Ben's Buyer Guide

RE/MAX URBAN PROPERTIES

HOME BUYER'S
GUIDE

PRESENTED BY BEN OSBORN

BEN OSBORN
CO-MANAGING BROKER | BROKER ASSOCIATE
RE/MAX URBAN PROPERTIES
2801 WELTON ST, SUITE 200 DENVER, CO 80205
CELL: 720-635-7275
[email protected]

BEN OSBORN

CELL: 720-635-7275 If you’re looking for someone to lead you on your quest of buying
or selling real estate, Ben Osborn is your Man! Ben first
[email protected] developed a passion for Colorado traveling the state as a land
surveyor for over a decade. During that time as a project
manager, he worked with some of the most successful
engineering companies in the Colorado. Clients were Residential
& Commercial Land Developers, Custom Home Builders and
Local Municipalities. Boundary Analysis was his passion, and this
required an intimate knowledge of physical evidence in the field,
chain of title and records research. His love of the land has always
led to the exploration and climbing of mountains in Colorado
and other states. For Ben, climbing up an 18,000-foot peak is not
un-like buying or selling real estate. You set a goal and you
diligently make plans to accomplish your goal. But, you must
also be prepared for unexpected events and have contingencies
in place. The skills needed for both the real estate business and
mountain climbing are interchangeable. Logistics planning,
stress mitigation, deadline
management, problem-solving, crisis management, endurance,
and high-performance under pressure are all things one needs
on a quest to the summit of a mountain. They are also skills that
Ben
implements to provide his clients with complete customer
satisfaction. Communication is also very important to Ben and
the key to any real estate transaction. Direct communication, no
matter what the situation, is something Ben values the most.

Ben’s skills include: Contract Negotiation, Boundary Dispute Knowledge, Vacant Land Specialist, Well Permits,
Septic, Survey Knowledge, Title Issues, Easement Knowledge. Specialties: Residential, Farm Land, Mountain
Property.
When Ben is not at the office he can be found getting lost in the great mountains of Colorado and beyond,
studying the martial art of Ninjutsu and practicing Yoga. He also enjoys spending time with his wife Amy, who
is a school teacher, and his dog Guinness who runs the household!
“If you always put limits on everything you do, physical or anything else, it will spread into your work and into
your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them.”
Bruce Lee
Affiliations: National Association of Realtors, Colorado Association of Realtors, and South Metro Denver Realtor
Association.

QUALITY SERVICE GUARANTEE

Quality Service Certified- For Home Buyers

The Quality Service Guarantee is your written commitment from your REALTOR
assuring the delivery of all services described below.

As your representative I will:

1. Conduct a counseling and information session to identify your needs and goals to plan the
property search.

2. Offer to arrange pre-qualifying or pre-approval meeting with a lender to determine affordability
range and improve negotiating position at the point of offer.

3. Commit to work within your schedule when researching and showing you properties.
4.Complete a thorough market search to identify all properties consistent with your needs

and price range.
5. Prepare a written Comparable Market Analysis for you prior to making an offer.
6. Prepare a written offer to purchase on the property of your choice reflecting your price and terms.
7. Provide counsel and negotiating assistance on all offers to purchase.
8. Obtain and review with you the sellers written property history and disclosure statement.
9. Recommend professional building and termite/pest inspections and review findings and

remedies with you.
10. Monitor and communicate the status and satisfaction of contract contingencies.
11. Accompany you on a walk through property inspection before closing, if provided for in the

contract.
12. Attend the closing or escrow.
13. Contact you after the closing to assure the satisfactory completion of all service details.
14. Offer the opportunity to evaluate the service provided through the Quality Service Assurance

Survey.

Buyer(s)Signature____________________________________________ Date___________________

Realtor Signature____________________________________________ Date___________________

Why selecting a QSC
real estate professional
is important to you.

Buying or selling a home is one of the most important decisions
you will ever make—it is not something to be handled in a
casual or random way. A Quality Service Certified® sales
professional guarantees that the service you receive will be
consistent, reliable, responsive and exceptionally satisfying.

Being Quality Service Certified means that I participate in a service process that
results in the best real estate experience possible for you. To earn the Quality
Service Certified designation I have met training and performance standards,
and I maintain those standards on an on-going basis.
My services are spelled out in the Quality Service Guarantee that shows you
exactly what to expect—from an initial counseling session to after-sale service
follow-up.
I will remain accountable to you throughout the home finding or selling
experience to do everything I promise. That includes giving you the
opportunity to evaluate my service through a Quality Service Assurance
Survey© conducted by an independent research firm.
If you are contemplating buying or selling a home, you have a lot to think
about, and the last thing you want is confusion and uncertainty. You can have
greater confidence and peace of mind knowing that I will be with you every
step of the way.

Quality Service Certified assures you of the highest level
of service in the real estate industry.

Benefits of
Home Ownership

Happiness Tax Savings Equity

The feeling of owning The government Home values have a
your own home is rewards homeowners well documented
history of going up
unmatched. You can fix by providing over time. This
it up, make it your own, excellent tax benefits. increase becomes
The interest paid on equity you can
get a dog, or plant a benefit from when
tree if you want. your mortgage,
property taxes, and you refinance or sell.
Doesn’t that sound other home-related
exciting!
expenses can
generally be
deducted from your

income.

Roots Appreciation Education

People who own rather Renting has often Research shows children
than rent stay in their been compared to of homeowners earn
homes 4 times longer. paying 100% interest, higher test scores and
but when you own a graduate at a higher
This provides an
opportunity to get to home and a percentage than those of
know your neighbors and mortgage is in place, renters.
connect with your local
a portion of your
community. payment goes toward
the principal balance

on your loan. This
builds your equity and

acts as a savings
account.

Buyer's
Questionairre





Denver Area Zip Codes

New
Construction

Homes

Why You Should Hire A Real Estate Agent

Ideally, I should accompany you on your first visit to the new build community and register you.
Keep in mind the onsite salesperson is working on behalf of the BUILDER and MUST work in the
best interest of the builder. Your interests are not represented. Builders compensate me as your

buyer’s agent, so there is no additional cost of ownership passed on to you. Builders may not
offer you a lower price to not use your own agent. This would be a violation.

Representation Pre-Approved

Your agent represents you and Help get pre approved to buy
not the builder. your new home.

Decision Making What's Standard

Assist in making a well-informed Discover what is standard and
decision. what is an upgrade.

Is It In Writing? Negotiation

Is everything in writing and is the Will help with getting creative
contract clear? with negotiations.

Research Builder Home Inspection

Learn more about the Contact and schedule a
community and the builder. reputable home inspector.

HOA Restrictions Builder Warranty

What the the restrictions and Is it backed by the builder or
bylaws for the community? purchased from a third party?

The Home
Buying
Process

Types of home inspections

Types of Home Inspections
General home inspectors look for defects. If they spot something unusual that lies outside of their scope of exper-
tise, they'll recommend that you obtain a more specialized inspection.

Wood Destroying Pests

You can nd wood destroying pests in just about any part of the country, but especially in warm climates. A pest
inspection will disclose not only termites or powder post beetles, for example, but also dry-rot.

Chimney

Some older chimneys don't have ue liners, or the brick inside the chimney may be crumbling. A chimney inspector
will also make sure smoke is discharged properly.

Electrical

A general home inspector may tell you that the electrical box is so old that it no longer complies with city code, but
an electrician can tell you the best brands to replace it with and how much it costs, among other disclosures. Be sure
to check out the electrical panel and google the model number to make sure it has not been recalled.

Heating & air conditioning

Most furnaces must be taken apart to determine whether the heat exchanger is cracked, for example, or to nd out
why the unit is malfunctioning. An HVAC specialist can tell you what's wrong, how much it costs to x the unit, and
whether it needs to be replaced.

Lead based paint

The federal government banned the use of lead-based paint in 1978, but homes newer than 1978 can still contain
lead-based paint. You have the right to have the home tested for lead-based paint. To remove lead-based paint, hire
a certi ed lead abatement contractor.

Square footage

You may want to verify the square footage of your home. Public records documents sometimes contain mistakes.
Sellers can calculate square footage yourself or hire an appraiser. The buyer's appraiser will undoubtedly measure
the square footage..

Easements & encroachments

Your owner's title policy will disclose easements, but some encroachments may require a physical inspection. Ask
the title company to send you the actual easement documents from the public records. You can also hire a surveyor
to prepare an improvement location certi cate, or ILC, which shows encroachments.

Foundation

While a home inspector can tell you if your home was built on a slab or raised foundation, a foundation engineer
can tell you if the home is sliding or the foundation is faulty. Note suspicious cracks, it makes a di erence whether
they are vertical or horizontal, and often horizontal are worse.

Lot size & boundaries

A preliminary search for a title policy will give you a plat map, showing the boundaries and size of the lot. Consider
hiring a surveyor if you want this information veri ed. Don't rely on fences to determine boundaries.

Pool & spa

Pool and spa experts can give you an estimated life expectancy on crucial key components such as the heater or spa
blower. These specialists also check for leaks. Sometimes pools are covered under home warranties for an additional
cost.

Types of home inspections

Roof inspection

If the seller won't pay for a roof certi cation on an older roof, then get your own. Make sure the company is reputa-
ble and likely to be in business later should you have a claim. It is best if the roof inspector does not also replace
roofs.

Sewer or septic system inspection

Some older homes may not be connected to a sewer system. Get a sewer inspection. Modern technology calls for a
digital camera to be inserted into the sewer line and pushed through to the main line. Many sewer inspectors make
movies for you.

Soil stability

Testing the soil is important if you're buying a home on the side of a hill, because you don't want it sliding away
during a rainstorm. Some areas also are prone to soil contamination.

arborist

The best way to determine if the trees on the property are healthy is to hire an arborist to inspect them.

Water systems & plumbing

If the plumbing is galvanized, a plumber can tell you if it needs to be replaced. Some galvanized pipes are so
clogged that you can barely t the lead of a pencil through them.

Well

Inspect the construction of the well and nd out the depth of the water table, including water sanitation.

Radon or methane gas

A mitigation contractor can test for radon or methane gas and recommend ways to remove it.
EPA supports the following hot-lines to best serve consumers with radon-related questions and concerns.
1-800-SOSRADON (1-800-767-7236)* Purchase radon test kits by phone.
1-800-55RADON (557-2366)* Get live help for your radon questions.
1-800-644-6999* Radon Fix-It Hot-line for general information on xing or reducing the radon level in your home.
1-800-426-4791 Safe Drinking Water Hot-line for general information on drinking water, radon in water, testing and
treatment, and standards for radon drinking water.
Operated under a contract with EPA.
www.epa.gov/radon/radon-hotlines-and-information-resources

Asbestos

The only way to tell if a material actually contains asbestos is to have it tested. Taking a sample to a lab is preferred
over do-it-yourself home tests.

Formaldehyde

Formaldehyde is a colorless and ammable gas used as a chemical in building products. It is known to cause cancer
in rats. Hire a quali ed formaldehyde inspector to do this inspection.

Mold

Mold can trigger health problems in even healthy individuals. There are many di erent types of mold. You can test
for mold presence in a home by testing the air quality.

Permits & zoning

Go to your city planning department and ask to see the permits on the home. Sometimes people remodel without
permits. The zoning department can tell you, for example, if it is legal to run a home-based business from your
home.

The Home Buying Process

1. MEET WITH YOUR PROFESSIONAL TEAM

A. REALTOR®: I think it’s important that you feel like your REALTOR® is willing to move at the same pace
you are. For example, if you are a first-time home buyer, you may require a little more “handholding”
throughout the home buying process. A good REALTOR® is willing to take the time to explain the confusing
forms you will be signing. They will make sure that you know what steps are next throughout the home
buying process.

B. LENDER: Figure out how much you can spend on a home and determine what you want in a house
(must-have versus would love). To be completely honest, I would be very careful asking a lender how
much they will lend you. In many cases, this amount may be more than you’re ready to commit to or more
than you’re used to setting aside for your monthly payment. The last thing you want to do when buying a
house is get in over your head.

After you know how much you’re willing to spend and verify with a lender that you q ualify for that
amount, one of the most helpful things you can do is to start making a list of the items you need and the
items you want.

EXPERT TIP: 1. Know what you can spend before you even start looking otherwise you’ll just be
disappointed that you can’t afford that house full of your “wants” not your “needs”. 2. Remember that
location is very important for the future as regards to schools, resale value, amenities. 3. Lastly, sit down
and write a few things on a hit list that you just can’t do without, ie how many bedrooms, bathrooms, size
of kitchen, yard size, one story, two story, type of exterior, style of home, roof type, schools, nearby
shopping, how far to the closest grocery/convenience store, to name a few things.

• A REALTOR® can direct you to qualified lenders that won’t gloss over the truth just to make a
deal.

• Hit list, basically there are a few really big items that matter to people: bedrooms, bathrooms,
kitchen placement and yard. What Realtors do is help you prioritize and then find you that
home instead of looking at all the homes that don’t work for you. It won’t do any good to look
at 2 bed/1 bath homes if you need 4 bed/3 bath.

2. GET A PRE-QUALIFICATION LETTER FROM A LENDER

A pre-approval with direct underwriter approval is now almost a requirement to write an offer.

EXPERT TIP: You really can’t write an offer without one these days. In fact, as a REALTOR®, I won’t even
present an offer until I have a pre-qual letter and after I’ve talked with the lender to verify the information
unless it’s a lender I know.

I always get my clients pre-qualified and keep them within their means. I take it a step deeper by asking
what monthly payment they are comfortable with. Just because you can afford $300,000 on paper doesn’t
mean you can per month with all the other expenses associated with home ownership.

3. DETERMINE YOUR TIMEFRAME AND START TOURING HOMES WITH
YOUR REALTOR

Starting to tour homes is the fun part of the home buying process!!! We will set you up with your very
own listing portal to be notified almost instantly of any new listings that fit your criteria. You can then
decide if you’d like to take a look at it by viewing the pictures and home details. Keep in mind that
searching for homes via the internet can give you slightly outdated information. Zillow, Trulia and the like
are good sites, but they still have a lag time and sometimes their info is not as up to da te as a REALTOR®
can provide. Don’t forget to keep an eye out for signs too!

EXPERT TIP: After that, let the house “talk” to you. I know that sounds really strange, but most of my
clients usually know within a few moments if they like the house or not. Then on the practical side, make
sure it has most of the things on your hit list that you can’t live without.

4. MAKE AN OFFER

This can be the sort-of scary part of the home buying process. Be sure you know what all of the different
documents mean that you are signing. If you don’t understand something, ASK. That’s what your
REALTOR® is for. A good REALTOR® will explain everything in-depth before moving forward. When you go
to make your offer, you will need to have your pre-qualification letter from the lender and a check for the
deposit. Don’t worry though, the check won’t be deposited until you actually open escrow.

EXPERT TIP: Be sure this is the house you want. Once you enter into the agreement, it is a bonafide
contract. You can’t just change your mind, you really need to have a valid reason to break the
contract. But don’t forget, you do have an inspection period of usually 7-10 days or so to withdraw your
contract if you find a valid reason during inspection. Just changing your mind is not a valid reason. You
have to remember the seller is trusting you to follow through on your end as they have taken their house
off the market because you promised to buy it.

WHAT SHOULD YOU ALWAYS ASK FOR ON OFFERS? It depends on you as the buyer and the market, but
sometimes there is a need to ask for closing costs, possibly a home warranty, escrow fees to be split

between buyer and seller. Also, if there are any specific personal property items that you want. Lastly, I
always ask about the appliances and washer/dryer on the contract.

A. Know the contract

In your offer, you will indicate a deadline for the seller to respond, so at least there is a light at the end of
the tunnel!
If the seller “counters” you (sends you a counter offer, which just means that there is some
more negotiating to do on price or terms) then you will have a specific time that you will have to respond
back. At this point in the home buying process for first time home buyers, it is important that you know
your limits. You may find yourself in a place where you are making an offer at a price higher than you are
comfortable with.

5. Negotiating and Getting Your Contract Accepted

Under Contract…. Open escrow…Cement the Deal (Earnest money)

Opening escrow means starting the closing process on the property. Once you open escrow, you can start
ordering any inspections that you want to have done. You will hand over your deposit money to your
escrow company. The escrow company is a neutral third party that helps facilitate the sale process. At this
point, that check you gave when you wrote your original offer is cashed!

6. FIND DETAILS: DO YOUR DUE DILIGENCE AND CONTRACT OBJECTIONS

A. Schedule Inspections

B. Appraisal

C. Title

D. Survey

E. HOA

The most obvious inspection that buyers will almost always get is the home inspection report. The
company will go inspect the house. Then they will give you a detailed report of anything that you should
be aware of.

7. RESOLVING DUE DILIGENCE ITEMS DISCOVERED

If there are things that you learned on your home inspection report that you would like the seller to fix
before you purchase the home, you will present an inspection objection. Your REALTOR® will help you
with this and will probably have some great advice for what you should ask for.

Your REALTOR® will go through the home inspection report with a fine-tooth comb to help you figure out
what you are comfortable doing yourselves and what health and safety items you want the seller to take
care of before purchasing the home. Everyone is going to have different thoughts on this. Do WHATEVER
you feel comfortable with here and remember unless it’s a new build home it won’t be perfect—this isn’t
a honey do list of requests.

8. FINAL DETAILS

A. FINAL LOAN APPROVAL

B. Settlement Statement and Funds

C. FINAL walkthrough - Ensure all repairs have been made. On your inspection objection, you will
indicate a date that you would like all of the repairs to be completed. You will also make sure the property
is in the same condition as the day you went under contract. For example, all appliances that are included
in the sale are still in the home, there is no damage to the home that you were no t aware of, etc.

9. CLOSING

A. Sign all loan documents

On the day of your closing you will go to your Escrow office and sign ALL the necessary settlement
documents. Be sure to grab a cup of coffee first and stretch out your hand! There will be a lot of
signatures required!!

Usually both your lender and REALTOR® will attend the closing.

B. Loan is funded

After all your paperwork is done and filed, your lender will fund the loan. Once you receive the
confirmation that your loan funding, you get the keys!!!

10. CELEBRATE!!!

You made it. Congratulations! Now it’s definitely time to celebrate!!!!!!

Madison & Company Properties
201 Milwaukee Street Suite G, Denver, CO 80206

The printed portions of this form, except differentiated additions, have been approved by the Colorado Real Estate
Commission. (DD25-5-09) (Mandatory 7-09)

DIFFERENT BROKERAGE RELATIONSHIPS ARE AVAILABLE WHICH INCLUDE SELLER AGENCY,
BUYER AGENCY OR TRANSACTION-BROKERAGE.

DEFINITIONS OF WORKING RELATIONSHIPS

For purposes of this document, seller also means "landlord" (which includes sublandlord) and buyer also means
"tenant" (which includes subtenant).

Seller’s Agent: A seller’s agent (or listing agent) works solely on behalf of the seller to promote the
interests of the seller with the utmost good faith, loyalty and fidelity. The agent negotiates on behalf of and acts
as an advocate for the seller. The seller’s agent must disclose to potential buyers all adverse material facts
actually known by the seller’s agent about the property. A separate written listing agreement is required which
sets forth the duties and obligations of the broker and the seller.

Buyer’s Agent: A buyer’s agent works solely on behalf of the buyer to promote the interests of the buyer
with the utmost good faith, loyalty and fidelity. The agent negotiates on behalf of and acts as an advocate for the
buyer. The buyer’s agent must disclose to potential sellers all adverse material facts actually known by the
buyer’s agent including the buyer’s financial ability to perform the terms of the transaction and, if a residential
property, whether the buyer intends to occupy the property. A separate written buyer agency agreement is
required which sets forth the duties and obligations of the broker and the buyer.

Transaction-Broker: A transaction-broker assists the buyer or seller or both throughout a real estate
transaction by performing terms of any written or oral agreement, fully informing the parties, presenting all offers
and assisting the parties with any contracts, including the closing of the transaction without being an agent or
advocate for any of the parties. A transaction-broker must use reasonable skill and care in the performance of
any oral or written agreement, and must make the same disclosures as agents about all adverse material facts
actually known by the transaction-broker concerning a property or a buyer’s financial ability to perform the terms
of a transaction and, if a residential property, whether the buyer intends to occupy the property. No written
agreement is required.

Customer: A customer is a party to a real estate transaction with whom the broker has no brokerage
relationship because such party has not engaged or employed the broker, either as the
party’s agent or as the party’s transaction-broker.

THIS IS NOT A CONTRACT.
I acknowledge receipt of a copy of this document on .

Signer: _______________________________________________________ Date: _______________

On , Broker provided with this document via and retained a copy for the Broker’s records.
Brokerage Firm: Madison & Company Properties

123456

________________________________________________
Broker: Ben Osborn

DD25-5-09. DEFINITIONS OF WORKING RELATIONSHIPS Page 1 of 2

CTMeContracts.com - ©2021 CTM Software Corp.

1 The printed portions of this form, except differentiated additions, have been approved by the Colorado Real Estate Commission.
2 (BC60-8-13) (Mandatory 1-14)

3
4 THIS IS A BINDING CONTRACT. THIS FORM HAS IMPORTANT LEGAL CONSEQUENCES AND THE PARTIES SHOULD
5 CONSULT LEGAL AND TAX OR OTHER COUNSEL BEFORE SIGNING.

6 Compensation charged by brokerage firms is not set by law. Such charges are established by each real estate brokerage firm.

7 DIFFERENT BROKERAGE RELATIONSHIPS ARE AVAILABLE WHICH INCLUDE BUYER AGENCY, SELLER AGENCY OR
8 TRANSACTION-BROKERAGE.
9

10 EXCLUSIVE RIGHT-TO-BUY LISTING CONTRACT

11 BUYER AGENCY TRANSACTION-BROKERAGE

12

13 Date:

14

15 1. AGREEMENT. Buyer and Brokerage Firm enter into this exclusive, irrevocable contract (Buyer Listing Contract) and agree

16 to its provisions. Broker, on behalf of Brokerage Firm, agrees to provide brokerage services to Buyer. Brokerage Firm will receive

17 compensation as set forth in this Buyer Listing Contract.

18 2. BROKER AND BROKERAGE FIRM.
19 2.1. Multiple-Person Firm. If this box is checked, the individual designated by Brokerage Firm to serve as the broker of
20 Buyer and to perform the services for Buyer required by this Buyer Listing Contract is called Broker. If more than one individual

21 is so designated, then references in this Buyer Listing Contract to Broker includes all persons so designated, including substitute or

22 additional brokers. The brokerage relationship exists only with Broker and does not extend to the employing broker, Brokerage

23 Firm or to any other brokers employed or engaged by Brokerage Firm who are not so designated.
24 2.2. One-Person Firm. If this box is checked, Broker is a real estate brokerage firm with only one licensed natural person.
25 References in this Buyer Listing Contract to Broker or Brokerage Firm mean both the licensed natural person and brokerage firm,

26 who serve as the broker of Buyer and perform the services for Buyer required by this Buyer Listing Contract.

27 3. DEFINED TERMS.
28 3.1. Buyer:

29 and any other person or entity on whose behalf the named party acts, directly or indirectly, to Purchase the Property.

30 3.2. Brokerage Firm:

31 3.3. Broker:

32 3.4. Property. Property means real estate which substantially meets the following requirements or similar real estate

33 acceptable to Buyer:

34

35

36

37 3.5. Purchase; Lease.

38 3.5.1. Purchase means the acquisition of any interest in the Property or the creation of the right to acquire any

39 interest in the Property, including a contract or lease. It also includes an agreement to acquire any ownership interest in an entity

40 that owns the Property.

41 3.5.2. If this box is checked, Buyer authorizes Broker to negotiate a lease of the Property. Lease of the Property or

42 Lease means any agreement between a landlord and the Buyer to create a tenancy or leasehold interest in the Property.

43 3.6. Listing Period. The Listing Period of this Buyer Listing Contract begins on , and continues through the

44 earlier of (1) completion of the Purchase of the Property or Lease of the Property or (2) ,

45 and any written extensions (Listing Period). Broker will continue to assist in the completion of any purchase or lease for which

46 compensation is payable to Brokerage Firm under § 7 of this Buyer Listing Contract.

47 3.7. Applicability of Terms. A check or similar mark in a box means that such provision is applicable. The abbreviation

48 “N/A” or the word “Deleted” means not applicable. The abbreviation “MEC” (mutual execution of this contract) means the date upon

49 which both parties have signed this Buyer Listing Contract.

50 3.8. Day; Computation of Period of Days, Deadline.

51 3.8.1. Day. As used in this Buyer Listing Contract, the term “day” means the entire day ending at 11:59 p.m.,

52 United States Mountain Time (Standard or Daylight Savings as applicable).

BC60-8-13. EXCLUSIVE RIGHT-TO-BUY LISTING CONTRACT Page 1 of 6

53 3.8.2. Computation of Period of Days, Deadline. In computing a period of days, when the ending date is not
54 specified, the first day is excluded and the last day is included, e.g., three days after MEC. If any deadline falls on a Saturday,
55 Sunday or federal or Colorado state holiday (Holiday), such deadline Will Will Not be extended to the next day that is not
56 a Saturday, Sunday or Holiday. Should neither box be checked, the deadline will not be extended.

57 4. BROKERAGE RELATIONSHIP.
58 4.1. If the Buyer Agency box at the top of page 1 is checked, Broker represents Buyer as Buyer’s limited agent (Buyer’s
59 Agent). If the Transaction-Brokerage box at the top of page 1 is checked, Broker acts as a Transaction-Broker.
60 4.2. In-Company Transaction – Different Brokers. When the seller and Buyer in a transaction are working with different
61 brokers, those brokers continue to conduct themselves consistent with the brokerage relationships they have established. Buyer

62 acknowledges that Brokerage Firm is allowed to offer and pay compensation to brokers within Brokerage Firm working with a

63 seller.
64 4.3. In-Company Transaction – One Broker. If the seller and Buyer are both working with the same Broker, Broker will
65 function as:
66 4.3.1. Buyer’s Agent. If the Buyer Agency box at the top of page 1 is checked, the parties agree the following applies:
67 4.3.1.1. Buyer Agency Only. Unless the box in § 4.3.1.2 (Buyer Agency Unless Brokerage Relationship
68 with Both) is checked, Broker represents Buyer as Buyer’s Agent and must treat the seller as a customer. A customer is a party to
69 a transaction with whom Broker has no brokerage relationship. Broker must disclose to such customer Broker’s relationship with

70 Buyer.
71 4.3.1.2. Buyer Agency Unless Brokerage Relationship with Both. If this box is checked, Broker
72 represents Buyer as Buyer’s Agent and must treat the seller as a customer, unless Broker currently has or enters into an agency or

73 Transaction-Brokerage relationship with the seller, in which case Broker must act as a Transaction-Broker.
74 4.3.2. Transaction-Broker. If the Transaction-Brokerage box at the top of page 1 is checked, or in the event neither
75 box is checked, Broker must work with Buyer as a Transaction-Broker. A Transaction-Broker must perform the duties described in

76 § 5 and facilitate purchase transactions without being an advocate or agent for either party. If the seller and Buyer are working

77 with the same broker, Broker must continue to function as a Transaction-Broker.

78 5. BROKERAGE DUTIES. Brokerage Firm, acting through Broker, as either a Transaction-Broker or a Buyer’s Agent, must
79 perform the following Uniform Duties when working with Buyer:
80 5.1. Broker must exercise reasonable skill and care for Buyer, including but not limited to the following:
81 5.1.1. Performing the terms of any written or oral agreement with Buyer;
82 5.1.2. Presenting all offers to and from Buyer in a timely manner regardless of whether Buyer is already a party to a
83 contract to Purchase the Property;
84 5.1.3. Disclosing to Buyer adverse material facts actually known by Broker;
85 5.1.4. Advising Buyer regarding the transaction and advising Buyer to obtain expert advice as to material matters
86 about which Broker knows but the specifics of which are beyond the expertise of Broker;
87 5.1.5. Accounting in a timely manner for all money and property received; and
88 5.1.6. Keeping Buyer fully informed regarding the transaction.
89 5.2. Broker must not disclose the following information without the informed consent of Buyer:
90 5.2.1. That Buyer is willing to pay more than the purchase price offered for the Property;
91 5.2.2. What Buyer’s motivating factors are;
92 5.2.3. That Buyer will agree to financing terms other than those offered; or
93 5.2.4. Any material information about Buyer unless disclosure is required by law or failure to disclose such
94 information would constitute fraud or dishonest dealing.
95 5.3. Buyer consents to Broker’s disclosure of Buyer’s confidential information to the supervising broker or designee for the
96 purpose of proper supervision, provided such supervising broker or designee does not further disclose such information without

97 consent of Buyer, or use such information to the detriment of Buyer.
98 5.4. Broker may show properties in which Buyer is interested to other prospective buyers without breaching any duty or
99 obligation to Buyer. Broker is not prohibited from showing competing buyers the same property and from assisting competing

100 buyers in attempting to purchase a particular property.
101 5.5. Broker is not obligated to seek other properties while Buyer is already a party to a contract to purchase property.
102 5.6. Broker has no duty to conduct an independent inspection of the Property for the benefit of Buyer and has no duty to
103 independently verify the accuracy or completeness of statements made by a seller or independent inspectors. Broker has no duty to
104 conduct an independent investigation of Buyer’s financial condition or to verify the accuracy or completeness of any statement

105 made by Buyer.
106 5.7. Broker must disclose to any prospective seller all adverse material facts actually known by Broker, including but not
107 limited to adverse material facts concerning Buyer’s financial ability to perform the terms of the transaction and whether Buyer

108 intends to occupy the Property as a principal residence.

BC60-8-13. EXCLUSIVE RIGHT-TO-BUY LISTING CONTRACT Page 2 of 6

109 5.8. Buyer understands that Buyer is not liable for Broker’s acts or omissions that have not been approved, directed or
110 ratified by Buyer.

111 6. ADDITIONAL DUTIES OF BUYER’S AGENT. If the Buyer Agency box at the top of page 1 is checked, Broker is

112 Buyer’s Agent, with the following additional duties:

113 6.1. Promoting the interests of Buyer with the utmost good faith, loyalty and fidelity;
114 6.2. Seeking a price and terms that are acceptable to Buyer; and
115 6.3. Counseling Buyer as to any material benefits or risks of a transaction that are actually known by Broker.

116 7. COMPENSATION TO BROKERAGE FIRM. In consideration of the services to be performed by Broker, Brokerage Firm

117 will be paid as set forth in this section, with no discount or allowance for any efforts made by Buyer or any other person.

118 Brokerage Firm is entitled to receive additional compensation, bonuses, and incentives paid by listing brokerage firm or seller.

119 Broker will inform Buyer of the fee to be paid to Brokerage Firm and, if there is a written agreement, Broker will supply a copy to

120 Buyer, upon written request of Buyer.

121 7.1. Brokerage Firm’s Fee - Purchase.

122 Check Compensation Arrangement:

123 7.1.1. Success Fee. Brokerage Firm will be paid as follows:

124 7.1.1.1. Amount. A fee equal to % of the purchase price, but not less than $ , except

125 as provided in § 7.1.1.2.

126 7.1.1.2. Adjusted Amount. See § 19 (Additional Provisions) or Other .

127 7.1.1.3. When Earned; When Payable - Purchase. The Success Fee is earned by Brokerage Firm upon the

128 Purchase of the Property and is payable upon closing of the transaction. If any transaction fails to close as a result of the seller’s

129 default, with no fault on the part of Buyer, the Success Fee will be waived. If any transaction fails to close as a result of Buyer’s

130 default, in whole or in part, the Success Fee will not be waived; such fee is payable upon Buyer’s default, but not later than the

131 date that the closing of the transaction was to have occurred.

132 7.1.2. Hourly Fee. Brokerage Firm will be paid $ per hour for time spent by Broker pursuant to this

133 Buyer Listing Contract, up to a maximum total fee of $ . This hourly fee is payable to Brokerage Firm upon receipt of

134 an invoice from Brokerage Firm.

135 7.1.3. Retainer Fee. Buyer will pay Brokerage Firm a nonrefundable retainer fee of $ due and payable

136 upon signing of this Buyer Listing Contract. This amount Will Will Not be credited against other fees payable to Brokerage

137 Firm under this section.

138 7.1.4. Other Compensation. .

139 7.2. Brokerage Firm’s Fee - Lease. If the box in § 3.5.2 is checked, Brokerage Firm will be paid a fee as follows, less any

140 amounts paid by the listing brokerage firm or landlord:

141 7.2.1. Amount. $ per square foot per , or , except as

142 provided in § 7.2.2.

143 7.2.2. Adjusted Amount. See § 19. (Additional Provisions) or Other .

144 7.2.3. Other. .

145 7.2.4. When Earned; When Payable - Lease. This Lease fee is earned upon the mutual execution of the Lease.

146 One-half of this Lease fee is payable upon mutual execution of the Lease and one-half upon possession of the premises by tenant

147 or as follows:

148 . If the Lease, executed after the date of this Buyer Listing Contract, contains an option to extend or renew, or if Buyer

149 expands into additional space within the building or complex where the Property is located, Brokerage Firm Will Will Not

150 be paid a fee upon exercise of such extension or renewal option or expansion. If Brokerage Firm is to be paid a fee for such

151 extension, renewal or expansion, the amount of such fee and its payment are as follows: .

152 7.3. Who Will Pay Brokerage Firm’s Fee.

153 7.3.1. Listing Brokerage Firm or Seller May Pay. Buyer IS Obligated to Pay. Broker is authorized and instructed

154 to request payment of Brokerage Firm’s fee from the listing brokerage firm or seller. Buyer is obligated to pay any portion of

155 Brokerage Firm’s fee which is not paid by the listing brokerage firm or seller.

156 7.3.2. Buyer Will Pay. Buyer is obligated to pay Brokerage Firm’s fee.

157 7.3.3. Listing Brokerage Firm or Seller May Pay. Buyer is NOT Obligated to Pay. Broker is authorized to obtain

158 payment of Brokerage Firm’s fee from the listing brokerage firm or seller. Provided Buyer has fulfilled Buyer’s obligations in this

159 Buyer Listing Contract, Buyer is not obligated to pay Brokerage Firm’s fee.

160 If no box is checked above, then § 7.3.3 (Buyer is NOT Obligated to Pay) will apply.

161 7.4. Holdover Period. Brokerage Firm’s fee applies to Property contracted for (or leased if § 3.5.2 is checked) during the

162 Term of this Buyer Listing Contract or any extensions and also applies to Property contracted for or leased within calendar

163 days after the Listing Period expires(Holdover Period) (1) if the Property is one on which Broker negotiated and (2) if Broker

164 submitted its address or other description in writing to Buyer during the Listing Period, (Submitted Property). Provided, however,

165 Buyer Will Will Not owe the compensation under §§ 7.1, 7.2, 7.3.1 and 7.3.2 as indicated, if a commission is earned by

BC60-8-13. EXCLUSIVE RIGHT-TO-BUY LISTING CONTRACT Page 3 of 6

166 another real estate brokerage firm acting pursuant to an exclusive agreement with Buyer entered into during the Holdover Period,
167 and a Sale or Lease of the Submitted Property is consummated. If no box is checked in this § 7.4, then Buyer does not owe the
168 commission to Brokerage Firm.

169 8. LIMITATION ON THIRD-PARTY COMPENSATION. Neither Broker nor Brokerage Firm, except as set forth in § 7,
170 will accept compensation from any other person or entity in connection with the Property without the written consent of Buyer.
171 Additionally, neither Broker nor Brokerage Firm is permitted to assess and receive mark-ups or other compensation for services
172 performed by any third party or affiliated business entity unless Buyer signs a separate written consent for such services.

173 9. BUYER’S OBLIGATIONS TO BROKER. Buyer agrees to conduct all negotiations for the Property only through Broker
174 and to refer to Broker all communications received in any form from real estate brokers, prospective sellers, or any other source
175 during the Term of this Buyer Listing Contract. Buyer represents that Buyer Is Is Not currently a party to any agreement
176 with any other broker to represent or assist Buyer in the location or Purchase of Property.

177 10. RIGHT OF PARTIES TO CANCEL.
178 10.1. Right of Buyer to Cancel. In the event Broker defaults under this Buyer Listing Contract, Buyer has the right to
179 cancel this Buyer Listing Contract, including all rights of Brokerage Firm to any compensation if the Buyer Agency box at the top

180 of page 1 is checked. Examples of a Broker default include, but are not limited to (1) abandonment of Buyer, (2) failure to fulfill

181 all material obligations of Broker and (3) failure to fulfill all material Uniform Duties (§ 5) or, if the Buyer Agency box at the top

182 of page 1 is checked, the failure to fulfill all material Additional Duties Of Buyer’s Agent (§ 6). Any rights of Buyer that accrued

183 prior to cancellation will survive such cancellation.
184 10.2. Right of Broker to Cancel. Brokerage Firm may cancel this Buyer Listing Contract upon written notice to Buyer if
185 Buyer fails to reasonably cooperate with Broker or Buyer defaults under this Buyer Listing Contract. Any rights of Brokerage

186 Firm that accrued prior to cancellation will survive such cancellation.

187 11. COST OF SERVICES OR PRODUCTS OBTAINED FROM OUTSIDE SOURCES. Broker will not obtain or order
188 products or services from outside sources unless Buyer has agreed to pay for them promptly when due (e.g., surveys, radon tests,
189 soil tests, title reports, engineering studies, property inspections). Neither Broker nor Brokerage Firm is obligated to advance funds
190 for Buyer. Buyer must reimburse Brokerage Firm for payments made by Brokerage Firm for such products or services authorized
191 by Buyer.

192 12. BROKERAGE SERVICES; SHOWING PROPERTIES.

193 12.1. Brokerage Services. The following additional tasks will be performed by Broker:

194

195

196

197 12.2. Showing Properties. Buyer acknowledges that Broker has explained the possible methods used by listing brokers and

198 sellers to show properties, and the limitations (if any) on Buyer and Broker being able to access properties due to such methods.

199 Broker’s limitations on accessing properties are as follows: .

200 Broker, through Brokerage Firm, has access to the following multiple listing services and property information services:

201 .

202 13. DISCLOSURE OF BUYER’S IDENTITY. Broker Does Does Not have Buyer’s permission to disclose Buyer’s
203 identity to third parties without prior written consent of Buyer.

204 14. DISCLOSURE OF SETTLEMENT SERVICE COSTS. Buyer acknowledges that costs, quality, and extent of service vary
205 between different settlement service providers (e.g., attorneys, lenders, inspectors and title companies).

206 15. NONDISCRIMINATION. The parties agree not to discriminate unlawfully against any prospective seller because of the
207 race, creed, color, sex, sexual orientation, marital status, familial status, physical or mental disability, handicap, religion, national

208 origin or ancestry of such person.

209 16. RECOMMENDATION OF LEGAL AND TAX COUNSEL. By signing this document, Buyer acknowledges that Broker has
210 advised that this document has important legal consequences and has recommended consultation with legal and tax or other counsel

211 before signing this Buyer Listing Contract.

212 17. MEDIATION. If a dispute arises relating to this Buyer Listing Contract, prior to or after closing, and is not resolved, the
213 parties must first proceed in good faith to submit the matter to mediation. Mediation is a process in which the parties meet with an

214 impartial person who helps to resolve the dispute informally and confidentially. Mediators cannot impose binding decisions. The

BC60-8-13. EXCLUSIVE RIGHT-TO-BUY LISTING CONTRACT Page 4 of 6

215 parties to the dispute must agree, in writing, before any settlement is binding. The parties will jointly appoint an acceptable
216 mediator and will share equally in the cost of such mediation. The mediation, unless otherwise agreed, will terminate in the event
217 the entire dispute is not resolved within 30 calendar days of the date written notice requesting mediation is delivered by one party
218 to the other at the other party’s last known address.

219 18. ATTORNEY FEES. In the event of any arbitration or litigation relating to this Buyer Listing Contract, the arbitrator or court
220 must award to the prevailing party all reasonable costs and expenses, including attorney and legal fees.

221 19. ADDITIONAL PROVISIONS. (The following additional provisions have not been approved by the Colorado Real Estate
222 Commission.)

223
224
225
226
227

228 20. ATTACHMENTS. The following are a part of this Buyer Listing Contract:

229
230
231

232 21. NOTICE, DELIVERY AND CHOICE OF LAW.
233 21.1. Physical Delivery. All notices must be in writing, except as provided in § 21.2. Any document, including a signed
234 document or notice, delivered to the other party to this Buyer Listing Contract, is effective upon physical receipt. Delivery to
235 Buyer is effective when physically received by Buyer, any signator on behalf of Buyer, any named individual of Buyer or
236 representative of Buyer.
237 21.2. Electronic Delivery. As an alternative to physical delivery, any document, including a signed document or written
238 notice may be delivered in electronic form only by the following indicated methods: Facsimile Email Internet. If no
239 box is checked, this § 21.2 is not applicable and § 21.1 governs notice and delivery. Documents with original signatures will be
240 provided upon request of any party.
241 21.3. Choice of Law. This Buyer Listing Contract and all disputes arising hereunder are governed by and construed in
242 accordance with the laws of the State of Colorado that would be applicable to Colorado residents who sign a contract in this state
243 for property located in Colorado.

244 22. MODIFICATION OF THIS CONTRACT. No subsequent modification of any of the terms of this Buyer Listing Contract
245 is valid, binding upon the parties, or enforceable unless in writing and signed by the parties.

246 23. COUNTERPARTS. This Buyer Listing Contract may be executed by each of the parties, separately, and when so executed
247 by all the parties, such copies taken together are deemed to be a full and complete contract between the parties.

248 24. ENTIRE AGREEMENT. This agreement constitutes the entire contract between the parties and any prior agreements,
249 whether oral or written, have been merged and integrated into this Buyer Listing Contract.

250 25. COPY OF CONTRACT. Buyer acknowledges receipt of a copy of this Buyer Listing Contract signed by Broker, including
251 all attachments.

252 26. MEGAN’S LAW. If the presence of a registered sex offender is a matter of concern to Buyer, Buyer understands that Buyer
253 must contact local law enforcement officials regarding obtaining such information.

254 Brokerage Firm authorizes Broker to execute this Buyer Listing Contract on behalf of Brokerage Firm.

Buyer’s Name: Broker’s Name:

Buyer’s Signature Date Broker’s Signature Date
Address: Address:
Page 5 of 6
BC60-8-13. EXCLUSIVE RIGHT-TO-BUY LISTING CONTRACT

Available Loan Programs

Conventional and Government Loans

Any mortgage loan other than an FHA, VA or a RHS loan is a conventional one.

FHA Loans

The Federal Housing Administration (FHA), which is part of the U.S. Dept. of Housing and Urban
Development (HUD), administers various mortgage loan programs. FHA loans have lower down
payment requirements and are easier to qualify than conventional loans. FHA loans cannot
exceed the statutory limit.

VA Loans

VA loans are guaranteed by U.S. Dept. of Veterans Affairs. The guaranty allows veterans and
service persons to obtain home loans with favorable loan terms, usually without a down
payment. In addition, it is easier to qualify for a VA loan than a conventional loan. Lenders
generally limit the maximum VA loan to $548,250. The U.S. Department of Veterans Affairs
does not make loans, it guarantees loans made by lenders. VA determines your eligibility and, if
you are qualified, VA will issue you a certificate of eligibility to be used in applying for a VA loan.

VA-guaranteed loans are obtained by making application to private lending institutions.

RHS Loan Programs

Rural Housing Service (RHS) of the U.S. Dept of Agriculture guarantees loans for rural residents
with minimal closing costs and no down payment. Visit our page RHS programs for details.

Ginnie Mae which is part of HUD guarantees securities backed by pools of mortgage loans
insured by these three federal agencies – FHA, or VA, or RHS. Securities are sold through
financial institutions that trade government securities.

State and Local Housing Programs

Many states, counties and cities provide low to moderate housing finance programs, down
payment assistance programs, or programs tailored specifically for a first-time buyer. These
programs are typically more lenient on the qualification guidelines and often designed with
lower upfront fees. Also, there are often loan assistance programs offered at the local or state
level such as MCC (Mortgage Credit Certificate) which allows you a tax credit for part of your
interest payment. Most of these programs are fixed rate mortgages and have interest rates
lower than the current market.

Conforming Loans

Conventional loans may be conforming and non-conforming. Conforming loans have terms and
conditions that follow the guidelines set forth by Fannie Mae and Freddie Mac. These two
stockholder-owned corporations purchase mortgage loans complying with the guidelines from
mortgage lending institutions, packages the mortgages into securities and sell the securities to
investors. By doing so, Fannie Mae and Freddie Mac, like Ginnie Mae, provide a continuous flow
of affordable funds for home financing that results in the availability of mortgage credit for
Americans.

Fannie Mae and Freddie Mac guidelines establish the maximum loan amount, borrower credit
and income requirements, down payment, and suitable properties. Fannie Mae and Freddie
Mac announces new loan limits every year.

Jumbo Loans

Loans above the maximum loan amount established by Fannie Mae and Freddie Mac are known
as “jumbo” loans. Because jumbo loans are bought and sold on a much smaller scale, they often
have a little higher interest rate than conforming, but the spread between the two varies with
the economy.

B/C Loans

Loans that do not meet the borrower credit requirements of Fannie Mae and Freddie Mac are
called ‘B’, ‘C’ and ‘D’ paper loans vs. ‘A’ paper conforming loans. B/C loans are offered to
borrowers that may have recently filed for bankruptcy, foreclosure, or have had late payments
on their credit reports. Their purpose is to offer temporary financing to these applicants until
they can qualify for conforming ‘A’ financing. The interest rates and programs vary, based upon
may factors of the borrower’s financial situation and credit history.

Examples:

1. 3/27 ARM Loan
2. 2/28 ARM Loan

Fixed Rate Mortgages

With fixed rate mortgage (FRM) loan the interest rate and your mortgage monthly payments
remain fixed for the period of the loan. Fixed-rate mortgages are available for 40, 30, 25, 20, 15
years and 10 years. Generally, the shorter the term of a loan, the lower the interest rate you
can get.

The most popular mortgage terms are 30 and 15 years. With the traditional 30-year fixed rate
mortgage your monthly payments are lower than they would be on a shorter term loan. But if
you can afford higher monthly payments a 15-year fixed-rate mortgage allows you to repay
your loan twice as fast and save more that half the total interest costs of a 30-year loan.

The payments on fixed rate fully amortizing loans are calculated so that at the end of the term
the mortgage loan is paid in full. During the early amortization period, a large percentage of the
monthly payment us used for paying the interest. As the loan is paid down, more of the
monthly payment is applied to principal.

With bi-weekly mortgage plan you pay half of the monthly mortgage payment every 2 weeks. It
allows you to repay a loan much faster. For example, a 30-year loan can be paid off within 18 to
19 years.

Balloon Loans

Balloon loans are short-term fixed rate loans that have fixed monthly payments based usually
upon a 20-year fully amortizing schedule and a lump sum payment at the end of its term.
Usually they have terms of 3, 5, and 7 years.

The advantage of this type of loan is that the interest rate on balloon loans is generally lower
than 30-and 15-year mortgages resulting in lower monthly payments. The disadvantage is that
at the end of the term you will have to come up with a lump sum to pay off your lender, either
through a refinance or from your own savings.

Balloon loans with refinancing option allow borrowers to convert the mortgage at the end of
the balloon period to a fixed rate loan – based upon the outstanding principal balance – if
certain conditions are met. If you refinance the loan at maturity you need not be requalified,
nor the property reapproved. The interest rate on the new loan is a current rate at the time of
conversion. There might be a minimal processing fee to obtain the new loan. The most popular
terms are 5/25 Balloon, and 7/23 Balloon.

Adjustable-Rate Mortgages

Variable or adjustable loan is a loan whose interest rate, and accordingly monthly payments,
fluctuate over the period of the loan. With this type of mortgage, periodic adjustments based
on changes in a defined index are made to the interest rate. The index for your loan is
established at the time of application.

The margin is fixed percentage points added to the index to compute the interest rate. The
result will then be rounded to the nearest one-eight of a percent.

The margins remain fixed for the term of the loan and are not impacted by the financial
markets and movement of interest rates. Lenders use a variety of margins depending upon the
loan program and adjustment periods.

Most ARMs have an interest rate caps to protect you from enormous increases in monthly
payments. A lifetime cap limits the interest rate increase over the life of the loan. A periodic or
adjustment cap limits how much your interest rate can rise at one time.

Your mortgage disclosure will tell you the exact index to be used, whether the weekly or
monthly value applies, the lead time for your index, the margin, and any caps.

Negatively Amortizing Loans

Some types of ARMs (for example, option ARM loans) offer payment caps rather than interest
rate caps, which limit the amount the monthly payment can increase. If a loan has payment cap
but has no periodic interest rate cap, then the loan may become negatively amortized: if the
interest rates rise to the point that the monthly mortgage payment does not cover the interest
due, any unpaid interest will get added to the loan balance, so the loan balance increases.
However, you always have the option to pay the minimum monthly payment, or the fully
amortized amount due.

The advantage of negatively amortizing loans is that you can control cash flow (relatively stable
payment), take advantage of low interest rates relative to the market at any given time, and
pay back the money borrowed today at a depreciated value years from now (because of natural
inflation). This makes such loans a great tool for homeowners as long as you understand the
mechanics of what’s going on.

With most ARMs, the interest rate can adjust every month, every three or six months, once a
year, every three years, or every five years. The interest rate on negatively amortized loans can
adjust monthly. A loan with an adjustment period of 6 months is called a 6-month ARM, with an
adjustment period of 1 year is called a 1-year ARM, and so on.

Most ARMs offer an initial lower interest rate than the fully indexed rate (index plus margin)
during the initial period of the loan, which could be one month or a year or more. It is also
known as teaser rate.

All ARMs are available with 30-year terms and some with 15- or 40-year terms.

Adjustable-rate mortgages generally have a lower initial interest rate than fixed rate loans.

Option ARM Loans

One of the most creative products that doesn’t require a set payment each month is the option
ARM. After the first payment, you get four payment options to choose from each month: your
lender sends you a monthly statement offering a minimum payment, interest-only payment,
30-year amortized payment, or 15-year amortized payment.



Your home loan toolkit

A step-by-step guide

Consumer Financial
Protection Bureau

Page 1

How can this toolkit help you?

Buying a home is exciting and, let’s face it, complicated. This booklet is a toolkit
that can help you make better choices along your path to owning a home.

After you finish this toolkit: Section 1: Page 3

§ You’ll know the most important steps you need to take to Section 2: Page 16
get the best mortgage for your situation Section 3: Page 24

§ You’ll better understand your closing costs and what
it takes to buy a home

§ You’ll see a few ways to be a successful homeowner

How to use the toolkit:

The location symbol orients you to where you are in the home buying process.

 The pencil tells you it is time to get out your pencil or pen to circle, check, or

fill in numbers.

 The magnifying glass highlights tips to help you research further to find

important information.

 T he speech bubble shows you conversation starters for talking to others and

gathering more facts.

About the CFPB

The Consumer Financial Protection Bureau is a federal agency that helps
consumer finance markets work by making rules more effective, by consistently
and fairly enforcing those rules, and by empowering consumers to take more
control over their economic lives.

Have a question about a common consumer financial product or problem?
You can find answers by visiting consumerfinance.gov/askcfpb. Have an issue
with a mortgage, student loan, or other financial product or service? You can
submit a complaint to the CFPB. We’ll forward your complaint to the company
and work to get you a response. Turn to the back cover for details on how to
submit a complaint or call us at (855) 411-2372.

1

Page 2

This booklet was created to comply with federal law pursuant to 12 U.S.C. 2604,
12 CFR 1024.6, and 12 CFR 1026.19(g).
2  YOUR HOME LOAN TOOLKIT

Page 3

Choosing the best
mortgage for you

Y ou’re starting to look for a mortgage or IN THIS SECTION
want to confirm you made a good decision. 1. Define what affordable

To make the most of your mortgage, you need to means to you
decide what works for you and then shop around to
find it. In this section, you’ll find eight steps to get 2. Understand your credit
the job done right.
3. Pick the mortgage type
1. Define what affordable means to you that works for you

Only you can decide how much you are comfortable paying 4. Choose the right down
for your housing each month. In most cases, your lender can payment for you
consider only if you are able to repay your mortgage, not whether
you will be comfortable repaying your loan. Based on your whole 5. Understand the trade-
financial picture, think about whether you want to take on the off between points and
mortgage payment plus the other costs of homeownership such interest rate
as appliances, repairs, and maintenance.
6. Shop with several lenders

7. Choose your mortgage

8. Avoid pitfalls and handle
problems

THE TALK
Ask your spouse, a loved one, or friend about what affordable means to you:

“W hat’s more important—a bigger home with a larger mortgage or more
financial flexibility?”

“ How much do we want to budget for all the monthly housing costs,
including repairs, furniture, and new appliances?”

“What will a mortgage payment mean for other financial goals?”

SECTION 1: CHOOSING THE BEST MORTGAGE FOR YOU  3

Page 4

 K NOW YOUR NUMBERS
Calculate the home payment you can take on by filling in the worksheets below:

Think about what an affordable home loan looks like for you. These worksheets can help. First,
estimate your total monthly home payment. Second, look at the percentage of your income that will
go toward your monthly home payment. Third, look at how much money you will have available to
spend on the rest of your monthly expenses.

Step 1. Estimate your total monthly home payment by adding up the items below

Your total monthly home payment is more than just your mortgage. There are more expenses that go

along with owning your home. Start with estimates and adjust as you go. MONTHLY ESTIMATE
EMPTY CELL

Principal and interest (P&I) $

Your principal and interest payment depends on your home loan
amount, the interest rate, and the number of years it takes to repay the
loan. Principal is the amount you pay each month to reduce the loan
balance. Interest is the amount you pay each month to borrow money.
Many principal and interest calculators are available online.

Mortgage insurance +$

Mortgage insurance is often required for loans with less than a 20%
down payment.

Property taxes +$

The local assessor or auditor’s office can help you estimate property
taxes for your area. If you know the yearly amount, divide by 12 and
write in the monthly amount.

Homeowner’s insurance +$

You can call one or more insurance agents to get an estimate for homes
in your area. Ask if flood insurance is required.

Homeowner’s association or condominium fees, if they apply +$

Condominiums and other planned communities often require
homeowner’s association (HOA) fees.

My estimated total monthly home payment =$

4  YOUR HOME LOAN TOOLKIT

Page 5

Step 2. Estimate the percentage of your income spent on your monthly home payment

Calculate the percentage of your total monthly income that goes toward your total monthly home
payment each month. A mortgage lending rule of thumb is that your total monthly home payment
should be at or below 28% of your total monthly income before taxes. Lenders may approve you for
more or for less depending on your overall financial picture.

  100 

My estimated total monthly My total monthly income Percentage of my income
home payment (from step 1) before taxes going toward my monthly
home payment

Step 3. Estimate what is left after subtracting your monthly debts

To determine whether you are comfortable with your total monthly home payment, figure out how
much of your income is left after you pay for your housing plus your other monthly debts.

Total monthly income after taxes $
—$
My estimated total monthly home payment (from step 1) —$
Monthly car payment(s) —$
Monthly student loan payment(s) —$
Monthly credit card payment(s) —$
Other monthly payments, such as child support or alimony

Total monthly income minus all debt payments =$

This money must cover your utilities, groceries, child care, health
insurance, repairs, and everything else. If this isn’t enough, consider
options such as buying a less expensive home or paying down debts.

Step 4. Your choice

I am comfortable with a total monthly home payment of: $

SECTION 1: CHOOSING THE BEST MORTGAGE FOR YOU  5

Page 6

2. Understand your credit TIP

Your credit, your credit scores, and how wisely you shop for a loan that best fits Be careful
your needs have a significant impact on your mortgage interest rate and the fees making any
you pay. To improve your credit and your chances of getting a better mortgage, big purchases
get current on your payments and stay current. About 35% of your credit scores on credit
are based on whether or not you pay your bills on time. About 30% of your credit before you
scores are based on how much debt you owe. That's why you may want to consider close on your
paying down some of your debts. home. Even
financing a new
  RESEARCH STARTER refrigerator
could make
Check out interest rates and make sure you’re getting the credit you’ve earned. it harder for
you to get a
¨¨ Get your credit report at annualcreditreport.com and check it for errors. mortgage.
If you find mistakes, submit a request to each of the credit bureaus asking them
to fix the mistake. For more information about correcting errors on your credit TIP
report, visit consumerfinance.gov/askcfpb.
Correcting
¨¨ For more on home loans and credit, visit consumerfinance.gov/owning-a-home. errors on your
credit report
NOW IN THE FUTURE may raise your
score in 30
§ If your credit score is below 700, you will § If you work on improving your credit days or less.
likely pay more for your mortgage. and wait to buy a home, you will likely It’s a good
save money. Some people who improve idea to correct
§ Most credit scoring models are built their credit save $50 or $100 on a typical errors before
so you can shop for a mortgage within monthly mortgage payment. you apply for a
a certain period—generally between mortgage.
14 days and 45 days—with little or § An average consumer who adopts
no impact on your score. If you shop healthy credit habits, such as paying
outside of this period, any change bills on time and paying down credit
triggered by shopping should be cards, could see a credit score
minor—a small price to pay for saving improvement in three months or more.
money on a mortgage loan.

 YOUR CHOICE OR ¨ I will wait a few months or more
Check one: and work to improve my credit.

¨ I will go with the credit I have.

6  YOUR HOME LOAN TOOLKIT

Page 7

3. Pick the mortgage type—fixed or adjustable—that TIP
works for you
Many
With a fixed-rate mortgage, your principal and interest payment stays the same for borrowers
as long as you have your loan. with ARMs
underestimate
§ Consider a fixed-rate mortgage if you want a predictable payment. how much
their interest
§ You may be able to refinance later if interest rates fall or your credit or financial rates can rise.
situation improves.

With an adjustable-rate mortgage (ARM), your payment often starts out lower
than with a fixed-rate loan, but your rate and payment could increase quickly. It is
important to understand the trade-offs if you decide on an ARM.

§ Your payment could increase a lot, often by hundreds of dollars a month.

§ Make sure you are confident you know what your maximum payment could be
and that you can afford it.

Planning to sell your home within a short period of time? That’s one reason some
people consider an ARM. But, you probably shouldn’t count on being able to sell
or refinance. Your financial situation could change. Home values may go down or
interest rates may go up.

You can learn more about ARMs in the Consumer Handbook on Adjustable Rate
Mortgages (files.consumerfinance.gov/f/201401_cfpb_booklet_charm.pdf) or by
visiting consumerfinance.gov/owning-a-home.

 YOUR CHOICE
Check one:

¨ I prefer a fixed-rate mortgage. OR ¨ I prefer an adjustable-rate mortgage.

Check for risky loan features

Some loans are safer and more predictable than others. It is a good idea to make
sure you are comfortable with the risks you are taking on when you buy your home.
You can find out if you have certain types of risky loan features from the Loan
Terms section on the first page of your Loan Estimate.

A balloon payment is a large payment you must make, usually at the end of your
loan repayment period. Depending on the terms of your loan, the balloon payment
could be as large as the entire balance on your mortgage.

A prepayment penalty is an amount you have to pay if you refinance or pay off your
loan early. A prepayment penalty may apply even if you sell your home.

SECTION 1: CHOOSING THE BEST MORTGAGE FOR YOU  7

Page 8

4. Choose the right down payment for you

A down payment is the amount you pay toward the home yourself. You put a percentage
of the home’s value down and borrow the rest through your mortgage loan.

 YOUR CHOICE WHAT THAT MEANS FOR YOU
Check one:
YOUR DOWN PAYMENT

¨¨ I will put down 20% A 20% or higher down payment likely provides the best rates and most
or more. options. However, think twice if the down payment drains all your savings.

¨¨ I will put down You probably have to pay higher interest rates or fees. Lenders most
between 5% likely require private mortgage insurance (PMI). PMI is an insurance
and 19%. policy that lets you make a lower down payment by insuring the lender
against loss if you fail to pay your mortgage.

Keep in mind when you hear about “no PMI” offers that doesn’t mean zero
cost. No PMI offers often have higher interest rates and may also require
you to take out a second mortgage. Be sure you understand the details.

¨¨ I will make no down Low down payment programs are typically more expensive because
payment or a small they may require mortgage insurance or a higher interest rate. Look
one of less than 5%. closely at your total fees, interest rate, and monthly payment when
comparing options.

Ask about loan programs such as:

§ Conventional loans that may offer low down payment options.
§ FHA, which offers a 3.5% down payment program.
§ VA, which offers a zero down payment option for qualifying veterans.
§ USDA, which offers a similar zero down payment program for eligible

borrowers in rural areas.

The advantages of prepayment TIP

Prepayment is when you make additional mortgage payments so you pay down Prepayment
your mortgage early. This reduces your overall cost of borrowing, and you may is your choice.
be able to cancel your private mortgage insurance early and stop paying the You don’t have
premium. Especially if your down payment is less than 20%, it may make sense to to sign up for a
make additional payments to pay down your loan earlier. program or pay
a fee to set it up.
8  YOUR HOME LOAN TOOLKIT

Page 9

5. Understand the trade-off between points
and interest rate

Points are a percentage of a loan amount. For example, when a loan officer talks about
one point on a $100,000 loan, the loan officer is talking about one percent of the loan,
which equals $1,000. Lenders offer different interest rates on loans with different
points. There are three main choices you can make about points. You can decide you
don’t want to pay or receive points at all. This is called a zero point loan. You can pay
points at closing to receive a lower interest rate. Or you can choose to have points paid
to you (also called lender credits) and use them to cover some of your closing costs.

The example below shows the trade-off between points as part of your closing
costs and interest rates. In the example, you borrow $180,000 and qualify for a
30-year fixed-rate loan at an interest rate of 5.0% with zero points. Rates currently
available may be different than what is shown in this example.

COMPARE THREE SCENARIOS OF HOW POINTS AFFECT INTEREST RATE

R AT E 4.875% 5.0% 5.125%

POINTS +0.375 0 -0.375

YOUR You plan to keep your You are satisfied You don’t want to pay a
SITUATION mortgage for a long time. with the market rate lot of cash upfront and
You can afford to pay without points in you can afford a larger
more cash at closing. either direction. mortgage payment.

YOU MAY Pay points now and get Zero points. Pay a higher interest rate
CHOOSE a lower interest rate. This and get a lender credit
will save you money over toward some or all of your
the long run. closing costs.

WHAT You might agree to pay With no You might agree to a
THAT $675 more in closing adjustments in higher rate of 5.125%, in
MEANS costs, in exchange for a either direction, exchange for $675 toward
lower rate of 4.875%. it is easier to your closing costs.
understand what
Now: You pay $675 you’re paying and Now: You get $675
to compare prices.
Over the life of the loan: Over the life of the loan:
Pay $14 less each month Pay $14 more each month

SECTION 1: CHOOSING THE BEST MORTGAGE FOR YOU  9

Page 10

6. Shop with several lenders TIP

You’ve figured out what affordable means for you. You’ve reviewed your credit A loan officer is
and the kind of mortgage and down payment that best fits your situation. Now is not necessarily
the time to start shopping seriously for a loan. The work you do here could save shopping on
you thousands of dollars over the life of your mortgage. your behalf or
providing you
 G ATHER FACTS AND COMPARE COSTS with the best fit
or lowest cost
¨¨ Make a list of several lenders you will start with loan.
M ortgages are typically offered by community banks, credit unions, mortgage
brokers, online lenders, and large banks. These lenders have loan officers you TIP
can talk to about your situation.
It is illegal
¨¨ Get the facts from the lenders on your list for a lender
F ind out from the lenders what loan options they recommend for you, and the to pay a loan
costs and benefits for each. For example, you might find a discount is offered officer more to
for borrowers who have completed a home buyer education program. steer you into
a higher cost
¨¨ Get at least three offers—in writing—so that you can compare them loan.
Review the decisions you made on pages 4 to 8 to determine the loan type, down
payment, total monthly home payment and other features to shop for. Now ask at
least three different lenders to give you a Loan Estimate, which is a standard form
showing important facts about the loan. It should be sent to you within three days,
and it shouldn’t be expensive. Lenders can charge you only a small fee for getting
your credit report—and some lenders provide the Loan Estimate without that fee.

¨¨ Compare Total Loan Costs
R eview your Loan Estimates and compare Total Loan Costs, which you can see
under Section D at the bottom left of the second page of the Loan Estimate. Total
Loan Costs include what your lender charges to make the loan, as well as costs for
services such as appraisal and title. The third page of the Loan Estimate shows the
Annual Percentage Rate (APR), which is a measure of your costs over the loan term
expressed as a rate. Also shown on the third page is the Total Interest Percentage
(TIP), which is the total amount of interest that you pay over the loan term as a
percentage of your loan amount. You can use APR and TIP to compare loan offers.

RESEARCH STARTER
Loan costs can vary widely from lender to lender, so this is one place where a little
research may help you save a lot of money. Here’s how:
¨¨ Ask real estate and title professionals about average costs in your area.
¨¨ Learn more about loan costs, and get help comparing options, at

consumerfinance.gov/owning-a-home.

10  YOUR HOME LOAN TOOLKIT

Page 11

THE TALK

Talking to different lenders helps you to know what options are available
and to feel more in control. Here is one way to start the conversation:

“T his mortgage is a big decision and I want to get it right. Another lender
is offering me a different loan that may cost less. Let’s talk about what the
differences are and whether you may be able to offer me the best deal.”

 T RACK YOUR LOAN OFFERS LOAN OFFER 2 LOAN OFFER 3
Fill in the blanks for these important factors:

LOAN OFFER 1

Lender name

Loan amount $ $ $

Interest rate %%%

o Fixed o Fixed o Fixed
o Adjustable o Adjustable o Adjustable

Monthly principal and interest $ $ $

Monthly mortgage insurance $ $$
$$
Total Loan Costs $
SECTION 1: CHOOSING THE BEST MORTGAGE FOR YOU  11
(See section D on the second
page of your Loan Estimate.)

My best loan offer is:

Page 12

7. Choose your mortgage

You’ve done a lot of hard work to get this far! Now it is time to make your call.

 C ONFIRM YOUR DECISION
Check the box if you agree with the statement:
¨¨ I can repay this loan.
¨¨ I am comfortable with my monthly payment.
¨¨ I shopped enough to know this is a good deal for me.
¨¨ There are no risky features such as a balloon payment or prepayment
penalty I can’t handle down the road.
¨¨ I know whether my principal and interest payment will increase in the future.

Still need advice? The U.S. Department of Housing and Urban Development
(HUD) sponsors housing counseling agencies throughout the country to provide
free or low-cost advice. To find a HUD-approved housing counselor visit
consumerfinance.gov/find-a-housing-counselor or call HUD’s interactive voice
system at (800) 569-4287.

Intent to proceed

When you receive a Loan Estimate, the lender has not yet approved or denied
your loan. Up to this point, they are showing you what they expect to offer if you
decide to move forward with your application. You have not committed to this
lender. In fact, you are not committed to any lender before you have signed final
closing documents.

Once you have found your best mortgage, the next step is to tell the loan officer
you want to proceed with that mortgage application. This is called expressing your
intent to proceed. Lenders have to wait until you express your intent to proceed
before they require you to pay an application fee, appraisal fee, or most other fees.

Rate lock

Your Loan Estimate may show a rate that has been “locked” or a rate that is
“floating,” which means it can go up or down. Mortgage interest rates change daily,
sometimes hourly. A rate lock sets your interest rate for a period of time. Rate locks
are typically available for 30, 45, or 60 days, and sometimes longer.

12  YOUR HOME LOAN TOOLKIT

Page 13

The interest rate on your Loan Estimate is not a guarantee. If your rate is floating
and it is later locked, your interest rate will be set at that later time. Also, if there are
changes in your application—including your loan amount, credit score, or verified
income—your rate and terms will probably change too. In those situations, the
lender gives you a revised Loan Estimate.

There can be a downside to a rate lock. It may be expensive to extend if your
transaction needs more time. And, a rate lock may lock you out of better market
pricing if rates fall.

THE TALK
Rate lock policies vary by lender. Choosing to lock or float your rate
can make an important difference in your monthly payment. To avoid
surprises, ask:

“What does it mean if I lock my rate today?”

“What rate lock time frame does this Loan Estimate provide?”

“Is a shorter or longer rate lock available, and at what cost?”

“What if my closing is delayed and the rate lock expires?”

“I f I lock my rate, are there any conditions under which my rate could
still change?”

SECTION 1: CHOOSING THE BEST MORTGAGE FOR YOU  13

Page 14 WHY?

8. Avoid pitfalls You are agreeing to repay a substantial amount of money over
an extended period of time. Make sure you know what you are
WHAT NOT TO DO getting into and protect yourself from fraud.
Don’t sign documents where
important details are left HUD-approved housing counselors can help you navigate
blank or documents you the process and find programs available to help first-time
don’t understand. homebuyers.
You can find a HUD-approved housing counselor in your area at
Don’t assume you are on consumerfinance.gov/find-a-housing-counselor or call HUD’s
your own. interactive voice system at (800) 569-4287.

Don’t take on more Make certain that you want the loan that you are requesting and
mortgage than you want that you are in a position to live up to your end of the bargain.
or can afford.
If you are not comfortable with the loan offered to you, ask
Don’t count on refinancing, your lender if there is another option that works for you. Keep
and don’t take out a loan if looking until you find the right loan for your situation.
you already know you will
have to change it later. You are responsible for an accurate and truthful application. Be
upfront about your situation. Mortgage fraud is a serious offense.
Don’t fudge numbers
or documents. Hiding negative information may delay or derail your
loan application.
Don’t hide important
financial information.

14  YOUR HOME LOAN TOOLKIT

Page 15

Handle problems WHAT TO DO ABOUT IT

WHAT HAPPENED Ask to talk to a supervisor. It may be a good idea to talk to
the loan officer first, and if you are not satisfied, ask to speak
I have experienced a problem with a supervisor.
with my loan application or
how my loan officer is
treating me.

I think I was unlawfully The Fair Housing Act and Equal Credit Opportunity Act prohibit
discriminated against when housing and credit discrimination. If you think you have been
I applied for a loan or when discriminated against during any part of the mortgage process,
I tried to buy a home. you can submit a complaint and describe what happened. To
do so, you can call the Consumer Financial Protection Bureau at
(855) 411-2372 or visit consumerfinance.gov/complaint. Submit
a complaint to the U.S. Department of Housing and Urban
Development (HUD) by calling (800) 669-9777, TTY (800) 927-
9275. Or, file a complaint online at HUD.gov.

You can find more information about your rights and how to submit
a complaint with the CFPB at consumerfinance.gov/fair-lending.

I have a complaint. Submit a complaint to the Consumer Financial Protection
Bureau if you have problems at any stage of the mortgage
application or closing process, or later if you have problems
making payments or become unable to pay. You can call (855)
411-2372 or visit consumerfinance.gov/complaint.

I think I may have been the Don’t believe anyone who tells you they are your “only chance
victim of a predatory lender to get a loan,” or that you must “act fast.” Learn the warning
or a loan fraud. signs of predatory lending and protect yourself. Find more
information at portal.hud.gov/hudportal/HUD?src=/program_
offices/housing/sfh/hcc/OHC_PREDLEND/OHC_LOANFRAUD.

You could learn more about your loan officer at
nmlsconsumeraccess.org.

SECTION 1: CHOOSING THE BEST MORTGAGE FOR YOU  15

Page 16

Your closing

You’ve chosen a mortgage. Now it’s time to IN THIS SECTION
select and work with your closing agent.
1. Shop for mortgage closing
Once you’ve applied for a mortgage, you may services
feel like you’re done. But mortgages are
complicated and you still have choices to make. 2. Review your revised Loan
Estimate

3. Understand and use your
Closing Disclosure

1. Shop for mortgage closing services

Once you’ve decided to move forward with a lender based on the Loan Estimate, TIP
you are ready to shop for the closing agent who gathers all the legal documents,
closes the loan, and handles the money involved in your purchase. After you Settlement
apply for a loan, your lender gives you a list of companies that provide closing services may
services. You may want to use one of the companies on the list. Or, you may be feel like a drop
able to choose companies that are not on the list if your lender agrees to work with in the bucket
your choice. The seller cannot require you to buy a title insurance policy from a compared to
particular title company. the cost of the
home. But in
Closing agent some states
borrowers who
In most of the country, a settlement agent does your closing. In other states, shop around
particularly several states in the West, the person is known as an escrow agent. And may save
in some states, particularly in the Northeast and South, an attorney may be required. hundreds of
dollars.

  RESEARCH STARTER

When you compare closing agents, look at both cost and customer service.

¨¨ Ask your real estate professional and your friends. These people may know
companies they would recommend. Be sure to ask how that company handled
problems and if they have a good reputation.

16  YOUR HOME LOAN TOOLKIT

Page 17

¨¨ Review the list of companies your lender gave you. Select a few companies
on the list and ask for references from people who recently bought a home.
Ask those people how the company handled problems that came up during
the transaction.

Title insurance

When you purchase your home, you receive a document most often called a deed,
which shows the seller transferred their legal ownership, or “title,” to the home to
you. Title insurance can provide protection if someone later sues and says they
have a claim against the home. Common claims come from a previous owner’s
failure to pay taxes or from contractors who say they were not paid for work done
on the home before you purchased it.

Most lenders require a Lender’s Title Insurance policy, which protects the amount
they lent. You may want to buy an Owner’s Title Insurance policy, which protects
your financial investment in the home. The Loan Estimate you receive lists the
Owner’s Title Insurance policy as optional if your lender does not require the policy
as a condition of the loan.

Depending on the state where you are buying your home, your title insurance
company may give you an itemized list of fees at closing. This itemized list may be
required under state law and may be different from what you see on your Loan
Estimate or Closing Disclosure. That does not mean you are being charged more.
If you add up all the title-related costs your title insurance company gives you, it
should match the totals of all the title-related costs you see on your Loan Estimate
or Closing Disclosure. When comparing costs for title insurance, make sure to
compare the bottom line total.

Home inspector and home appraiser

When you are considering buying a home, it is smart to check it out carefully to see if
it is in good condition. The person who does this for you is called a home inspector.
The inspector works for you and should tell you whether the home you want to
buy is in good condition and whether you are buying a “money pit” of expensive
repairs. Get your inspection before you are finally committed to buy the home.

A home inspector is different from a home appraiser. The appraiser is an
independent professional whose job is to give the lender an estimate of the home’s
market value. You are entitled to a copy of the appraisal prior to your closing. This
allows you to see how the price you agreed to pay compares to similar and recent
property sales in your area.

SECTION 2: YOUR CLOSING  17

Page 18

2. Review your revised Loan Estimate

When important information changes, your lender is required to give you a new
Loan Estimate that shows your new loan offer.
It is illegal for a lender to quote you low fees and costs for its services on your
Loan Estimate and then surprise you with much higher costs in a revised Loan
Estimate or Closing Disclosure. However, a lender may change the fees it quotes
you for its services if the facts on your application were wrong or changed, you
asked for a change, your lender found you did not qualify for the original loan
offer, or your Loan Estimate expired.
Here are common reasons why your Loan Estimate might change:
§ You decided to change loan programs or the amount of your down payment.
§ The appraisal on the home you want to buy came in higher or lower

than expected.
§ You took out a new loan or missed a payment and that has changed your credit.
§ Your lender could not document your overtime, bonus, or other income.

THE TALK
If your Loan Estimate is revised you should look it over to see what
changed. Ask your lender:
“ Can you explain why I received a new Loan Estimate?”
“ How is my loan transaction different from what I was originally
expecting?”
“H ow does this change my loan amount, interest rate, monthly payment,
cash to close, and other loan features?”

18  YOUR HOME LOAN TOOLKIT

Page 19

3. Understand and use your Closing Disclosure

You’ve chosen a home you want to buy and your offer has been accepted. You’ve
also applied for and been approved for a mortgage. Now you are ready to take
legal possession of the home and promise to repay your loan.

At least three days before your closing, you should get your official Closing Disclosure,
which is a five-page document that gives you more details about your loan, its key
terms, and how much you are paying in fees and other costs to get your mortgage and
buy your home.

Many of the costs you pay at closing are set by the decisions you made when you
were shopping for a mortgage. Charges shown under “services you can shop for”
may increase at closing, but generally by no more than 10% of the costs listed on
your final Loan Estimate.

The Closing Disclosure breaks down your closing costs into two big categories:

YOUR LOAN COSTS OTHER COSTS

§ The lender’s Origination Costs to make or § Property taxes.
“originate” the loan, along with application
fees and fees to underwrite your loan. § Homeowner’s insurance premiums. You can
Underwriting is the lender’s term for making shop around for homeowner’s insurance
sure your credit and financial information from your current insurance company, or
is accurate and you meet the lender’s many others, until you find the combination
requirements for a loan. of premium, coverage, and customer service
that fits your situation. Your lender will ask
§ Discount points—that is, additional money you for proof you have an insurance policy on
you pay up front to reduce your interest rate. your new home.

§ Services you shopped for, such as your § Any portion of your total mortgage payment
closing or settlement agent and related you must make before your first full payment
title costs. is due.

§ Services your lender requires for your loan. § Flood insurance, if required.
These include appraisals and credit reports.

RESEARCH STARTER

Get tips, a step-by-step checklist, and help with the rest of the documents you’ll
see at closing at consumerfinance.gov/owning-a-home.

SECTION 2: YOUR CLOSING  19

Page 20

What is your Closing Closing Disclosure This form is a statement of final loan terms and closing costs. Compare this
Disclosure? document with your Loan Estimate.

The five-page Closing Closing Information Transaction Information Loan Information
Disclosure sums up the terms
of your loan and what you Date Issued 4/15/2013 Borrower Michael Jones and Mary Stone Loan Term 30 years
pay at closing. You can easily Closing Date 4/15/2013 Seller 123 Anywhere Street Purpose Purchase
compare the numbers to the Disbursement Date 4/15/2013 Lender Anytown, ST 12345 Product Fixed Rate
Loan Estimate you received Settlement Agent Epsilon Title Co. Steve Cole and Amy Doe
earlier. There should not be File # 12-3456 321 Somewhere Drive Loan Type x Conventional FHA
any significant changes other Property 456 Somewhere Ave Anytown, ST 12345 VA _____________
than those you have already Anytown, ST 12345 Ficus Bank Loan ID #
agreed to. Sale Price $180,000 MIC # 123456789
000654321
Take out your own Closing
Disclosure, or review the Loan Terms $162,000 Can this amount increase after closing?
example here. Double-check Loan Amount
that you clearly understand 3.875% NO
what you’ll be expected to Interest Rate $761.78 NO
pay—over the life of your loan NO
and at closing. Monthly Principal & Interest
See Projected Payments below for your Does the loan have these features?
ON PAGE 1 OF 5 Estimated Total Monthly Payment
YES • As high as $3,240 if you pay off the loan during the
Loan terms Prepayment Penalty
Review your monthly payment. Balloon Payment first 2 years
Part of it goes to repay what you
borrowed (and may build equity NO
in your new home), and part of
it goes to pay interest (which Projected Payments Years 1-7 Years 8-30
doesn’t build equity). Equity is Payment Calculation
the current market value of your $761.78 $761.78
home minus the amount you Principal & Interest + 82.35 +—
still owe on your mortgage. Mortgage Insurance + 206.13 + 206.13
Estimated Escrow
Costs at Closing Amount can increase over time $1,050.26 $967.91
Be prepared to bring the Estimated Total
full “Cash to Close” amount Monthly Payment This estimate includes In escrow?
with you to your closing. This
amount includes your down Estimated Taxes, Insurance $356.13 x Property Taxes YES
payment and closing costs. & Assessments x Homeowner’s Insurance YES
The closing costs are itemized Amount can increase over time a month x Other: Homeowner’s Association Dues NO
on the following pages. See page 4 for details
See Escrow Account on page 4 for details. You must pay for other property
Costs at Closing costs separately.
Closing Costs
$9,712.10 Includes $4,694.05 in Loan Costs + $5,018.05 in Other Costs – $0
Cash to Close
in Lender Credits. See page 2 for details.

$14,147.26 Includes Closing Costs. See Calculating Cash to Close on page 3 for details.

CLOSING DISCLOSURE PAGE 1 OF 5 • LOAN ID # 123456789

Closing Disclosure, page 1. The most important facts about your loan are on the first page.

ON PAGE 2 OF 5 Prepaids
Homeowner’s insurance is
Total Loan Costs often paid in advance for the
Origination charges are fees first full year. Also, some taxes
your lender charges to make and other fees need to be paid
your loan. Some closing costs in advance.
are fees paid to the providers
selected by your lender. Some
are fees you pay to providers
you chose on your own.

20  YOUR HOME LOAN TOOLKIT

Closing Cost Details Page 21

Loan Costs Borrower-Paid Seller-Paid Paid by Escrow
At Closing Before Closing Others An escrow or impound
At Closing Before Closing account is a special account
A. Origination Charges where monthly insurance and
$1,802.00 tax payments are held until
01 0.25 % of Loan Amount (Points) $405.00 they are paid out each year.
02 Application Fee $300.00 You get a statement showing
03 Underwriting Fee $1,097.00 how much money your lender
04 or mortgage servicer plans
05 to require for your escrow or
06 impound account.
07
08 You also get an annual analysis
showing what happened to the
B. Services Borrower Did Not Shop For $236.55 money in your account. Your
lender must follow federal
01 Appraisal Fee to John Smith Appraisers Inc. $29.80 $405.00 rules to make sure they do not
02 Credit Report Fee to Information Inc. end up with a large surplus
03 Flood Determination Fee to Info Co. $20.00 or shortage in your escrow or
04 Flood Monitoring Fee to Info Co. $31.75 impound account.
05 Tax Monitoring Fee to Info Co. $75.00
06 Tax Status Research Fee to Info Co. $80.00
07
08
09
10

C. Services Borrower Did Shop For $2,655.50

01 Pest Inspection Fee to Pests Co. $120.50
02 Survey Fee to Surveys Co. $85.00
03 Title – Insurance Binder to Epsilon Title Co.
04 Title – Lender’s Title Insurance to Epsilon Title Co. $650.00
05 Title – Settlement Agent Fee to Epsilon Title Co. $500.00
06 Title – Title Search to Epsilon Title Co. $500.00
07 $800.00
08

D. TOTAL LOAN COSTS (Borrower-Paid) $4,694.05

Loan Costs Subtotals (A + B + C) $4,664.25 $29.80

Other Costs

E. Taxes and Other Government Fees $85.00
$85.00
01 Recording Fees Deed: $40.00 Mortgage: $45.00
02 Transfer Tax to Any State $2,120.80
$1,209.96 $950.00
F. Prepaids
$279.04
01 Homeowner’s Insurance Premium ( 12 mo.) to Insurance Co. $631.80
02 Mortgage Insurance Premium ( mo.)
03 Prepaid Interest ( $17.44 per day from 4/15/13 to 5/1/13 ) $412.25
04 Property Taxes ( 6 mo.) to Any County USA $201.66
05
$210.60
G. Initial Escrow Payment at Closing

01 Homeowner’s Insurance $100.83 per month for 2 mo.

02 Mortgage Insurance per month for mo.

03 Property Taxes $105.30 per month for 2 mo.

04

05

06

07

08 Aggregate Adjustment – 0.01
$2,400.00
H. Other
$500.00
01 HOA Capital Contribution to HOA Acre Inc. $150.00
$750.00
02 HOA Processing Fee to HOA Acre Inc.
$1,000.00
03 Home Inspection Fee to Engineers Inc. $750.00
$5,018.05 $750.00
04 Home Warranty Fee to XYZ Warranty Inc. $5,018.05 $450.00
$5,700.00
05 Real Estate Commission to Alpha Real Estate Broker $5,700.00

06 Real Estate Commission to Omega Real Estate Broker

07 Title – Owner’s Title Insurance (optional) to Epsilon Title Co.

08

I. TOTAL OTHER COSTS (Borrower-Paid)

Other Costs Subtotals (E + F + G + H)

J. TOTAL CLOSING COSTS (Borrower-Paid) $9,712.10
Closing Costs Subtotals (D + I)
Lender Credits $9,682.30 $29.80 $12,800.00 $405.00

CLOSING DISCLOSURE PAGE 2 OF 5 • LOAN ID # 123456789

Details of your closing costs appear on page 2 of the Closing Disclosure.

 U SE YOUR CLOSING DISCLOSURE TO CONFIRM THE DETAILS OF YOUR LOAN
Circle one. If you answer no, turn to the page indicated for more information:

The interest rate is what I was expecting based on my Loan Estimate. YES / NO (see page 10)

I know whether I have a prepayment penalty or balloon payment. YES / NO (see page 7)

I know whether or not my payment changes in future years. YES / NO (see page 7)

I see whether I am paying points or receiving points at closing. YES / NO (see page 9)

I know whether I have an escrow account. YES / NO (see above)

SECTION 2: YOUR CLOSING  21