Aspiring homeowners, before proceeding to buy a house, must first be familiar with how real estate transaction works. Homebuyers must exercise diligence, particularly because buying a house can be quite costly. This includes the down payment, the projected monthly mortgage payment for what you will borrow, and other related costs.
The home buying process is not simple. Negotiations between buyers and sellers can be quite complicated.
Keep in mind that any home purchase must be under federal housing state law, and legal representation from a trusted Calabasas real estate attorney is crucial. They can give legal advice on how homebuyers can check the paperwork provided by lenders (monthly payment and all), good faith estimates, homeowners’ insurance policy, and funds in escrow. How these escrow funds affect borrowers will be the focus of this article.
Is it more difficult getting a mortgage for a lot than a home loan?
The quick answer is yes. A mortgage company is more likely to approve a loan for an existing residential property than a lot. Let us say that the total amount you need a borrower would need to buy a house is $350,000. With a good credit score, a lender will likely approve the loan and the borrower could have 30 years to pay back the principal and interest owed. However, getting the same loan amount for a vacant lot can be more challenging. A down payment of 20% would often be required, and you will likely be given two to five years to pay your mortgage loan.
People buying a lot to build a home on often process a Construct to Perm loan, which means the bank must first approve the plans for whatever will be built. An appraiser will visit the property, check the plans, and makes an appraisal of the final built home. The mortgage loan would then be against this value. If the appraised amount is $700,000, for instance, the buyer would likely be able to get a loan equivalent to 75% of that, or $525,000.
Once you close escrow on the lot, the mortgage company funds the loan to buy the lot and the buyer starts paying interest on this amount. As building proceeds, home mortgage companies would often pay out additional money in a series of draws, with the final draw being paid once construction is finished. Here, escrowed funds are necessary to kick start the process.
What is an escrow fund and why is the escrow process important?
The need for escrow agent (or escrow company) services is often underestimated, but this should not be the case. An escrow agreement is very important for both the would-be homeowner and the lender he or she would negotiate with.
Before transacting a home sale and finalizing a purchase agreement, a mortgage lender would require money to be placed in escrow (or held by a third party). The escrow deposit could vary. Such is held in escrow until both parties involved meet certain conditions. Escrow accounts involve a neutral third person or neutral third party to provide an additional layer of protection for all parties, or both the home buyer and seller.
Our Calabasas real estate attorney can help you walk through escrow instructions and how they affect real estate transactions. Generally, the earnest money is deposited by the homebuyer into an escrow account to show to the one selling real estate that he or she is serious with the home purchase and sale.
If the buyer reaches the close of escrow, owning his or her new home (or the lot, at least) is within reach Closing escrow allows you to proceed with the next steps. After the closing process (when you settle whatever you are obligated to settle things with the lender, closing agent, and title company), the earnest money deposit shall be released, which you may apply to real estate closing costs.
The escrow period and the actual closing are crucial for the transaction that you are entering. Closings can be stressful, but they are something most look forward to in real estate settlement.
Why do I need to consult with trusted a Calabasas real estate attorney?
Even a first-time homebuyer or seller will generally be familiar with the need for real estate brokerage. If you are home buying, for instance, you will likely contact your real estate agent or real estate broker, who will send you properties or lots that are available. There is, however, more to owning and buying a home than just knowing how much money you need (given the agreed-upon purchase price) or making payments each month. Aside from mortgage payments, you have to make real property tax payments and settle mortgage insurance premiums on time. Monthly payments and interest rates are just one of your many obligations.
At Moschetti Law Group, we are dedicated to helping you and your family protect your wealth, assets, and legacy. We help you build a comprehensive plan so you can have peace of mind whether it is with an estate plan, asset protection, probate, or real estate transaction. We serve Los Angeles County, eastern Ventura County, and North Orange County from our office in Calabasas