The purchase of a home is a significant financial transaction with many moving parts. The following is a brief overview of those parts:
FINANCING
There are numerous means of financing available to purchasers:
GOVERNMENT LOANS
Federal Housing Administration ("FHA"). FHA does not issue loans, instead; it insures qualified lenders against losses on mortgages securing private homes.
Veterans Administration ("VA"). VA loans are guaranteed by the Department of Veterans Affairs and assist service members, veterans, and eligible surviving spouses in becoming homeowners.
State of New York Mortgage Agency ("SONYMA"). SONYMA is a public authority created by New York State to provide affordable homeownership to low and moderate-income first-time homebuyers.
CONVENTIONAL LOANS
Fixed Rate: Interest rate and monthly payments remain fixed throughout the life of the loan.
Adjustable Rate (Variable): Interest rate and monthly payment varies over the loan term. These changes are based on a defined index, which is established at the time of the application.
Credit Line: Credit secured by real property permitting borrower to borrow up to a certain amount. In residential transactions, this loan is often referred to as a Home Equity Line of Credit ("HELOC").
Sales and Purchases of Homes
REAL ESTATE CONTRACT
These forms are generally prepared by third parties (e.g. realtor association) to reflect local real estate customs. Contracts, whether preprinted or newly drafted, should be carefully reviewed and tailored to protect both the rights and responsibilities of both the buyer and seller.
ABSTRACT OF TITLE
An abstract sets forth the chain of title to a parcel of land as well as information that may affect title, such as: unsatisfied mortgages, notice of pendency of actions, mechanic's liens, tax liens, and judgments that have become liens against the property. However, an abstractor does not pass judgment on or guarantee the condition of title.
TITLE INSURANCE
A title insurance policy covers loss to the insured from encumbrances or defects in the title that the title company failed to disclose in its title search. The policy is paid for once and is in force for the whole period of ownership.
SURVEY
Surveys are prepared by a licensed land surveyor to show the boundary lines of a parcel of land set forth in a legal description. A survey will also identify and note easements, building setback lines, and encroachments.
TAXES
Transfer Taxes. The seller is responsible for the New York State and the Erie County Transfer Tax. The rate is a total of $4.50 per $500.00 of consideration [The New York State portion or the rate is $2.00; the Erie County portion is $2.50. Please note that in some instances relating to the transfer of previously unimproved property upon which a residence has been constructed, the transfer may be exempt from the Erie County portion of the rate].
Senior Citizen Exemption. A reduction in the transfer tax from $4.50 per five hundred dollars to $2.00 per five hundred dollars is available to senior citizens aged 62 or older who own and occupy the property, which must be a one or two family dwelling, for at least one year.
Mansion Tax. A 1% tax is applied in the following situations: (1) purchase of a dwelling unit in a structure containing up to three dwelling units where the purchase price is $1 million or more, and (2) purchase of an individual condominium or cooperative unit sold for $1 million or more.
