Glossary

Illinois Contract

REALTOR (R) Buyer's Agent A REALTOR (R) is real estate professional that is both a licensed real estate agent or broker AND a member of the National Realtor's Association. They are experts in the residential real estate process and help represent Sellers and Buyers during their real estate transaction. ​ On this page, we will discuss the role, duties, and responsibilities of the Buyer's Agent: ​ Role Showings: Buyer's Agents will contact seller properties to schedule time and access for property showings. Negotiations: Buyer's Agents will assist the Buyer in the Offer Negotiation process when a Buyer decides to purchase a property. Management: Buyer's Agents will assist the Buyer in managing the entire buying process by organizing all of the requisite documents and ensuring all parties involved in the transaction are active in ensuring the buying process is being executed. ​ Benefits - You do not need a real estate agent to buy a home; in fact, some home buyers leave the Buyer's Agent out of the equation. However, you might benefit from hiring one. ​ To save time. Agents can often help you find homes in your price range, and they may have access to more properties than what you’ll see online. To get information and help with negotiations. Good agents should have wealth of information to help you make a decision. And, they’ll handle a lot of complex paperwork on your behalf. Offer Contract Contingency Negotiations Home Inspection Reports Appraisal Reports Earnest Money Escrow Extension Requests Another plus is that your agent will handle a ton of paperwork on your behalf. Unless you love filling out forms – and have experience in real estate transactions – this is a chore best left to the professionals, who should ensure that everything is done by the book. You could easily make a mistake with these documents. Mistakes can cause deals to fall apart or (worse) make you liable for an inadvertent breach of contract. (Licensed agent will have errors and omissions insurance to limit this risk.) An experienced agent will make sure that everything that needs to take place — counter-offers, extensions, appraisal, inspection, walk-through, loan approval — happens when it’s supposed to and how it’s supposed to.​ Market expertise: Conducting a home search by yourself can be a full-time job. Though the Internet makes it easy to find homes in your price range, a good agent usually has access to more properties. That includes For Sale By Owner (FSBO) properties and homes that aren’t yet listed. In addition, some sellers of desirable homes do not wish to “go public.” Only agents (and their colleagues) working with those sellers even know about those so-called “pocket listings.” The exception: There is ONE instance in which you must use an agent to purchase property. That applies if you bid on FHA foreclosure properties. The Department of Housing and Urban Development (HUD) requires all bidders to use licensed agents. ​ ​​

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Open House For the Seller Open Houses are a great way to allow the general public access to view your property. Your Realtor will be present to facilitate and host the guests as they arrive to view your home. Open Houses are a great way to allow more people into the home and see the property. Some might just be neighbors who are curious to see your home. But, it’s a great opportunity to have more eyes on the property because they might know someone who is interested! Open Houses are not just for those interested in buying but also those who might know someone who is buying. ​ For the Buyer Open Houses are great opportunities to see a home without prior coordination. Once an open house is scheduled by a Seller, buyers can visit the property anytime within that window. Unlike a scheduled showing, a Buyer will not be allocated an exclusive time slot to view the property. Instead, there may be multiple Buyers at the property simultaneously depending on the traffic coming through to visit the property. Open Houses are generally not a good time to negotiate with a Seller’s Agent because they may be attempting to assist and answer multiple Buyers’ questions during the Open House. It is usually better to contact the Seller’s Agent after the Open House is over to negotiate or submit an offer . ​ ​

Calculate Your Proceeds When an offer comes in, a seller can accept it exactly as it stands, refuse it (seldom a useful response), or make a counteroffer with the changes they want. ​ In evaluating a purchase offer, sellers estimate the amount of cash they'll walk away with when the transaction is complete. For example, when they're presented with two offers at once, they may discover they are better off accepting the one with the lower sale price if the other asks them to pay points to the buyer's lending institution. ​ Once a seller has a specific proposal, calculating net proceeds becomes simple. From the proposed purchase price, they subtract the following: Payoff amount on present mortgage Any other liens (equity loan, judgments) Broker's commission Legal costs of selling (attorney, escrow agent) Transfer taxes Unpaid property taxes and water bills If required by the contract: cost of survey, termite inspection, buyer's closing costs, repairs, etc. ​ The seller's mortgage lender may maintain an escrow account into which they deposit money to pay property tax bills and homeowner's insurance premiums. In that case, remember sellers will receive a refund of money left in that account, which will add to their proceeds.

Mortgage Loan A home mortgage is a loan given by a financial institution for the purchase of a residence—either a primary residence, a secondary residence, or an investment residence—in contrast to a piece of commercial or industrial property. Depending on the State where the property resides, in a home mortgage, either a mortgage lien is placed on the title of the property OR the owner of the property (the borrower) transfers the title to the lender on the condition that the title will be transferred back to the owner once the final loan payment has been made and other terms of the mortgage have been met or a mortgage lien will be placed on the title. ​ A mortgage payment is composed of 4 components, simply known as PITI - which is the Principal , Interest , Taxes , and Interest . ​ Principal The principal of your mortgage is the amount that you owe before any interest is added. For example, if you buy a home worth $250,000 with a 20% down payment, your principal amount would be $200,000. However, throughout the life of the loan, you pay more than your original $200,000 because of interest. Most lenders look at your principal balance and debt-to-income (DTI) ratio when they consider whether they should extend you a loan. Your debt to income (DTI) ratio is a calculation of your ability to make payments toward money you’ve borrowed. Your DTI ratio is comprised of your total minimum monthly debt divided by your gross monthly income and is expressed as a percentage. A mortgage company will evaluate two ratios: Front Ratio = monthly housing payments/gross monthly income (should be <30%) Back Ratio = total monthly debt obligations/gross monthly income (should be <40%) ​ Interest An interest rate is a percentage that shows how much you’ll pay your lender each month as a fee for borrowing money. Your mortgage lender calculates interest as a percentage of your principal over time. For example, if your principal loan is worth $200,000 and your lender charges you an interest rate of 4%, this means that you pay $8,000 (4% of $200,000) for the first year of your mortgage in interest. ​ Taxes You must pay taxes on your property. Taxes are one of the often-overlooked costs of homeownership. It’s important to consider them when you think about how much home you can afford. The most expensive tax most homeowners pay is property tax, which may vary by location. Property taxes support the local community and pay for things like libraries, local fire departments, public schools, road and park maintenance and community development projects. It’s difficult to say exactly how much you can expect to pay in taxes because they depend upon your home’s value and your local property tax rate. Taxes can vary from year to year. As a general rule, anticipate paying $1 for every $1,000 of your home’s value every month in property taxes. For example, if your home is worth $250,000, you pay around $250 per month in property taxes or about $3,000 per year. ​ Insurance Home Owners Insurance Though homeowners insurance is not required by law in most states, most mortgage lenders require that you maintain at least a certain level of property insurance as a condition of your loan. Homeowners insurance covers your property if a fire, lightning storm or break-in occurs. Some homeowners insurance policies include additional coverage for damage from flooding and earthquakes as add-ons. If you have something very valuable in your home, like a piece of artwork, an expensive piece of jewelry or a musical instrument, you may purchase a high-value layer of protection called a rider in addition to your standard policy. If you live in a condominium, you’ll usually pay a homeowners association fee in lieu of individual insurance that covers your dwelling. Like property insurance, it’s difficult to say exactly how much you can expect to pay in property insurance because every insurance company uses their own unique formula when they calculate your rates. Some factors that influence your premium include: Your home’s value Whether you live in a rural area or an urban area How close you live to a fire department or police station Whether you have an attractive nuisance on your property, which is something that is likely to injure children who enter your property like a pool, trampoline or aggressive dog How many claims you make each year on average for other types of insurance As a general rule, expect to pay about $3.50 for every $1,000 of your home’s value in homeowner’s insurance per year. In this example, you will pay $875 on a property worth $250,000 per year, or about $73 per month. Private Mortgage Insurance​ PMI — private mortgage insurance — is a type of insurance policy that protects mortgage lenders in case borrowers default on their loans. Here’s how it works: If a borrower defaults on their home loan, it’s assumed the lender will lose about 20 percent of the home’s sales price. 20 percent — sound familiar? That’s the smallest down payment you can make without having to pay mortgage insurance. If you put down 20 percent, that makes up for the lender’s potential loss if your loan defaults. But if you put down less than 20 percent, the lender will usually require mortgage insurance. Mortgage insurance covers that extra loss margin for the lender. If you ever default on your loan, it’s the lender that will receive a mortgage insurance check to cover its losses. How much is mortgage insurance?​ Mortgage insurance costs vary by loan program. But in general, mortgage insurance is about 0.5-1.5% of the loan amount per year. So for a $250,000 loan, mortgage insurance would cost around $1,250-$3,750 annually — or $100-315 per month.​​ ​ ​ Mortgage Products Terms ​ Mortgages are provided by mortgage companies . Most mortgage companies are able to help you facilitate the application for a Conventional Loan, FHA Loan, USDA Loan, or a VA Loan . Each of these types of loans also come in a variety of terms. Below are some examples of what you product terms you may encounter: ​ ​ Long-Term Fixed Mortgages (30-year) This is a mortgage loan where you will make monthly payments for 30 years. It is called a "fixed" mortgage because the interest rates are "fixed" meaning they remain the same for the duration of the loan. If you were quoted for a 4% interest rate, you will pay the same annual interest rate for 30 years. ​ The benefit of choosing a 30-year fixed mortgage compared to a short-term fixed mortgage is having lower monthly mortgage payments. The downside is that you will pay a much greater amount of interest over time. The benefit of choosing a fixed mortgage over an adjustable rate mortgage is being able to know your interests will not change over time. Adjustable Rate Mortgages interest change depending on the market rate which means your monthly loan payments may change over time. Short-Term Fixed Mortgages (15-year) This is a mortgage loan where you will make monthly payments for 15 years. It is called a "fixed" mortgage because the interest rates are "fixed" meaning they remain the same for the duration of the loan. If you were quoted for a 4% interest rate, you will pay the same annual interest rate for 15 years.​ Short-Term fixed mortgages come with higher monthly payments compared to long-term fixed mortgages because you will be paying off the principal at a higher rate. The benefit over long-term fixed mortgages is that you pay less interest overall on the loan. Adjustable Rate Mortgages (ARM) An adjustable-rate mortgage (ARM) is a type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan. With an adjustable-rate mortgage, the initial interest rate is fixed for a period of time. After this initial period of time, the interest rate resets periodically, at yearly or even monthly intervals. ARMs are also called variable-rate mortgages or floating mortgages. ​ With adjustable-rate mortgage caps, there are limits set on how much the interest rates and/or payments can rise per year or over the lifetime of the loan. An ARM can be a smart financial choice for home buyers that are planning to pay off the loan in full within a specific amount of time or those who will not be financially hurt when the rate adjusts. Home Equity Line of Credit (HELOC) ​With a HELOC, you’re borrowing against the available equity in your home and the house is used as collateral for the line of credit. As you repay your outstanding balance, the amount of available credit is replenished – much like a credit card. This means you can borrow against it again if you need to, and you can borrow as little or as much as you need throughout your draw period (typically 10 years) up to the credit limit you establish at closing. At the end of the draw period, the repayment period (typically 20 years) begins. To qualify for a HELOC, you need to have available equity in your home, meaning that the amount you owe on your home must be less than the value of your home. You can typically borrow up to 85% of the value of your home minus the amount you owe. Also, a lender generally looks at your credit score and history, employment history, monthly income and monthly debts, just as when you first got your mortgage. Similar to mortgage loans, HELOCs can come with variable interest rate or fixed interest rate options. ​

How to choose a lender? Comparing quotes from several mortgage lenders is a critical part of the homebuying process. According to Freddie Mac data, getting three quotes can save you about $1,500, while five quotes can save you an average of $5,000. ​ So, how do you do this? First, apply with at least three lenders. ​ Head to their websites, fill out their online application forms, and give them a little information about your homebuying plans. You can usually get a quote within a few hours to a day or two. ​ Once you have the quotes in hand (they’ll come in the form of what’s called a “loan estimate”), you should look at the following points to compare your options: ​ Interest Rates Interest rates vary greatly between lenders. So, see how your quotes measure against other lenders. ​ Example of how interest rates can drastically change your monthly payment: Purchase Price: $300,000​ 10% down payment Loan Amount: $270,000 At 4.25% , your monthly interest and principal payment is $1,328.24​ At 4.75% , your monthly interest and principal payment is $1,408.45 APR ​This is your total annual cost to borrow the money, plus any fees or other charges required. Origination, underwriting, and application fees: Do the lenders charge fees for any of their services? If they do, compare the cost of those and see what comes out on top.​ Prepayment penalties Some lenders charge a penalty if you pay off your loan early. Make sure you know which of your options does and doesn’t​. Estimated closing costs and cash-to-close This is what you’re expected to owe for the loan’s closing and on closing day. These can vary greatly as well.​ Private Mortgage Insurance (PMI) Private mortgage insurance (PMI) is a ​ type of insurance policy that protects mortgage lenders in case borrowers default on their loans. This insurance cost will vary depending on the lender and the type of loan that you are seeking (i.e. Conventional, FHA, USDA, VA, etc.) ​ ​ How To Find A Lender? ​ You can find mortgage lenders online, through your real estate agent, or by using a mortgage broker. You can also look to your personal bank or local credit union for a mortgage loan. If you’re in Illinois, here are a few of our trusted partners: ​ Juan Fleitas - Compass Mortgage Direct Line: 630.687.6023 Cell Phone: 708.214.2222 Email Address: juanfleitas@compmort.com State License: NMLS# 219823 ​ Erica Garcia - Compass Mortgage Direct Line: 773.644.2932 Cell Phone: 773.710.1665 Email Address: ericagarcia@compmort.com State License: NMLS #1714772 ​ Amiel Steurman - Cypress Mortgage Direct Line: 312.829.1010 Email Address: amiel@cypressmc.com State License: NMLS #234812 ​ Wendy Aquino - SunWest Mortgage Company Direct Line: 773.946.3650 Email Address: wendy.aquino@swmc.com State License: NMLS #921729 ​ ​

Meet The Team Helping You Navigate Your Next Real Estate Decision Daniel Walus Designated Managing Broker (E) Daniel@PadScouts.com (P) 773-551-4990 ​ Lic. 471.019463 Araceli Flores Buyer & Seller Specialist Lic. 475.202929 Miguel Aranda Buyer & Seller Specialist Lic. 475.181657 Aneta Korzec Buyer & Seller Specialist Lic. 475.124896 Andrew Aranda Buyer & Seller Specialist Lic. 475.211239 What We Do We understand that buying or selling a home is more than just a transaction: it’s a life-changing experience. That’s why our team of highly-seasoned real estate professionals is dedicated to providing exceptional, personalized service for all of our clients. We take great pride in the relationships we build and always work relentlessly on the client’s behalf to help them achieve their real estate goals. We also diligently work to educate everyone on the home buying and selling process. We understand that buying or selling a home is unlike the day-to-day transactions we are used to. We pride ourselves in educating our clients to make sure the whole process is transparent so there are no surprises. Lastly, there is never an obligation to work with us. You can always contact us to learn more without committing to working with our team. We believe in educating everyone regardless if they are our client. We wish you the best on your next real estate decision!

Final Walk-Through Final walk-throughs are not home inspections . It is not a time to begin negotiations with the seller to do repairs or a contingency of sale . The primary purpose of a final walk-through is to make certain that the property is in the condition in which you agreed to buy it. Agreed-upon repairs, if any, were made, and nothing has gone wrong with the home since you last looked at it. A final walk-through is performed before settlement of the home buying transaction. Buyers are often pressed for time as the transaction closing date draws near, so they might be tempted to pass on this opportunity. But many issues can come up, and it's never a good idea to skip the final walk-through. The walk-through serves as a final check for any remaining, unresolved issues with the home. Follow this checklist to ensure you don't overlook any steps. Turn on and off every light fixture. Run water and check for leaks under sinks. Test all appliances. Check garage door openers. Open and close all doors. Flush toilets. Inspect ceilings, wall, and floors. Run the garbage disposal and exhaust fans. Test the heating and air conditioning. Open and close windows. Make sure all debris is removed from the home.​

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