HOME BUYER FAQ

1.    Why should I hire an attorney in connection with the purchase of my home?

        Your house is likely the most valuable asset you own; a lawyer can help make sure your interests in that asset are properly protected.  Before you sign an offer to buy, you should have an attorney review the offer.  Among other things, your attorney can make sure appropriate contingencies have been added (e.g., a financing contingency and an inspection contingency).  Your lawyer can then negotiate and draft the purchase and sale agreement for you.  When you sign that document, you will be asked to make a significant deposit; one of the things the lawyer can do is help make sure you don't lose the deposit if the transaction falls through.  Finally, your lawyer can also help you at the closing by reviewing the settlement statement and loan documents, making sure you haven't been overcharged and your loan is on the terms that were promised to you, as well as answering any questions you may have, ensuring that you take title to the property in a way that best protects your interests, and following up to make sure discharges of any prior mortgages are recorded after the closing.

2.    Should I obtain a mortgage loan from a bank or a mortgage broker?

        The decision of whether to use a bank or a mortgage broker depends upon the circumstances of your situation and is entirely up to you.  Keep in mind a mortgage broker is an intermediary, not a bank.  A mortgage broker helps you find a bank that will make the loan on the terms you desire.  If you decide to not to contact a bank directly, but rather to use a mortgage broker, you should consider taking some extra steps to help protect your interests.  If you apply for a loan over the phone, make sure you follow up to get in writing the statements the broker has made to you and the information you have provided to him or her.  Massachusetts law requires that mortgage brokers provide their customers with a disclosure form explaining who the broker is, what fees they intend to charge, and the terms of the loan that have been requested.  940 CMR 8.00   If you deal with a mortgage broker, make sure they give you the required form, and make sure it has been properly filled out.  Also, always insist on a a written commitment letter and a "Good Faith Estimate" of the settlement charges you will be asked to pay before the mortgage contingency in your purchase and sale agreement expires.

3.    What government and other programs are available to low-income home buyers finance the purchase of a home?

        There are a number of subsidized loan programs in Massachusetts that help low and moderate income home buyers finance the purchase of a home.  For example, MassHousing, the state's housing finance agency, has a home buyer financing program called MassAdvantage; and Massachusetts Housing Partnership Fund has a similar program called Soft Second.  Both these programs are available from private banks like TD Banknorth.  For more information about these and other programs you can also visit the website for the Massachusetts Department of Housing and Community Development or you can contact a local housing agency in your area like South Shore Housing, the Plymouth Redevelopment Authority, the Affordable Housing Program for the Cape Cod Commission, or Housing Assistance Corporation on Cape Cod.  If you don't have sufficient income to qualify for any of these loans, another option might be to contact a local affiliate of Habitat for Humanity like Habitat for Humanity of Greater Plymouth to see if you are eligible for a Habitat Home.

        To find an affordable home in Massachusetts, try looking in the online searchable database of affordable homes provided by the Massachusetts Affordable Housing Alliance.  The site is www.massaffordablehomes.org.  

4.    What documents should I give the bank's attorney before the closing?

        The bank's attorney will typically send you a letter indicating all the documents and information he or she will need from you to close the loan.  Among other things, if you are buying a home, the attorney will need a copy of the purchase and sale agreement.  Also, the attorney will typically ask you to obtain hazard insurance for the property and provide him or her with a copy of the binder showing the bank as mortgagee and loss payee, as well as a receipt confirming that the insurance has been prepaid for one year.  The sooner you give the attorney the requested documents and information, the sooner he or she will be ready to close the loan, so don't delay in responding to that initial letter.

5.    What is the bank's attorney doing before the closing?

        Prior to the closing, the bank's attorney will examine the title to the property.  Among other things, he or she will confirm that the seller actually has title, and determine what liens or other encumbrances affect the title.  If the seller has a mortgage on the property, for example, the the attorney will request that the seller complete an authorization form, and he or she will obtain a payoff letter from the bank indicating the amount necessary to payoff the loan and obtain a discharge of the mortgage.  In addition to examining the title, the bank's attorney will also obtain a municipal lien certificate from the town to confirm that the property taxes have been paid or, if taxes are due and owing, the amount that should be obtained from the seller to bring the taxes up to date.  Also, the attorney will obtain a plot plan of the property to make sure the building is properly located on the applicable lot.  And he or she will contact the seller for a smoke detector certificate (certifying that smoke detectors are working properly), 6(d) certificate (certifying that condo fees have been paid) and/or Title V certificate (certifying that septic system is operating properly), if applicable.

6.    What documents should I get from the bank's attorney before the closing?

        You should obtain a HUD-1 Settlement Statement from the bank's attorney the day before the closing, and it is important that you review the Statement for errors.  The form consists of two pages, on the first page are items that are allocated between the buyer and the seller, including the purchase price and any additional charges to the buyer, and the loan proceeds plus any deposits minus any any additional charges to the seller.  Any tax, water or sewer allocations will also appear on that page.  On the second page are lists of the third party payments charged to the buyer and seller, including the broker's commission, any bank charges, the attorney's fees, the premiums for any title insurance policies, and any charges that will be incurred at the registry of deeds.  If the buyer has to bring money to the closing, the amount will be stated on the HUD-1; and the amount of the net proceeds that will be paid to the seller is also indicated. 

7.    Why should I buy a title insurance policy?

       The bank typically buys a title insurance policy that covers the bank for the amount of the mortgage, but that policy does not cover the homeowner for the value of the property.  An owner's policy is a separate agreement that can be purchased from the bank's attorney at additional cost.  It provides protection against losses that could result from defects in the title to the property, or from errors made in searching that title.  The types of risks that are typically covered include those relating to lost or forged deeds, undisclosed heirs, deeds executed by incompetents, un-filed mechanic's liens, incorrectly indexed deeds and deeds by minors.  Additional coverage is also available upon request. 

8.    Why should married couples hold title as tenants by the entirety?

        A tenancy by the entirety is similar to a joint tenancy in that both tenants have rights of survivorship (i.e. if one person dies, their interest in the property goes to the other person), but a tenancy by the entirety also includes additional protections that are only available to married couples.  If a creditor of either spouse attaches the property, they will be unable to sell the property while the other spouse occupies it as his or her principal residence.  Thus the non-creditor spouse will be protected from loosing the home during that period. 

9.    Why should I declare a homestead in my principal residence?

        If you will own the home as your principal residence, declaring a homestead in the property will enable you to protect up to $500,000.00 of your equity in the property against creditors and forced sale.  The applicable form can be obtained at your local registry of deeds (or on-line at the registry's web-site) and is simple to complete.  There is also a relatively small filing fee of $35.00 that you will be charged when you submit it to the registry for recording. 

10.    What should I bring with me to the closing?

         Those persons who will be signing the loan documents will obviously have to appear at the closing, unless one of them has executed a power of attorney that has been reviewed and accepted by the bank's counsel.  Each of those individuals should also bring multiple forms of identification, including a driver's license and/or passport, birth certificate or other ID.  In addition, if the Settlement Statement indicates that you will have to bring additional funds to the closing, that amount should be brought in a certified or bank check, and it is also advisable to bring a personal check book for any additional charges that may arise.

11.    What documents will I be asked to sign at the closing?

        In addition to the HUD-1 Settlement Statement, there are a number of loan documents you will be asked to review and sign at the closing.  The Promissory Note contains your promise to repay the loan.  When you read it, make sure the principal balance, term, rate and monthly payment amounts are correct.  In the Mortgage, you convey the property to the bank as security for the loan; and there may also be one or more riders that apply to your specific situation.  The lender must provide you with a Truth in Lending statement that provides you with the Annual Percentage Rate for your loan.  That is the cost of the loan in percentage terms taking into account various loan charges of which interest is only one such charge.  In the case of a refinancing, the lender must notify you of your Right to Cancel the loan (the law gives you until midnight of the third business day following the closing to cancel).  Also, there are a number of additional documents that you will need to review and sign, including an escrow account disclosure statement, typed loan application, first payment letter, compliance and correction agreement and W-9 form (taxpayer identification).  In addition, in Massachusetts, sellers are required to disclose to buyers whether there is any urea formaldehyde foam insulation in the property, buyers are required to certify that they will have the property inspected for lead paint if a child under six years of age occupies the property, both buyers and sellers have to certify that smoke detectors have been installed in the property, and, in purchase transactions, closing attorneys must certify the title to the property (i.e. disclose any exceptions and encumbrances to the title) to the buyer and the bank providing financing for the purchase.  Don't hesitate to take your time reviewing these documents, asking any questions you may have, and making sure you understand what you are signing.  Also, make sure you get a copy of everything you sign (you should either be provided with unsigned copies at the closing or copies of the signed documents shortly thereafter).

12.    What documents should I receive after the closing?

        After the closing, you should receive the deed to your property from the registry of deeds.  If you did not receive a copy of the loan documents at the closing, you should receive one in the mail shortly thereafter.  Also, if you requested an owner's title insurance policy, the policy should be sent to you after the closing as well.