The Real Estate Process

Making it simple.

Buyers and sellers can often feel lost when it comes to the flow of a transaction and can benefit from a primer. The closing process can take 30 – 60 days from the date of contract acceptance. Understanding the importance of each step better prepares buyers and sellers to expect the unexpected. Before embarking on your next real estate contract, reviewing the process can help make real estate very easy.

Common Terminology

Purchasing a home is a smart investment. However, if you’re purchasing a home for the first time, there is some terminology you need to be aware of regarding your future home mortgage. Here are some common words you’ll encounter when you’re looking for a home loan. Knowing the terminology involved in your mortgage will help you stay on top of the mortgage process and allow the entire process to run smoothly. Familiarize yourself with these terms and keep yourself out of the dark.

Adjustable Rate Mortgage (a.k.a. ARM Loan):

A home loan where the interest rate adjusts throughout the term of the loan. ARM Loans usually have an initial interest rate that is lower than that of a Fixed-Rate Mortgage. This low interest rate is locked for a set length of time. Once that time has expired, the interest rate can go up based on market factors. The lower initial interest rate helps those who can’t afford a fixed-rate mortgage get financing for their home. However, the interest rate will most likely increase when the initial term of the low interest rate expires.

Annual Percentage Rate (APR):

The measurement of the full cost of a loan including interest and loan fees expressed as a yearly percentage rate. Because all lenders apply the same rules in calculating the annual percentage rate, it provides consumers with a good basis for comparing the cost of different loans.

Appraisal:

An estimate of the value of property made by a qualified professional called an “appraiser.”

Closing Costs:

The expenses involved in finalizing a mortgage. Closing costs include lender/agency fees, loan origination costs, escrow payments, title insurance, attorney fees, etc. Closing costs are often shared between both the buyer and the seller.

Escrow:

This comes at the end of the mortgage process - where a neutral third party obtains the documentation and money involved in the transaction until the transaction is complete. An escrow account is also used to hold the property tax and insurance monies that are collected during payment of the loan.

Fixed-Rate Mortgage:

A loan where the interest rate stays the same. It does not fluctuate while the loan is being paid off. Financing for fixed-rate mortgage loans are commonly spread out over 10, 15, 20, or 30 years. This type of loan is popular because there are typically no surprises. Since the interest rate remains the same, the monthly mortgage payments are static, and don’t change year to year.

Points:

A percentage of the principal of the loan used to lower the interest rate of a loan. There are two types of points: Discount Points and Origination Points. Discount Points reduce the interest rate of a loan by having the lender pay more at closing. One point equals one percent. So, if you want to lower your interest rate by one percent, the borrower needs to pay one percent of the principal at closing. However, this does not lower the principal amount. It merely lowers the interest rate. Origination Points are used in the same fashion and utilized to cover the loan processing expenses.

Private Mortgage Insurance (PMI):

Mortgage insurance provided by non-government insurers that protects a lender against loss if the borrower defaults.

Principal: 

The original amount borrowed from the lender. It does not include interest or other fees. It’s the lump sum the borrower gets from the lender.

Title Insurance:

Insurance to protect a lender or owner against loss in the event of a property ownership dispute.

Insuring Your Investment

Some of the Potential Problems to Check For -
A REALTOR® should be aware of these issues and suggest solutions to you based on their experience in the field:

  • Mold/moisture
  • Age/condition of the roof
  • Lead paint
  • Flood zone/home location
  • Central heat (primary must be gas, oil or electric)
  • Dogs/animals
  • Swimming pools with diving boards
  • Electrical – 100amp service minimum.
  • Furnace must be new within the last 25 years.
  • Other issues that affect the premium substantially are: wood and pellet stoves, day cares, trampolines, prior issues, and credit ratings. (Info. provided by Tompkins Insurance Agencies, Inc.)

Market Reports

Be aware of overall trends & performance in the local residential real estate market for each of the primary markets we serve. 

Purchase Offer

When it comes to time to make a purchase offer, you most likely will be using a standard purchase offer contract specific to your market. We recommend that you familiarize yourself with the contract details so that when it comes time to accept a purchase offer on your home, you can move quickly. Here are sample contracts from all three of our market areas: