Buying a Home in Virginia
Congratulations on your big decision to buy a home – whether it’s an existing property or new construction, buying a home is a very exciting endeavor, and the attorneys at Keithley Law, PLLC can help you avoid some of the common stressors by better understanding the process. First and foremost, know that the following information should be used as a general guideline. We’ve assembled this informational brochure to help guide you through the entire process of buying a home. Every situation is different, and we can advise you regarding the particulars of your circumstances once you become a client.
Be sure to discuss how much home you can afford with a certified public accountant, tax lawyer, and some mortgage lenders. If you’re working with a real estate agent, make sure you understand that although your real estate agent can help draft your contract, you should not rely upon your agent for legal advice. In our experience, the best real estate agents are those that tell you getting an experienced real estate lawyer to review your contract is never a bad decision, and potentially, it can help you avoid many future legal problems.
With decades of combined experience, Keithley Law, PLLC has a thorough understanding of Virginia real estate laws. Our Fairfax real estate attorneys can guide you through the negotiation process and review your contracts before you sign the dotted line.
How to Purchase a Virginia Home
Shopping for a Mortgage
There are many types of loan products, and your mortgage lender or broker can discuss the options with you. Your credit history, financial situation, and risk tolerance will be the main factors for qualifying for a mortgage, and you may ultimately decide to obtain a fixed rate, adjustable rate, fixed term, or adjustable term loan. You may be eligible for a VA loan guaranteed by the Department of Veterans Affairs, an FHA loan or other lower, or even, no down payment loans. Your monthly mortgage payment will probably include the principal, interest, taxes, and property insurance, known as “PITI.” In Virginia, it’s also very common to pay homeowners’ association (“HOA”) dues on a monthly or quarterly basis. If you buy a condo, you’ll pay “COA” or condominium owners’ association dues. You should consider all of these expenses when making decisions about affordability.
Calculate Your Closing Costs & Required Down Payment
Typically, in Virginia, you are going to pay for a home appraisal to qualify for most forms of financing, unless you are one of the lucky few that can pay for the entire transaction in cash. You may also pay for a home inspection and radon testing, moving costs, title insurance, points or loan original fees, and other lender-required administrative costs for processing your loan. Most Virginia real estate contracts require sellers to pay the costs of any real estate brokerage commissions, and most often, up to three percent of the purchase price goes to the listing agent (seller’s agent) and up to three percent goes to the selling agent (buyer’s agent), unless the transaction is for sale by owner (FSBO), which may give you more room to negotiate.
Finding a Home
Most of our employees have lived in the Northern Virginia area for years; as such, we know the area very well. By now, you probably have a good idea as to the general area in which you’d like to purchase your home. Talk to friends, neighbors, and possibly, your real estate agents about neighborhoods, schools, local attractions, and the general condition of that area. If you prefer to purchase a newly constructed home, Northern Virginia has many newly constructed communities. We can give you general guidance as to the types of purchase contracts new homebuilders may use, and some will require that you sign their standard agreements. Remember, you have choices, and you should never sign any agreement without consulting an attorney.
Selecting a Closing Company or Settlement Company
Pursuant to §55.1-1006 of the Code of Virginia of 1950, as amended “A purchaser or borrower in a transaction related to real estate in the Commonwealth shall have the right to select the settlement agent to provide escrow, closing, or settlement services in connection with the transaction. The seller in such a transaction may not require the use of a particular settlement agent as a condition of the sale of the property.” The closing or settlement company will coordinate the entire process for you but will not provide specific legal advice and will be acting as an impartial party. You can expect to spend at least an hour or two at the settlement agent’s office, usually with the sellers, and each side’s agents, which can include your attorneys. We will help you understand what you’re signing. If you are financing your home, then you will give your home as collateral to the bank or trustee in exchange for repayment of the loan. This means that if you default on your loan, your trustee or bank has the right to foreclose on your home and to use the foreclosure proceeds to repay its investors and sue you for any deficiency (difference between the sale price and the amount you owe).
Making an Offer and Preapproval Letters
With most contracts, you’ll need to submit a prequalification letter with your offer, unless you can pay all-cash. Your lender will prequalify you for the amount of the loan and the term of the interest rate for your loan (rate locks).
We want you to present the best contract possible, and this means that we’ll need to review the terms of the real estate contract, or you can ask us to draft one for you, which you may be able to use again. The offer you make will depend upon your lender’s requirements, your prequalification letter, the fair market value of the home, and comparable surrounding home values. You may also want to request concessions from the sellers or help with your closing costs. At this point, understand that if the sellers accept your offer, your contract may be ratified, and you will be bound by the legal provisions of your contract. A contingency is a condition that must be satisfied for the transaction to proceed to closing. If you are relying on the proceeds from the sale of your current home, then you probably want some type of contingency in the purchase contract that states the offer will not be effective until you sell your home at a certain price. You probably need a home inspection so we will help you understand what home inspections entail. You may also need financing contingencies so that if for some reason your loan falls through, your contract obligations become void and you don’t lose your earnest money deposit. At this point, the sellers may counter your original offer with a different offer, which usually entails another round of negotiations – or two. Whatever you do, don’t sign multiple contracts! You may be legally required to purchase multiple properties!
Applying for Your Loan
If the seller accepts your offer, your contract may be ratified, and around this time, you’ll have to contact your lender and continue the loan approval process. You will give your lender many, many documents, including bank statements, credit obligations, tax returns, and any other financial information required to process and approve your loan. You will also complete a loan application. Remember, if you have a financing contingency, you only have a certain amount of time to qualify for your loan, and you may be obligated to proceed without any loan if you don’t properly and timely exercise your contingency options. Most lenders require that their borrowers purchase homeowners’ or property insurance to make sure their investments are covered if something should happen to the property or claims are made against the property. You should consider talking to a tax advisor or accountant to understand the tax and financial implications of your monthly mortgage obligations. Your loan will go through underwriting, and your lender will tell you that your approval will depend upon maintaining your financial health, or you may have to pay off other debts before qualifying for the loan, such as car loans or credit cards. Your lender may also require that the sellers satisfy certain judgments or liens on the property revealed during a title search and exam before you can qualify for the loan.
Scheduling Inspections and Satisfying Other Contingencies
If you have other contingencies, such as a home inspection contingency or termite inspection contingency, make sure you are resolving them in a timely fashion based upon the terms within your contract. Your lender will probably also require a home appraisal, which means that if the home doesn’t appraise for the purchase price, your lender will not qualify you for the loan. You may have other options if the home doesn’t appraise for the purchase amount, including bringing cash to the settlement to cover the difference between the appraisal amount and the purchase price, or you may be able to renegotiate the purchase price for the appraisal amount.
Review Your Closing Documents
We’ll help you review the documents, and we can also prepare the deed on your behalf, which is the legal document that is transferred from the sellers to you giving you title and ownership of your home.
Both state and federal law, including the Real Estate Settlement Procedures Act and the Truth in Lending Act, provide guidance regarding the disclosures about closing costs to which you are entitled. The actual amount you pay for the settlement will depend upon the lender’s charges, settlement costs, the amount required for escrowing homeowners’ insurance and property taxes, and any other payoff requirements. Your monthly mortgage requirements will depend on many factors, including the “cushion” or amount the lender can require you to maintain in your escrow account to make sure you’re paying property taxes and maintaining homeowners’ insurance, which is for the most part guided by federal law.
Settlement and Closing
This is your final step before you become new owners! At settlement, you will sign many, many papers. It’s a good idea to ask us to accompany you to the settlement. You may have to bring a cashier’s check, certified check, or cash payment to the closing. You will have conducted your final walkthrough inspection and made sure any remaining home inspection or punch-list items are complete. Usually, this is conducted on the day before settlement. It’s usually not a good idea to do the final walk-through the day of settlement because if any work remains outstanding, things get murky, and you probably won’t have any time to do another walk-through to make sure everything is done before the settlement papers get passed around. We can help you determine if the sellers should be required to escrow money or funds to make sure agreed-upon items are completed after settlement (usually, with your lender’s permission).