Steps to Purchasing a Chicago Home

March 2, 2012
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Jeff Donnellan

So you’ve found that perfect home after searching for a week, a month, or a year.  So what’s next?   Most likely you’ve already done your pre-approval and financially qualified the home to make sure it’s in your budget.  The next steps will show in detail of how to make that perfect home yours.

1.  Ask for the Home owner’s disclosures such as “lead paint”, “Radon”, and the Seller’s disclosure that lists about 20 items that are critical to a well-functioning home.  If you are buying a foreclosure the seller will not provide disclosures.  So a home inspection is crucial.

2.  Next a CMA or Comparative Market Analysis prepared by gathering at least 3 sold homes with in close proximity and similar features will help determine value and offer price.  If a home is asking 200k and the comparable sales are 195k, the home is well priced.

3.  Making the offer:  These are the 5 negotiable parts of the contract.

  • Price
  • Earnest Money ( good faith deposit kept in escrow until closing when it is returned)
  • Closing Date
  • Personal property ( appliances, fixtures, furniture)
  • Financing (FHA, VA, Conventional, Cash)

4.  After the contract is negotiated it’s time to get busy.  A home inspection should be scheduled in the 1st 5 days after acceptance.  The inspection will help determine if there are any defective parts of the home and issues that need to be repaired.

5.  An attorney should be contact as well to review the contract and get in writing  home inspection issues that the seller agreed to fix or give as cash credits. (with in 10 business days  after contract acceptance)

6.  Contact your mortgage lender and let them know you have an accepted contract.  They will take a mortgage application and start your loan processing.  They will ask for additional documentation such as bank statements, pay stubs, w 2’s and tax returns.

7.  Many of the next steps take place behind the scenes.  The underwriting your loan will begin to make sure all documentation is place and the appraisal will be order to verify the property’s value meets the loan amount.

8.  A mortgage commitment will be issued stating that funds are approved and awaiting the closing.

9.  You will want to do a final walk through of the home usually the day before or morning of closing to make sure no damage was done to the home when the seller moved out and that all agreed upon items have been left in place.

10.  And finally the Closing.  Your mortgage funds will be wired to the title company where the closing is taking place and loan documents will be signed.  Items needed:  A cashier check for down payment, & closing costs made out to the title company and Identification like drivers license or passport.

Congratulations!!! You’re now the proud owner of  a home.


10 Tips Know Before Buying a Condo

February 28, 2012
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Jeff Donnellan Re/Max

Search for Chicago Condos here

Condos are very different from purchasing a single family home, town home, or apartment building.  While most homes will qualify for almost any financing, condos can be much more difficult.  Since they are a collected group of owners sharing the same land, walls, & maintenance expenses, rules are necessary to govern the common good of the entire building or buildings.   An association of home owners or a private management company will administer the rules, collect monthly payments, pay bills and administer improvements or repairs.  In order for a condo building to qualify for financing the association must be active and healthy.  Here are 10 tips to make your condo purchase smoother and flush out all the potential challenges before making an offer.

1.  Will the building qualify for financing?  Since the down turn in real estate, financing options have changed and tightened up considerably.  Unless you are purchasing a home with cash, it will need to be financed.  Make sure the building can be financed with relative ease.  Find out what types of loan can be used, this will effect ease of resale if multiple loan types can be used.

2. What types of loans can be used?  Currently the most common financing  options for  purchasing a condo are:

  • FHA ( government backed with only 3.5% down payment.  Building has to be FHA approved and meet guidelines )
  • Conventional ( 5-20% down payment,  higher qualifications & most likely sold on the secondary mortgage market)
  • Portfolio Loan ( higher down payment, bank will lend it’s own money & keep the loan usually at a higher interest rate)
  • Cash ( necessary when a building will not qualify for financing)

The next 6 questions will determine financing options.

3.  How many condos are being rented?  Owner occupancy will effect financing since conventional & FHA loans allow no more than 50% to be rented. A good association will have rules in place to keep rentals at an acceptable level.

4.  What’s the investor concentration?  Find out if 1 person or entity owns more than 10% of the building.  With smaller buildings 3-10 units if 1 person owns more than 1 condo.  This is another financing guideline for FHA & Conventional loans.  This standard is in place so if that 1 person or entity defaults, the whole building doesn’t suffer.

5.  Are more than 10% of the condos delinquent or behind in assessment payments?  This can also be road block to financing because it is usually leads to the entire association not being able to pay it’s bill or insolvency.  Many times it’s also sign that condos owners will default on their loans.

6.  How many condos are for sale as foreclosure or short sales?  Not only do a high amount of short sales and foreclosures hurt values for all condos in the building but, conventional & FHA guidelines only allow for 25% or less.

7.  How much is in reserve funds?  Reserve funds are meant to pay for special projects or common repairs such as a roof, decks, exterior walls or other common elements.

8.  Are there special assessments?  When a condo building doesn’t have enough reserves to cover repairs or updates a special assessment is needed.  This comes in the form of additional payments from each condo owner with a 1 time payment or monthly installment payments over a set period of time ie 1-3 years.

9.  What’s included in monthly assessments?  Find out what your monthly assessments cover heat, electric, cable, internet, parking and common amenities such as a pool or gym.

10. Is parking included?  Parking spaces can be included as a common element with each unit, deeded & sold separately, or leased.

Before starting your condo search make sure you get pre-approved for a loan.  This will help guide in your condo search by letting you know which financing method you can use and which buildings will qualify for that type of financing.  The most disappointing feeling is finding that perfect place and finding out later that it won’t qualify for the type of financing you are using.