Should I Use My Emergency Fund to Pay Off Debt?

pay off debt

Most financial advisors recommend having at least three to six months savings in an emergency fund at any given time. An emergency fund can be helpful in getting through the expensive curveballs life throws your way. Unexpected car maintenance, the sudden loss of employment, medical emergencies, and unforeseen home repairs are examples of events for which you may have to use your emergency fund. Sometimes, though, it can be tempting to use this money for expenses that aren’t necessarily true emergencies. If you have a big pile of debt, it may seem like using your emergency fund to pay down the balance is a good idea. Here are the reasons why you shouldn’t use your emergency fund to pay down debt, and a few exceptions where you might want to consider it.

The simple reason not to pay off your debts with emergency fund money is that most debt is not an emergency. This fund is specifically meant to cover unforeseen costs and expensive emergencies. Cars loans, student loans, mortgages, and personal loans all tend to have set, predetermined monthly payments. That means this debt is controlled and you know what to expect every month. As long as you can meet those monthly payments and expect to be able to continue to pay on time, there is no reason to dip into your emergency fund. Paying off your debt over the agreed upon timeline is not, after all, an emergency.

While it may seem like you have all this debt looming over your head, you have to remember that your emergency fund is specifically there to handle the unexpected. Your monthly car payment is not going to have the same impact on your financial stability as sudden and major car repairs from an accident. Where will you be if you use your emergency fund to pay off your debts only to find yourself dealing with a major financial emergency a short time later? Since you never know when a mishap like this will occur, it is best to save the emergency fund for actual emergencies.

There are, however, a few exceptions. An “emergency” will change in definition from individual to individual. Having kids or pets, owning or renting your home, owning your own business, and the stability of your employment are factors that will likely impact what you consider an emergency worthy of tapping into your emergency fund. This also goes for determining whether or not your debt is an emergency. Unmanageable, high-interest credit card debt, for instance, may count as an emergency depending on your specific circumstances. If you find yourself struggling to pay your monthly bills and are facing down the consequences of late or missed credit card payments, this could be enough of a reason to dip into your emergency funds.

Before you panic and deplete your emergency fund to pay off debt, think about why you have this unmanageable debt in the first place. The reasons behind the debt can also be a determining factor in whether or not to use your emergency fund. Was the debt unavoidable or due to some unhealthy spending habits? If your unhealthy habits are behind the debt, it may not be the best idea to dip into your savings and emergency fund. Understanding the reasons behind the debt is the first step to changing those habits and avoiding similar mistakes in the future.

Even in the event that you do determine debt to be a financial emergency, it is not a good idea to completely drain your emergency fund. You are better off leaving your emergency fund alone (or continuing to build it) while you make the minimum payments required on your debt. Debt-swapping, or replacing your high-interest debt with a lower-interest option, should be considered before dipping into savings. If you are able to pay down the debt a decent amount, you could justify using a small portion of your emergency fund to finish paying off the debt, but even this should be a last resort.

When it comes down to it, emergency means emergency. Being honest with yourself about your financial situation is the first step to proper money management. It takes a lot of hard work and discipline to build up savings or an emergency fund. Don’t let that hard work go to waste! At Veitengruber Law, we can help you come up with debt solutions to stay on top of your financial situation so you don’t have to consider dipping into your savings.

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Mortgage Relief Scams: What You Need to Know

mortgage scam

If you’re in over your head on your mortgage, you may be starting to feel desperate. In these difficult times, it can be easy to see a mortgage relief scam as a lifeline to financial stability. By the time people realize the phony promises and baggage attached to these scams, it can be too late. The best way to avoid mortgage relief scams is to be informed of your rights and what warning signs to look for in a potential scam. Even if an offer looks legitimate, here are some basic precautions you can use to protect yourself against fraud.

The most important thing you can do is understand your rights as a homeowner. In 2010, the Federal Trade Commission published the Mortgage Assistance Relief Services (MARS) rule in order to protect homeowners from mortgage relief scams. This rule holds companies promising mortgage assistance accountable by prohibiting them from collecting any fees until after fulfilling their promises. This means that even if you agree to accept help from one of these companies, you don’t have to pay any money at all until you have received and accepted a written mortgage relief offer from your lender. The MARS rule also bars these companies from saying they work for the government or your lender and requires them to warn you that your lender may not agree to modify the loan.

When trying to spot a scam, a good rule of thumb is that any organization that tries to charge you a fee for mortgage counseling or loan modification is not legitimate. Other than accredited attorneys, the programs that can help struggling homeowners are almost always free. If a company asks you to pay up front or with a cashier’s check/wire transfer, it’s most likely a scam. Other red flags: if they guarantee results, pressure you to “sign now,” or attempt to cut you off from contacting your mortgage lender.

Here are some precautions you can take as a homeowner to protect yourself from mortgage relief scams:

1. Do your research.

Check to see if the establishment has a website and verify that the contact information listed matches the information you have. Make sure the business address is legitimate, and not just a P.O. box. The Better Business Bureau can also provide helpful information; more specifically if the company is associated with any known scams. Do not provide any personal information until you have taken the time to do ample research.

2. Don’t sign without reading the fine print.

Be careful what you sign. Make sure you have read the document thoroughly and understand it completely before you put pen to paper. It is very important for you to understand what you are agreeing to when you sign a document. If you are in doubt about anything, recruit the help of a lawyer to look over the document and explain to you in plain language what the agreement will be.

3. Keep up with mortgage payments.

Some scams advise homeowners to stop making regular payments on their mortgage while they “negotiate” with your lender. Never do this. Missing monthly mortgage payments can increase your risk of foreclosure and damage your credit, putting you into a deeper financial hole. It is also important to note that you should never be sending your mortgage payments to anyone other than your lender unless your lender has directly told you, in writing, to do so.

4. Never sign over your deed.

Under no circumstances should a mortgage relief company ask you to sign over your deed to a third party. There are two times you can sign your deed over: when you sell the home or if you sign it over to your lender in order to fulfill a debt forgiveness agreement. Signing your deed over to a third party will not save your home.

If you do find yourself the victim of one of these scams, the best thing you can do is to report it. This will give you the best chance of recovering some of your money, although the process may be lengthy. You can file reports through the FTC, the Better Business Bureau, the Consumer Finance Protection Bureau, or through an attorney.

Most people fall for mortgage relief scams looking for a quick way to get out of a financial jam, but getting on top of debt takes time and commitment to financial responsibility. If you find yourself in trouble with your mortgage, the best thing you can do is work with your lender to come to an agreement on the situation. Going to your lender directly can be intimidating. Veitengruber Law is here to help. Our experienced NJ real estate legal team can work with you to determine real debt relief solutions for your specific situation.

Are You Ready to Buy Your First NJ Home?

NJ home

In the US, homeownership has come to symbolize achieving part of the American Dream. Owning a home can offer independence, the opportunity to start a family, and a place to belong in the world. But owning a home isn’t for everyone—at least not right away. If you are considering purchasing your first NJ home, there are a lot of things to consider before you take the plunge. After all, the decision to own a home is a huge investment that will impact your life for years to come. If you are on the fence about homeownership, here are the top signs you are ready to buy a home.

1. You Plan to Stay in the Same Geographic Area

Being happy with where you are is a great sign you might be ready to plant roots and buy a home in your area. On the other hand, if you are planning to move in a few years or are unhappy with your current location, don’t purchase a home. With the cost of buying a home, between a down payment and closing costs, it doesn’t make sense to buy a home only to turn around and do the whole process over again in two or three years. You could also end up in the difficult position of being unable to sell your home, or having to sell your home for less than what you paid for it. For these reasons, it is important to only buy a home you plan to be in for a decent amount of time.

2. Your Finances are in Order

There are three financial aspects of the home buying process that you will need to be ready for: the down payment, the closing costs and associated fees, and the mortgage itself. For the down payment and the closing costs, you will need to have money in hand to complete a home purchase. Typically, a down payment is 20% of the purchase price and closing costs can range anywhere from 2-3% of the price of the home. You will also need to make sure you have a clear credit history with a decent credit score in order to secure a mortgage with good terms. But the financial responsibility of homeownership extends beyond your mortgage. You need to make sure that your income can support not only your mortgage, but home upkeep, property taxes, utilities, regular living costs, debt payments, and unplanned expenses.

3. You Are OK With the Idea of Home Maintenance

When you own your own home, you can’t call your landlord if something needs to be repaired. Every house will require repairs, maintenance, and improvements—and these can be costly and time consuming. All the time you spend on general upkeep of your home is less time spent doing the things you did pre-homeownership. This can impact your lifestyle. If spending the weekend painting the living room sounds terrible to you, you may want to reconsider a lower-maintenance housing option, like renting.

4. You Are Realistic About Your Home Goals

This means you know how much house you can afford as well as how much homes in your area are being sold for. A real estate agent can help you with this, but you need to know what kind of buying power you are bringing to the table and what kind of home will fit your budget best. Start going to open houses to get an understanding of what you get for the listing price. Look into a wide array of different kinds of houses in the neighborhoods you are interested in. How many bedrooms and bathrooms are there? Are there any special features? Is it up-to-date or does it need some work? All of these factors will help you determine what goes into a list price. Work with a real estate agent to get information about the estimated costs of repairs so you know exactly what you’re getting into before you buy a home. Buying a good home in your price range is key to homeowner success.

Buying a home can seem intimidating—and for good reason. The purchasing of a home is likely one of the biggest investments you will ever make. The rewards of owning your own space are innumerable, but it is also important to understand the work and commitment that goes into owning a home. If you need help working through the minutiae of buying a NJ home, Veitengruber Law is happy to help demystify the home buying process as well as make sure you are getting the most out of your real estate contract.

5 Mistakes to Avoid if You Ever Want to Retire

People can spend their entire working lives dreaming about retirement. Retirement is a time to travel, to enjoy leisurely days, and to do the things we have always wanted to do. How comfortable our golden years will be depends a lot on how well we prepare for retirement. More and more often, would-be retirees are finding they must work long after they wish to retire because they did not save enough money to get by without working. If you want to avoid working into your 70s, here five common mistakes to avoid.

1. Start Planning Too Late

Most of us aren’t thinking about retirement when we first enter the work force.  Young workers believe they have plenty of time to save or that they can’t afford to put money towards retirement. But starting to plan for retirement as soon as possible can make a huge difference down the road. Every year sooner that a young worker starts saving for retirement takes about a year off how long they will have to work. Starting to plan for retirement too late can make it very difficult to make up the difference. Even if all you can only save a little, it is important to start saving as soon as possible.

2. Having Too Much Debt

It will be hard to make any serious plans for retirement if you’re struggling under a mountain of debt. It is important to include being smart about debt when you are planning for retirement. If possible, consolidate your debt. This could lower your monthly payments which would free up money you could put towards your retirement savings. If most of your debt is from credit cards with high interest rates, it may be worthwhile to look into refinancing that debt. Personal loans with fixed interest rates can help you save money by spending less on high interest debt.

3. Taking Money Out of Your 401(k)

It can be very tempting to cash out money from your 401(k), especially when sudden and expensive life events occur. A lot of people also end up cashing out their 401(k) when they leave a job. While using the money you have saved in your 401(k) before retirement can seem like a good idea at the time, it can really damage your ability to retire comfortably later. Early withdrawals can come with high penalties and taxes. In a financial emergency, it is better to take out a low-interest loan than cash out money from your 401(k). This will allow your retirement fund to remain untouched as it continues to grow. Another option is to borrow against your 401(k). This way, you are borrowing from yourself and paying yourself back as your 401(k) keeps growing.

4. Assuming Social Security Will Be Enough

The average Social Security retirement benefit is $1,411.00 per month which is about $17,000 per year. Assuming this will be enough, or even close to enough, to live off of in retirement can be a big mistake. If you earned more during your working years, you will collect more than that. However, the max benefit is $2,788 per month. For many retirees, this is simply not enough to pay for monthly bills, medical expenses, and other financial responsibilities.

5. Underestimating How Long Your Retirement Will Be

In the US, people tend to retire around age 62 or 63. Knowing when to retire can be hard as you do not want to retire too early and run out of money, but you also want to enjoy the personal benefits of retiring as early as you can. The hard part is you never know how long you will live into retirement. The money you saved might get you to 85, but what happens after that? On top of this, many people end up retiring earlier than they planned. Health reasons, downsizing, or a workplace closure can all cause older workers to retire early. For this reason, it is wise to work as long as possible.

The key to retiring well is to plan well. Get started as early as possible and follow these tips to ensure you can enjoy your golden years in peace and financial security. You work hard to provide for yourself and your family. Make sure all that hard work pays off in the end by taking steps towards your retirement goals today.

NJ Estate Planning for Unmarried Partners

nj estate planning

Estate planning is important regardless of your relationship status. Of particular note, however, are couples who are not legally married (or joined through a civil union or domestic partnership) but who reside together and are committed to one another. With no estate plan in place, the state will determine what happens to your property if your partner passes away. Unmarried couples will not be able to inherit from each other or have any say in medical care or end-of-life procedures. Establishing a NJ estate plan is the best way to make sure your partner will have a say in carrying out your wishes after you’re gone.

Writing a will is a good first step for unmarried partners. In a will, you can choose to designate ownership of property or other assets to your significant other. Without a will, these assets will be distributed to your closest living relative(s). If you or your partner have minor children, you can designate a guardian for them to avoid guardianship being awarded to the closest acceptable family member. Along with naming your partner your child’s legal guardian, it is a good idea to include a letter to the court explaining why it is important for your partner to be the child’s guardian. A will can help ensure that your wishes are followed through after you’re gone in order to help protect the life you have built with your companion.

Joint ownership is also a huge factor in protecting your assets. Owning high dollar assets together, like a home or a car, will allow you to enter into joint tenancy with right of survivorship. This means that if one partner dies, the other will automatically own 100% of the property outright. The best way to do this is to make sure both of your names are on the asset’s title documentation, like a car title or the deed to a house. Doing this now will save you from having to go back and change these documents later. Joint ownership can ensure that your partner still has ownership over these assets even if something happens to you.

If you do not want to share ownership of your assets, you will need to make other arrangements to ensure these assets go to your partner when you’re gone. In addition to this, some assets—like bank, investment, and retirement accounts—cannot be designated by a will alone. You will need to fill out a beneficiary designation form, naming your significant other as the intended beneficiary of these assets. A beneficiary form can always be changed or amended later if your circumstances change. It is always important to keep beneficiary forms up to date with changing events in your life because beneficiary designation forms supersede your will.

A living will and durable power of attorney (medical and financial) are crucial documents if you and your beloved are not married. These documents will give your partner authority over your financial and medical decisions in the event that you are unable to make those decisions yourself. If you ever find yourself ill or incapacitated, your partner would have the ability to continue paying your bills and keep the household running. S/he would also be able to make medical decisions on your behalf, thus ensuring that your doctors understand your wishes even if you cannot speak for yourself. To help your partner make these decisions, create a living will to set out your wishes concerning end-of-life care. This will make your desires about your medical care clear.

Without the right estate planning, you could be leaving your partner vulnerable. An estate plan can help you honor your relationship even after you’re gone while also ensuring that your assets are protected. Veitengruber Law can help you create NJ estate plan that will cover all of your concerns. If you are unmarried, you do not want to leave your significant other with the burden of fighting court cases in order to honor your wishes. We will work with you to create an estate plan now so you can rest easy knowing your loved one and your assets will be secure during what will already be a stressful time of life.

How to Challenge Wage Garnishment

how to challenge wage garnishment

If you are unable to pay certain kinds of debts, creditors have the ability to seek legal recourse by taking you to court and securing a wage garnishment order against you. Wage garnishment is a court order sent directly to your employer, requiring them to withhold a specific amount of money from your paycheck to be sent to one of your creditors. The good news is you may be able to challenge the garnishment by objecting in court. Here, we explore your options when creditors start coming for your paycheck.

Before we talk about how to object to wage garnishment, it is important to note that there are federal and state rules in place to protect debtors from unfair wage garnishment practices. The amount your employer can withhold and the specific rules will be different depending on what kind of debt is in question and what your personal financial situation looks like. In New Jersey, there are specific laws in place to ensure you will have enough money to pay for your living expenses while your wages are being garnished. Creditors can only take up to 10% of your income when you earn less than 250% of the federal poverty level OR up to 25% when you earn more. Employers also cannot fire their employees for receiving a wage garnishment order.

In New Jersey, a creditor can garnish your wages only after they have sued and obtained a court judgement against you. The exception to this rule is if the creditor is collecting unpaid income taxes, child support payments, or defaulted student loans. Once your creditor has decided to sue you in an attempt to secure a judgement against you in court, you will likely receive a written notice and a hearing before your employer will start withholding money from your paychecks. This notice is called a Notice of Garnishment of Personal Earnings.

Once you receive this notice, you have to act fast. Your right to object to wage garnishment is limited and time sensitive. Depending on the debt in question, you can have between five and thirty days to bring forth a legitimate objection to the court decision. If you do not object within this time frame, your right to object to the garnishment is legally waived and your employer can begin withholding wages to send to your creditor. The garnishment letter will contain instructions on how to object, including specifics on court dates, deadlines, and expected objection formats.

If you decide to argue against wage garnishment and you receive a new hearing date to plead your case, there are a few valid legal reasons to object to the court order. Though this is a time consuming and complicated process, you still only have a limited time to present your case to the court. Some common reasons to object to wage garnishment are:

  • Federal or state limits aren’t being followed
  • You have a head of household exemption
  • Your creditor did not follow proper legal procedure
  • You are self-employed
  • The debt in question has been paid
  • You are already experiencing wage garnishment with another creditor
  • You are making payments to the creditor already
  • You have filed for bankruptcy

An experienced attorney will be able to work with you through some of the more difficult aspects of the court proceedings. They will know what the court is looking for and how what objections will work based on your specific case.

At Veitengruber Law, our experienced team will work with you to come up with a customized legal plan to meet your needs. If you are struggling with debt, it may be time for a fresh start. Our bankruptcy and debt relief legal team has years of experience working with clients to ensure a brighter financial future. We can help you explore all your options and protect your interests.

What Debts Must You Pay During Chapter 7 Bankruptcy?

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a useful tool to get out from under different kinds of dischargeable debts. Credit cards, medical bills, and personal loans all fall under debt that can be discharged as long as you meet specific Chapter 7 income requirements. It is important to note that while a Chapter 7 bankruptcy can get rid of a lot of your debts, there will still be debt you are responsible for paying during and after the bankruptcy process. It can be confusing to determine what you are still responsible for during and after bankruptcy. Here, we look at the debts you must keep paying even while filing for Chapter 7 bankruptcy.

Post-Petition Debt:

You will likely still receive bills while your bankruptcy case is pending. If the debt in question was incurred after you filed for bankruptcy, it is not included in your case and you will be responsible for paying it. These debts are called “post-petition” debts and they typically include child support, alimony, utilities, rent, homeowner’s association (HOA) fees, insurance, and most taxes. The court will determine on a case by case basis if any of these kinds of debts included in the filing will qualify for a discharge. Whereas most utility bills incurred before filing are dischargeable, child support payments are not and you will continue to owe on your outstanding balance after the case for these debts.

Secured Debt:

Secured debt typically occurs with the use of credit purchase of expensive property. In these cases, the lender typically requires collateral to use in case you cannot meet required payments on the loan. A mortgage or car loan are common examples of secured debt. Whether or not you should continue to make payments on these loans depends on if you plan to keep the property associated with the loans. If you give the property used for collateral back to the lender, then the loan will likely be discharged with your bankruptcy case.

If you want to keep the property in question, you should keep making regular payments through your bankruptcy and after. If you do not continue to make payments, even if you are in the middle of bankruptcy proceedings, the lender could use their rights to take back the property through foreclosure or repossession. There will be a temporary stay (more on that below) to prevent your lenders from taking legal action during bankruptcy proceedings, but lenders can file a motion to proceed even during a bankruptcy. Regardless, once the bankruptcy case has closed, the lender is free to pursue their legal rights to repossess the property if you have not kept up with payments.

Payment Responsibility:

In the event you cannot discharge all of your debt, you will still get a brief payment break on the debts that you cannot discharge, like student loans, taxes, and court fines. During the automatic stay, creditors will not be able to attempt to collect on your debts. Once the temporary stay has lifted, however, you will be legally obligated to resume payments on all non-dischargeable debts. How much you will owe on these debts post-bankruptcy depends on whether or not you plan to or are able to keep the property associated with the debt.

Filing for bankruptcy can be confusing and intimidating. At Veitengruber Law, we have years of experience working with clients throughout bankruptcy filings. We can help demystify the process so you can make confident and informed decisions about your financial future. Our experienced legal team will guide you through the legal ins and outs of a bankruptcy so you know exactly what to expect.

Help! I Want out of my NJ Real Estate Contract!

NJ real estate

The main goal of the negotiations surrounding a NJ real estate deal is for all parties involved to sign a contract they’re happy with. Sellers want to make a profit on their property and buyers want to have confidence in the huge investment they just made for their future. Sometimes, though, both parties sign on the dotted line only to find themselves second-guessing their decision. If something doesn’t seem right or you start to realize you didn’t get as much out of the deal as you had hoped, you may find yourself wanting out of the deal.

Is it possible to back out of a signed NJ real estate contract?

The good news is that even after you sign, there are still some ways to get yourself out of a real estate contract, but you have to act quickly. In New Jersey, the 3 day attorney review period will allow you to work with an attorney to bring your concerns back into negotiation. It is critical that you take advantage of New Jersey’s unique 3 day review period. During this time, you will work with your real estate attorney to review all aspects of the contract. As long as you’re within the attorney review period, you can make changes to the contract or walk away from the deal altogether.

What if I missed the attorney review period but still want out of my contract?

After the 3 day review period has passed, it is much more difficult to “un-sign” your name from your NJ real estate contract. In our experience, the three main reasons for a broken real estate contract are:

  1. Unsatisfactory appraisal
  2. Significant inspection issues
  3. Contingency clauses

Many real estate contracts include a contingency stating that the buyer and their lender must approve of the inspection and appraisal before a deal can move forward. If the buyer or lender is unsatisfied with the results of the inspection, appraisal (or both), it could open the door for further negotiations.

An appraisal price that is significantly lower than the purchase price will raise huge red flags for a lender and can give the buyer leverage to re-open contract negotiations. Likewise, a home inspection that turns up significant issues could give the buyer cause to break the contract if a seller is unwilling to make the necessary repairs.

While issues with inspection or appraisal can help the buyer back out of a contract, the “kick-out” clause of a real estate contract can be utilized by sellers. Traditionally, real estate contracts include a contingency clause that protects buyers from carrying two mortgages. The language usually reads like: “Buyer’s obligation to purchase this property is contingent on the sale of their current home.”

In today’s real estate market, many contracts now include contingency clauses that protect the seller if closing is dependent on the buyer selling their current home (as shown in the example above). Known as the “kick-out” clause, this contingency allows the seller to entertain other, potentially better offers on a property as long as the original potential buyer’s property has not sold. If a new buyer is found, the seller can “kick out” the original buyer and accept the new offer.

The key to getting out of a real estate contract is working closely with a trusted real estate attorney. In addition to helping you legally back out of a contract, your New Jersey real estate attorney will use the law to work in your best interest throughout the entirety of contract negotiations. Veitengruber Law will point out any issues or reservations about a contract early in the process. Understanding the ins and outs of a contract before you sign can save you the trouble of backing out later.

Our NJ real estate team is experienced in handling all of the complex legal details that go into real estate contracts. Working with us will ensure a smoother transaction and will get what you want! Don’t wait until you sign the contract to realize you need the advice of an expert attorney. Call us today for your free consultation about your real estate goals.

NJ Real Estate Lingo Explained

NJ real estate

In New Jersey, real estate contracts are required to be written in “plain language” to make sure even those inexperienced with buying and selling real estate can understand the terms of the agreement. However, a lot of real estate terms that are considered
“plain language” can still be confusing. Unfamiliar real estate terms can make it seem like the people around you are speaking a foreign language. This list of 14 real estate terms will help you make informed decisions during your future NJ real estate transactions.

Amortization:

This is a method of adjusting the ratio of principal to interest over time in order to equalize the monthly payment over the life of a mortgage or loan. So, while initially the interest payment will be high and the principal payment will be low, by the end of the loan the interest payments will be low and the principal payments will be high. Amortization of a loan will impact your ability to finance your property, making your payments standardized throughout the life of the loan.

Appraisal:

A lender will require a licensed appraiser to estimate the value of a home based on an investigation of the property and the selling price of similar homes in the area. This will help the lender determine if they will agree to mortgage a property.

Competitive Market Analysis (CMA):

CMA is a comparison of one property to other properties of similar size, style, location, and internal/external features that have recently sold or are on the market. This helps real estate agents determine how much money a house may be worth at any given time and help establish a listing price.

Contingencies:

In real estate, a contingency is a specific condition that must be met before closing. There are several different kinds of contingencies for the buyer and seller in a real estate transaction. The buyer will need to make sure they can get financing for the sale while the seller must ensure the home can pass an inspection, among other responsibilities.

Closing & Closing Fees:

Closing is the final step in a real estate transaction process. This is where the documents are submitted and carried out and when the sale of the property is complete. At closing, a closing statement will be issued listing the financial responsibilities of both buyer and seller. Closing costs include loan origination fees, attorney fees, discount points, and recording fees. This is typically somewhere between 3% and 5% of the price of the property.

Down Payment:

This is the amount of money a buyer will pay in cash initially in order to purchase a property. This is not financed and is typically anywhere from 5% and 25% of the overall value of the property. The bigger the down payment, the less a buyer will have to finance.

Escrow:

Escrow is when a neutral third party is hired during a real estate transaction to handle money transactions and hold documents as agreed upon by the buyer and seller of a property. They basically ensure the smooth transfer of ownership from seller to buyer and make sure all paperwork is handled correctly.

Fixed-rate mortgage and Adjustable-rate mortgage:

There are two kinds of conventional loans: fixed-rate and adjustable-rate. Under a fixed-rate mortgage, the interest rate stays the same throughout the entirety of the loan. Under an adjustable-rate mortgage, the interest rate can change over the course of the loan at the five, seven, and ten year marks. Depending on market conditions, this means your loan rate could increase drastically.

Inspection:

Once an offer is made on a home, the potential buyer will schedule an inspection. This typically costs between $500 and $800 and includes a full assessment of the property, including plumbing, structural stability, heating, electricity, and any appliances included in the sale.

Lien:

This is a legal claim or action on a property used as security for the payment of debt. A lien may be in place on a property for issues like an unpaid contractor or unpaid taxes.

Listing:

A listing is a home or property that is for sale. The home is often listed on online real estate sites or in real estate publications. This is how sellers alert potential buyers that their property is for sale.

Offer:

An offer is made by the buyer as an initial price offered to the seller. The offer can be accepted, rejected, or countered with a different offer by the seller.

Pre-approval Letter:

This is a letter from a bank or lending institution indicating the estimated amount they are willing to lend. This letter will help you determine how much you can afford as you start looking for houses and allows the seller to see that you will be able to get a loan when you need it.

Title Insurance:

Most mortgage lenders will require a buyer to pay title insurance as part of closing costs on a property. After a seller has accepted a buyer’s offer, title insurers will search through public records to determine whether or not the home seller had rights to the title of the house and that there are no liens on the property. This report is typically done within a week.

Veitengruber Law has extensive experience handling complex real estate transactions, from short sales to closings to refinancing and mortgage modification. Real estate transactions often involve complicated legal contracts. When you partner with us, we will advocate for your best interests and make sure you can make informed decisions about your real estate goals.