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The legal fine points of home buying

Dipping into the mail bag this week:

Q: My wife and I are considering purchasing our first home. What should we consider before we actually start shopping around?

A: The purchase of a first home is an exciting experience, but one that should not be undertaken lightly. You should first determine how much money you and your wife will be able to borrow and how much you could comfortably and realistically repay. As the subprime mortgage controversy has made clear, far too many people were loaned far too much money that they realistically had almost no chance to repay; they are now in danger of losing their dream homes to foreclosure. To avoid falling into such a trap, you and your wife should sit down with a credit counselor and/or loan officer from a reputable lender so you can determine how large a mortgage you will be able to handle.

After you have determined the amount of money you are able to borrow, you should interview several realtors to find one that you will be comfortable working with to assist you in your search for your new home. A qualified realtor will be able to guide you concerning neighborhoods, school districts, real estate tax obligations and other considerations that play a roll in finding and enjoying your dream home. Once you have found a home that you are interested in purchasing, a contract will have to be prepared setting forth the terms of your offer.

If the contract is prepared by someone other than your attorney, such as by the realtor, it is extremely important that the contract contain a provision that specifically makes the contract contingent upon the approval of your attorney. I highly recommend that you engage the services of your own attorney to represent you in what is most likely the most significant financial commitment you will undertake. An experienced real estate attorney will be able to review the contract on your behalf, make any changes that are required in order to protect your interests, order and review a title report covering the property to make sure that all liens and encumbrances — such as existing mortgages and judgment liens — are taken care of at the closing, compute the real estate tax pro-rations, and attend the closing with you and explain to you the myriad documents that you will be required to sign at the closing.

Q. I have just signed a contract to purchase my first home. My realtor told me that I can save a lot of money by using the lender’s attorney and not buying title insurance other than what the lender requires for its benefit. I want to save as much money as possible, but I also want to make sure that my interests are protected. Should I follow my realtor’s advice?

A. I would not follow the realtor’s advice. Although it’s true that by following the realtor’s advice you will spend less money at the closing, such savings may pale in comparison to what it may cost you in the end if the tax adjustments are not done correctly, if there is a problem with the title that the lender’s attorney overlooked or was not concerned about from the lender’s point of view, or if the title searcher made a mistake and overlooked a lien.

The lender’s attorney is referred to as the lender’s attorney for a very simple reason — he or she is representing the interests of the lender and not you, the borrower. Some matters that are disclosed by the title report may not concern the lender or its attorney, such as easements or restrictions that may affect how you may use or improve your home. Those might be deal-breakers for you if you learned about them in time to cancel the contract.

As far as not purchasing title insurance, which protects your ownership interest in your home, this could also prove to be a serious omission that could cost you far more than the cost of the insurance itself. The lender’s title insurance protects only the lender, so if a title problem arises after you own the home, whether because the title searcher missed a mortgage, judgment or lien, or if there was a forgery in an earlier deed, your interests would not be covered or protected unless you purchased your own policy.

Q. Should I have the property surveyed?

A. In most cases, having the property surveyed is a very good idea. Without a survey, you will not know exactly where your lot ends and where your neighbor’s lot begins or the location of the house and other structures with respect to the property lines.

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Mathew B. Tully, Esq. is a field artillery officer in the New York National Guard currently deployed to the Middle East in support of Operation Bright Star. He is also the founding partner of Tully, Rinckey and Associates (www.fedattorney.com), a law firm in Albany, N.Y. E-mail your legal questions to askthelawyer@militarytiumes.com.

The information in this column is provided for informational purposes only and is not intended to constitute legal advice. Readers are encouraged to seek the advice of an attorney or other professional when an opinion is needed. View more “Ask the Lawyer” columns online at http://www.militarytimes.com/community/ask_lawyer/.