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Know your rights in a real estate purchase -- Page 2

"A real estate attorney will go through the documents, make sure you understand what it is you're signing, and be the second pair of eyes that doesn't have a vested interest in seeing the deal close," says Glink. "The real estate agent doesn't get paid until the deal closes and the mortgage lender doesn't get paid until the deal closes but ... that attorney gets paid separately, so he or she doesn't care whether you close on the deal. They just want to make sure that if you're going to buy this house, you're going to be protected legally."

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In some states, a real estate attorney handles the closing, or settlement. In those cases, don't assume that the real estate attorney is representing you since he or she might be representing the seller or the lender.


Approve or disapprove
The sales contract will include such provisions as the price, mortgage clauses, sharing of expenses and the settlement date. Just because agents typically use a pre-printed purchase and sale contract doesn't mean you can't change anything in it. Everything in the contract is negotiable. The seller, however, has the same right and there's no agreement until you agree to agree.

Truth in lending
Under the Real Estate Settlement Procedures Act (RESPA), lenders and mortgage brokers are required by law to give you a copy of the booklet, "Buying Your Home: Settlement Costs and Information," within three days of you applying for a loan.

A number of federal laws are designed to protect you when you apply for loans. The Equal Credit Opportunity Act and the Fair Housing Act protect you during the lending and real estate transaction processes from discrimination based on race, color, religion, national origin, sex, marital status and age.

The Equal Credit Opportunity Act also gives you the right to know why you were approved or denied a particular loan and the right to secure a copy of the appraisal report for the home you're purchasing. The Fair Credit Reporting Act requires that your lender let you know if you were denied a mortgage loan because of information in your credit report, and if so, you have the right to a free copy of that credit report.

If your real estate agent or broker suggests you use a certain lender, realize that you're not obligated to do so. Be vigilant for kickbacks. Under RESPA, it is illegal for anyone to pay or receive money for referring lending or settlement business. So if your real estate agent gets a fee from a settlement company for steering you to that company, that is against the law.

A Truth in Lending Disclosure Statement is a document that shows you how much interest you'll be paying for a loan you've applied for. Also, compare settlement costs and points, fees that equal a percentage of the loan amount.

RESPA requires that lenders and mortgage brokers give you a 'good faith estimate,' which details an estimate of settlement costs. While this will not necessarily be an exact amount -- circumstances can change -- it should give you an idea of what you can expect when it's time to go to the closing.

Clear title
Many lenders require that you purchase title insurance, which protects the lender from any claims that may be made against the home. However, recognize that the policy does not protect you. However, you can purchase an owner's policy to protect yourself from such claims as well.

If you believe that you have been taken advantage of at any point in the home-buying process, contact an attorney. Your state's Department of Housing or the U.S. Department of Housing and Urban Development (HUD) Office of Consumer & Regulatory Affairs can also be of assistance. "It's the single largest purchase you're ever going to make in your life," says Glink. "To go into that without having any idea of what you're doing is just foolish."

 
 
-- Posted: May 16, 2005
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