7 Important Legal Tips When Buying A Home
Buying a house or apartment at any stage in life can be stressful and provide moments of uncertainty. This is due to the nature of the process and the fact that multiple parties are involved throughout, including, but not limited to (Real estate agents, lenders (banks), lawyers, the home seller, the listing agent (represents the seller), the home inspector, the appraiser, the escrow company and the title company).
In this article, Lawyer Monthly have compiled 7 essential legal tips to help you navigate the complex and uncertain world of real estate. From property titles to dealing with property liens, Lawyer Monthly have got you covered. Knowing the following key information, terms and processes can save you time, money, and lower your stress levels!
Without further ado, let’s get right in and ensure your real estate journey starts off on the right foot!
Top Tip 1. Property Titles
A property title is a legal document that proves ownership of a specific piece of property. It contains detailed information about the property, its boundaries, any liens (A lien is a security interest or legal right acquired in one's property by a creditor, or lienholder. A lien usually prevents sale of the property until the underlying obligation to the creditor is satisfied) or encumbrances, and most importantly, the owner’s name. Title to real property may be held solely, collectively, collectively with the right of survivorship, via joint tenancy, or with tenants in common. Title Deeds are retained by the mortgagee until such time as the loan is repaid.
Top Tip 2. Importance of Home Inspections
Your potentially about to make the biggest financial investment of your life and thats why is imperative to recognize the significance of home inspections. When buying a property, engaging a qualified home inspector to conduct a comprehensive evaluation of the house's condition is vital. A home inspection can reveal concealed problems that may not be visible to someone without expertise. These issues may encompass structural deficiencies, electrical and plumbing complications, or even the existence of mold or pests. Our advice is to take the home inspection, this way, you can prevent potentially expensive repairs or renovations in the future. Furthermore, the findings in the inspection report can enhance your negotiating position, allowing you to request necessary repairs or a reduction in the purchase price from the seller.
Top Tip 3. The Purchase Agreement
A purchase agreement is a binding contract between a buyer and seller that provides all the details of a home sale transaction. The buyer will suggest the conditions of the contract, including their offer price, which the seller will then agree to, reject or negotiate. It’s crucial to review and understand each provision before signing the agreement which will include, purchase price, any financing terms, contingencies, and closing date. If in doubt, speak to your real estate lawyer.
Top Tip 4. Financing and Legal Considerations
Conventional mortgage loans are widely favored, enabling individuals to secure funds from a financial institution to acquire real estate, which is then repaid over a specified period along with interest. Nonetheless, various alternative financing methods exist, including seller financing and lease-to-own agreements. Notable lenders include; United Wholesale Mortgage , Rocket Mortgage and Bank of America.
Loan-to-Value (LTV) indicates how much you’re borrowing compared to the value of the home. For example, if you need to borrow $90,000 to purchase a $100,000 home, your LTV would be 90%. The lower your LTV the better, as it indicates your ability to make a higher down payment.
Debt-to-Income (DTI) shows how much debt you have compared to your monthly income. The lower your DTI, the better your chances for qualifying for a loan. For example, if your total monthly debts are $2,000 and your gross monthly income is $6,000, your DTI would be 33%. Remember, your monthly housing costs should not exceed 28% of your gross monthly income. It is important to understand that prequalifying does not signify any obligation on your part to engage with a specific lender or real estate agent. Additionally, it does not assure that the lender will ultimately approve your loan application.
Top Tip 5. Zoning Laws and Restrictions
Zoning refers to municipal or local laws or regulations that govern how real property can and cannot be used in certain geographic areas. Make sure you do your due diligence and check to see if the property you are buying is restricted. For example, if you are thinking of working from home in your new home, there may be limits or restrictions on the type of business you can operate from your home. Take legal advice to check zoning laws and any restrictions.
Top Tip 6. Property Liens
A lien is a legal claim that gives someone the right to keep possession of another person's property until a debt is paid. Get your attorney to check for any liens. The last thing you want is to move in to your new house only to find someone else owns a stake in your home!
Top Tip 7. Property Taxes
Property taxes, are payable by real estate owners to their respective county or local tax authorities. The amount owed is determined by the assessed value of the property and varies according to the property tax rate established by the state. The majority of homeowners in the United States are required to pay these taxes, typically on a monthly schedule, alongside their mortgage payments. Once the mortgage is fully paid off, property owners will receive periodic tax bills from the local government throughout the year. The top states for property tax are; New Jersey, Illinois, New Hampshire, Vermont and Connecticut and can top $8,500 a year in NJ. The lowest happens to be Hawaii!
Conclusion:
Hire a real estate attorney to assist you with your property purchase. There are several things you can do when searching for a property lawyer to assist you with your purchase.
- Search local reviews and feedback.
- Does the lawyer have expertise in property and real estate law and transactions?
- Ask a trusted friend, relative, or business associate for a recommendation.
- Other considerations are proximity of lawyer’s office location to you, fees charged, and the length of time a case may take.
- Check the American Bar Association - in 2019, 565 lawyers were disbarred.
