Buying a Home

So you want to buy a home. It's a big decision! How do you know you're doing the right thing?

We've all heard the horror stories, but instead of worrying, there are things you can do to make it a positive experience. First, consider consulting an attorney. Buying a house is complicated. But it doesn't have to be overwhelming, especially if you have a legal professional on your side, looking out for your interests. Ensuring the peace-of-mind that comes with an attorney's services is every bit as valuable to a homeowner as locking in the best possible interest rate. The following are the basics of buying.

What can you afford?

We all have an image of our dream home. But remember, what is perfect in your mind might not be perfect for your bank account. Before you even start looking, find out what you can realistically afford.
Here's what you should do to establish your price range.

Do your homework. You'll need to gather basic information about your income, existing debts and credit history.
Meet with a lender (bank, mortgage company or credit union) to find out how much you can borrow.
After determining how much you can borrow, add the amount of savings you will use for the down payment to determine your price range. (Down payment + loan = sales price.)

Remember, don't tie up all your savings in the down payment. You will need some to go toward the costs of closing the transaction. These include closing costs, discount points, inspections, a survey, fire insurance, property taxes, interest and escrow accounts set up to pay future taxes and insurance.

All this sounds confusing, but it doesn't have to be. An attorney can review and explain all of the documents before you sign anything. It's always better to ask than to regret a decision later.

What kind of property is right for you?

There are a lot of choices out there: houses, townhouses, condominiums, traditional neighborhoods, cluster homes, high rises. When looking at your options, don't forget that your mortgage payment isn't the only consideration. There often are other "built-in" expenses. Find out about any mandatory neighborhood dues for swimming pools, tennis courts, playgrounds and landscaping. With condos and townhouses, find out about association fees -- how much and exactly what is covered.

Making an Offer

Once you've found the right home, it's natural to want to rush to submit an offer. Take a deep breath and think through the process, because a contract is a legally binding document. To begin, you or your realtor will need to prepare a sales contract offer. You can get blank contract forms from your realtor, office supply store or attorney. Although much of the language in these forms is standard, every blank is important. Filling it in represents an obligation. Here is some of the information you will need to provide.

Legal description of the property you want to buy.
Sales price that you are willing to pay.
Amount of earnest money and who will hold it.
Method of financing (all cash, bank or mortgage company loan, seller financing).
Amount of financing.
Who will pay closing costs and how much.
When the seller will move out and the buyer move in.
Amount of real estate commission (usually paid by seller).
Deadline for the closing.
Whether buyer can back out or require repairs if an inspection reveals problems with the house.
Whether any "portable" items such as curtains, blinds, swing sets, grills, refrigerator, washer, dryer, etc., stay with the house.
Who will provide and pay for a termite inspection letter.
Who will pay for repairs, if any.

The pre-printed contract forms provide that the seller will convey title to the buyer by either warranty deed, limited warranty deed or quit claim deed. If you are buying a new house, your contract may contain many pages of specifications on everything from appliances to carpet. Even simple forms can be deceiving, so it's a good idea to have an attorney take a look at your proposal before you sign anything.

Are you really ready to sign?

Presenting a formal offer to the seller is a big step. If you have any special considerations -- if, for example, your down payment depends on a bonus from work, or you have to sell another house, etc. -- an attorney can make sure the contract is worded appropriately. When the seller signs your offer, with no changes, you have an accepted and binding contract. There's no going back without financial and legal consequences. If you have any questions at all, consult an attorney before you become obligated to an agreement that doesn't meet your needs or one you don't completely understand.

What exactly is a "closing?"

The closing is when the seller actually transfers the title to the name of the buyer. The buyer signs all loan papers and makes the down payment for the property or brings a cashier's check if there is no loan. The closing usually takes place in the closing attorney's office. The party paying closing costs pays for the closing attorney. Remember, the closing attorney represents the lender -- not the seller, not the realtor and not you. If you want an attorney to represent you, it's up to you to hire one.

Getting Ready for Closing

You've got your loan lined up. The seller has accepted your offer. Now, it's on to closing. Once again, there are tales of hours of intense procedures and others of 20-minute completely painless transactions. The more you know, the more painless your closing can be. Here's how to make yours smooth and free of nasty surprises.
Once you have an accepted contract and an approved loan, you and your realtor need to coordinate a closing date and time with the lender, seller and closing attorney.

What do you take to closing?

You will be instructed as to the necessary documents needed for your specific closing, but generally these may include:

Cashier's check for the down payment and other buyer costs (based on estimate provided by lender);
Insurance policy (must be ordered prior to closing from any reputable company) and a bill or paid receipt;
Any paperwork still required by lender, for example, your most recent pay stub;
Photo identification (driver's license); and
All parties who must sign loan papers such as spouse and/or parents.

If you want a land survey of the property, be sure to let the closing attorney know at least a week before the closing. Your lender may not necessarily require a survey, so if you want one, you will need to request it. A current survey is good to have because it shows the location of the house and other improvements such as fences, garages, driveways, decks and walkways on the property. At the closing you also will be asked to decide on whether or not to purchase owner's title insurance. Discuss both of these issues with your attorney prior to closing.

What papers are signed at closing?

The closing can be intimidating, especially if it's your first time. You may feel as though you're signing away your life without really knowing what you are signing. Knowledge equals peace-of-mind, so here's a rundown of the documents typically included in a closing.

Promissory Note. This is the formal "IOU" showing the loan amount, interest rate and term of loan (number of years to pay back).
Security Deed. A mortgage document that is recorded in the courthouse records showing the amount and term of loan. It gives the lender the right to foreclose if the loan isn't paid back.
Warranty Deed. The seller signs this document to convey the title to the buyer. The warranty deed contains the exact legal description of the property and is recorded in the county courthouse where the land is located.
HUD-1 Settlement Statement. This also is called the closing statement and shows all financial terms of the transaction, including how much money both the seller and realtor receive as well as the exact amount the buyer must pay at closing.
Truth in Lending Statement. This identifies the annual percentage rate, which is the loan interest rate plus the finance charges paid by the buyer. It also shows the total amount paid back over the term of the loan.
Aggregate Escrow Disclosure. This shows the calculation of how much money you need to establish in your escrow account to pay next year's property taxes and insurance renewals.
Various Affidavits. These include a series of documents in which you, the buyer, promise that you still are employed, plan to occupy the house, agree to sign or initial corrections or additional papers later, promise that there are no side agreements between the buyer and seller, and that the down payment has not been borrowed. The seller will also sign an affidavit that he/she is not aware of any unpaid liens or title disputes.

But that's not all. Sometimes you will be asked to sign other documents to complete the loan file, such as a typed loan application and an acknowledgement that the closing attorney does not represent you.

What is owner's title insurance -- do I really need it?

Owner's title insurance is optional, but it guarantees that you have a marketable, insured title to the property. In other words, it is necessary. It's a relatively small one-time cost, and it protects the buyer from mistakes in title examinations and other title problems caused by prior owners of the property. You buy owner's title insurance at closing through the closing attorney. The lenders title insurance policy does not protect the owner.

How do you want to take title to the property?

If you are buying this property with another person, you will have the option of owning the property as joint tenants with right of survivorship or as tenants in common. Joint tenancy means that upon the death of one owner, the surviving owner has 100-percent ownership. The property can't be left in a will to anyone else and is not included in the deceased owner's estate. Tenancy in common means that the owners each own part of the property and they may designate who receives their share upon their death. If there is no will, it's up to state law.

Do you really need an attorney?

Yes. Buying a house is one of the most significant financial transactions of your life. While there are standard procedures for buying a home, every situation is as different as the people and properties involved. Why not rely on the professional services of an attorney to head off potential problems and to protect and advise you? In buying a home, you may have questions, problems, frustrations, disappointments, conflicts or other issues that could be avoided, resolved or at least better understood if you have an attorney on your side, representing your interests.

This pamphlet was prepared by the Real Property Law Section of the State Bar of Georgia as a public service. It is not intended to be a comprehensive statement of law. Its purpose is to inform, not to advise on any specific legal problem. If you have specific questions regarding any matter contained in this pamphlet, you are encouraged to consult an attorney.