are self-employed, bring copies of your personal and business tax returns for two years, business profit and loss and balance sheet for the current year.

6. List all stocks, bonds, and/or certificates of deposit, including their cash value in today’s market. If available, bring last three months statements.

7. Face amount and cash value of all life insurance policies.

8. If you presently own any real estate, please supply the following: name, address of lender, account number, original loan amount and balance on loan today. Provide same information for real estate previously owned and paid off, if applicable. Bring copies of settlement statements on real estate sales within past two years.

9. Name and address of all employers for the last two years.

10. Bank names and address for each savings and checking account, including account numbers and balances in each account. Please bring last three months bank statements.

11. Complete list of all debts. List account number, approximate balance, amount of monthly payment, the name the account is held in, and bank the card is drawn upon.

12. Present housing expenses, i.e., monthly mortgage or rental payment, maintenance, all utilities.

13. If divorced or separated, provide a copy of your final divorce decree and separation agreement.

14. Complete original executed Sales Contract.

15. Check for credit report and appraisal.


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TYPES OF LOANS

CONVENTIONAL FIXED RATE LOANS

A fixed rate mortgage has an interest rate, term, and a monthly payment to principal and interest that remains constant for the life of the loan. The term will be typically 30 years. The interest rate will be higher than other types but, in exchange for the fixed rate, you have permanent stability. Fixed rate loans can be obtained for as little as 0% - 5% down. However, if the down payment is less than 20% the lender may require that you have the loan secured with Private Mortgage Insurance (PMI). As an additional note, there are several lenders who have programs that have a higher rate of interest with no PMI. This may be a viable alternative, as PMI is not tax deductible and the added interest at a higher rate is deductible. If your down payment will be less than 20%, make sure to question your lender on these options.

ADVANTAGES

• Monthly payments to principal and interest are constant for the life of the loan. • Fixed rate loans are readily available allowing for a wide selection of homes. • As little as 5% down.

DISADVANTAGES

• Higher interest rate. • Usually not assumable. • PMI may be required if down payment is less than 20%.

ADJUSTABLE RATE LOANS (ARM)

The ARM is a mortgage instrument that allows for periodic interest rate increases and decreases. These increases or decreases are tied to a predetermined financial index. As the index moves, so does the rate. When the interest rate changes, the increase or decrease may be implemented by adjusting the payment. Rate changes and payment changes are based on an agreed schedule. The borrower must be given a minimum of 30 days notice before any change occurs as to how much the rate will change, what the new rate will be, what the new payment will be and what the outstanding principal loan will be. Most ARM’s now have a cap on the amount the interest rate can increase or decrease from one adjustment period to the next, as well as a life cap. This represents the maximum the rate can increase or decrease over the life of the loan. Interest rate capped loans do not generally have negative amortization when the amount owed is within the cap limit. That is, if the loan has an annual rate cap of 2% and the actual rate goes up 3%, the borrower’s payment can only go up 2%.

ADVANTAGES

• Easier to qualify for ARM. • Payments may go down as well as up. Most indexes increase and decrease. • They do not move consistently in any one direction. • Many ARM’s are convertible to fixed rate mortgages at certain times.


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• ARM’s are assumable with a qualified buyer.

DISADVANTAGES

• Differences between initial payment and 1st change payment can create payment shock.

• Interest rate and payment are subject to increase. • PMI

VA GUARANTEED LOAN

A VA loan is a government loan that requires no down payment up to 4 times the veteran’s entitlement. The interest rate and monthly payment remains fixed for the life of the loan. An up front funding fee will be collected or added into your mortgage instead of mortgage insurance.

NECESSARY DOCUMENTS TO OBTAIN CERTIFICATE OF ELIGIBILITY:

• Veterans DD-214 (Separation Papers). • Active Duty personnel - Statement of Service.

ADVANTAGES

• No down payment required up to 4 times veterans entitlement (Guaranty Benefits) • Long term, fixed rate, fixed payment loan. • Higher debt to income ratios are allowed. • Loan is fully assumable, qualifying, non-escalating rate. • Buy down features can be applied to VA loans.

DISADVANTAGES

• Must be a veteran. • Higher monthly payments.

FHA LOANS

The basic FHA Loan (203) is a fixed rate loan insured by the Federal Housing authority allowing a minimum down payment. The down payment is 3%. The maximum loan amount insurable by FHA varies according to the region. Buy down features and adjustable rate provisions can be applied to FHA loans.

ADVANTAGES

Low down payment requirements - approximately 4%. Higher debt to income ratios are allowed. Long term, fixed rate, fixed payments. Loan is fully assumable: Qualifying, non-escalating. Good loan for first time buyer.


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ARM available with 1% annual caps. Easier underwriting guidelines. Down payment can all be from a gift from a relative. Can borrow against your 401K and the debt not be counted against you.

DISADVANTAGES

Loan processing more complex - can take longer to close. Maximum loan amount can limit price of house in some areas. However, more can

be put down. A Mortgage Insurance Premium is required.

BUY DOWN

A buy down is not actually a mortgage but a special provisional feature than can be applied to any type of mortgage. It is a way of lowering the interest rate. The buy down can be on a permanent or a temporary basis. The buy down is accomplished by someone (a seller, builder, buyer or anyone else) paying the lender a certain amount of cash to lower the rate.

The maximum a rate can be bought down will depend upon the kind of buy down, permanent or temporary. Usually the lender will not allow as much of a reduction if the rate is only being reduced during the early years of the mortgage (temporary). The temporary or supplemental buy down is very popular in the Nashville area. In this type of loan the seller/builder (or anyone) subsidizes the highest rate by sharing in the buyer’s monthly payment during the early years of the loan. The rate is not permanently reduced; the rate is always at market but buyer’s payment rate is reduced during the early years and the seller pays the difference between the market rate and the buyer’s reduced payment rate. The total seller contribution between buyer’s rate and the market rate (aggregate difference) must be paid in cash at closing.

ADVANTAGES

Buyer gets lower initial rate. Buyer can apply “buy down” concept to Conventional Fixed Rate, FHA, and VA and

Conventional Adjustable Rate. Less income to qualify. Gives the buyer time for income improvement before rate returns to market level.

DISADVANTAGES

Requires income growth. Seller/Buyer or someone must be willing to pay up front cash at closing.


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ASSUMING AN EXISTING LOAN

Some properties have conventional loans which can be assumed. Most of these loans require purchaser qualification, escalation of the interest rate and sizable assumption fees. Some VA and FHA loans are assumable without rate escalation, and unless the seller wants to be released from liability, the purchaser does not have to qualify.

ADVANTAGES

With VA assumption (because the rate does not escalate) a lower monthly payment may be realized.

Closing costs are greatly reduced. A quick closing may be possible. No PMI (Private Mortgage Insurance) premiums.

DISADVANTAGES

A large amount of cash may be required due to low remaining loan balance. Assumable loans are hard to find, thus limiting your selection of homes. Cash invested is not easily converted in case of an emergency.

COMMUNITY HOME BUYERS (3% DOWN)

Another type of loan which is labeled as a conventional is catered to first time homebuyers. You have to be a first time buyer on some, but not all of these, CHB is a 30 year fixed rate with easier qualifying guidelines, such as higher qualifying ratios, no reserve requirements, easier underwriting guidelines and only 3% required for down payment, (with one program only requiring 2% down from your own funds). Some programs even allow you to roll in the cost of closing costs and prepaids.

ADVANTAGES

Lower down payment. Market rates. Lender able to pay cost for higher rate. Lender/seller able to pay some costs. No reserves required.

DISADVANTAGES

No ARM option. Less equity to start with. Higher Mortgage Insurance rate. Take home budget to fill out to qualify for program and attend a home buying

seminar


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ALL CASH

As a buyer you may choose to use your cash reserves or convert some other assets to cash to make your purchase.

ADVANTAGES

• Allows for quick closing. • No extensive closing costs, private mortgage insurance premium, escrow funds. • No mortgage payments. • No financing contingency.

DISADVANTAGES

• No interest deduction on taxes • Income from converted assets or savings is lost.

SELF INSURED – NO MORTGAGE INSURANCE

If you dislike mortgage insurance, there is another way. It is called “self-insurance”. Instead of paying mortgage insurance, the rate is increased. This way you have a much better tax write off because the MI is basically in the interest rate which is deductible where the flat MI payment is not. In addition, the payment is lower than on the typical scenario of principal and interest payment plus the MI payment.

ADVANTAGES

• Lower payment. • Increased tax deduction capability. • Lower up front money needed.

DISADVANTAGES

• Can’t get rid of mortgage insurance payment if, in the future, your loan to value becomes 80%.


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CLOSING COSTS

In addition to your down payment, you will be required to pay closing costs associated with obtaining the mortgage and establishing transfer of title. The following information will help clarify what they are and why they exist. Unless the seller agrees in the sales contract to pay for some or all of these costs, they are customarily paid by the buyer. Be aware that different lenders may require different fees and services.

COSTS ASSOCIATED WITH OBTAINING A MORTGAGE LOAN Loan Origination The lenders administrative fee to process the loan. This fee will vary among lenders (usually 1% to 3% of the loan). Loan Discount Often called “points” (each point equals 1% of the mortgage amount), used to adjust the interest rate on the loan. Paying a loan discount will lower your interest rate. Appraisal Fee Pays for a statement of property value by an independent appraiser. Credit Report Fee Cost of credit report summarizing your credit history. Underwriting Fee Paid to Lender to evaluate a loan application. Sometimes charged under some other name. Processing Fee Paid to lender to prepare loan for underwriting. Preparation Fee Covers preparation of final legal papers. Tax Service Fee Fee to set up new billing for real estate taxes. Survey Paid to determine legal boundaries of a property. Courier Charges Transfer charge between lender, attorney and other service providers. Transfer Charges Fees collected when a property changes hands or when a mortgage is made. They may be quite large and are set by state and/or local governments. They are also referred to as State Tax Stamps. Private Mortgage Insurance (PMI) An insurance policy that protects the lender from loss due to default by the Insurance or borrower. It is usually required by the lender when you borrow more than 80% of the fair market value of your home or on any government loan. There are a variety of payment options available. Title Insurance Protects lender’s equity against title defects in the property. Owner’s Title Insurance Protects owner’s equity against title defects in the property. This is an optional policy. Title Search/Examination An examination of the public land records to determine the condition of the title to the property. Usually performed by an attorney. Attorney’s Fee Legal services connected with the transaction. Recording Fees Paid to record new mortgage in the public records. Well and Septic Covers the cost of inspections.


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RESERVE ACCOUNTS AND PREPAIDS At closing you may need to make deposits into reserve accounts (escrows) to accumulate enough to pay for taxes and insurance when they become due. The following example illustrates how your escrow accounts are calculated. Assume the following details of a loan: Loan amount $100,000 Interest Rate 7.5% Closing/Settlement Date May 15 First Mortgage Payment Due July 1 Due Date For Taxes December 1 Yearly Taxes $1,200 Yearly Homeowner’s Insurance Policy $360 Real Estate Tax Escrow $700 (the remaining $500 due for taxes will be

added into your escrow account from July through December, $100 per month of monthly payment).

Hazard Insurance 1st Yr Premium $360 (is paid at or before closing. You will accumulate next years’ premium in your escrow account ($30 from each monthly payment).

An additional two months escrow deposit may be required for taxes and insurance.

PREPAID INTEREST Mortgage interest is paid in arrears. For example, the first payment on the mortgage is due July 1 and pays for the month of June. Since the closing date is May 15, interest must be paid to cover the period from May 15 to June 1. In the above example, the prepaid interest due would be $20.55 per day or $308.22 ($100,000 x 7.5% divided by 365 x 15 days). COSTS TYPICALLY PAID FOR BY THE SELLER

• Real Estate Commission • State transfer tax • Termite inspection and clearance letter • Recording fee for the release of Seller’s mortgage • Property tax due for the current year based on the number of days the seller owned

the home prior to closing. • Seller’s share of any other pro-ratable fees


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PURCHASE AND SALE AGREEMENT

CONTRACT QUESTIONS List any questions you might have concerning the contract below. _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________


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HOME WARRANTY Several companies offer home warranty programs to buyers purchasing previously occupied homes. Generally, such warranty programs are available for under $450 (or more depending upon your options), and they warrant the systems in the home for one year. The purpose of these programs is to give buyers some peace of mind about purchasing a previously occupied home where the systems and appliances in the home are relatively old.

The warranty typically covers the home’s plumbing, heating, air conditioning, built-in appliances, and electrical systems. Buyers should read the terms and conditions of the program they select carefully to determine what items are actually covered and to determine all exclusions. Buyers should also determine any additional costs for service calls and deductibles.

For new construction, builders typically provide a one-year warranty with the sale of the home. Buyers should inquire about any warranties available and review carefully the terms and conditions of such warranties. In addition, the systems in a newly constructed home may be under a manufacturer’s warranty when the home is purchased by the buyer.

I normally ask the Seller of existing property to pay for a Home Warranty at their expense. 89% of the time they will take this step.


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WHY INSPECT? According to your Purchase and Sale Agreement you have the opportunity to have the home inspected by a professional before closing. You can avoid, or at least anticipate, costly repairs to structural or mechanical systems by having an inspection. The sales contract specifies that the inspection will take place soon after the offer is accepted and that settlement is contingent upon satisfactory inspection.

NEW CONSTRUCTION IS NOT EXEMPT FROM ISSUES FROM SHEET ROCK AND PLUMBING TO ELECTRICAL.

The inspection requires specific technical skills. You can become familiar with common problems, but a professional home inspector can give you a better overview of the entire structure of a house and its potential problems. If at all possible, accompany the inspector who examines your house. They can point out potential problems and help you locate special devices like the items listed below:

• On/off switch on furnace, air conditioner, etc. • Pilot light on hot water heater, oven, etc. • Fuse box • Main water shut-off controls • Foundation • Floors • Walls and partitions • Roof • Windows and doors • Plumbing system • Electrical system • Heating, ventilation, and air conditioning system • Septic tank, well, or sewer line • Common areas (at condominiums and cooperatives)

PREFERED HOME INSPECTION COMPANIES

Al Ruhs- World Inspection Network Office: (615) 874-1345 4388 Oakcrest Ln. Fax: (615) 874-0290 Hermitage, TN 37076 AmeriSpec Home Inspection Service Office: (615) 333-1922 390 Harding Place, Suite 105 Fax: (615) 333-1923 Nashville, TN 37211

value: $50.00 us

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