Tips for first time home buyers
There's good news for renters! Recent dramatic changes in the
mortgage finance industry have placed homeownership within easy
reach of a greater number of people. A common obstacle today in
purchasing a home is the outdated notion that obtaining a
mortgage is an awesome task. Often, it is a lack of simple
information, rather than a lack of money, that keeps people from
even considering filling out a loan application. In fact, many
can afford a new home for the same or slightly more than they
are paying in rent now. The following tips can help potential
homebuyers find the right start in locating a new home they can
live in and a mortgage they can live with.
1. Pre-Qualify Before You Buy Pre-qualification allows you to
get an idea of your borrowing potential before beginning your
home search. Pre-qualification is usually free and the buyer's
ability to purchase a home can be confirmed quickly. This step
increases the buyer's leverage position with Realtors and
sellers.
2. Demonstrate You Can Pull Your Weight A mortgage lender wants
to know that your income can comfortably cover monthly mortgage
payments and your assets are sufficient to cover the downpayment
and closing costs. Acceptable sources of household income
include earnings from your regular job and any secondary jobs,
as well as overtime, commissions and bonuses. Also acceptable
are interest and dividend income; social security, VA and
retirement benefits; disability, welfare and unemployment
benefits, alimony, child support and other entitilements. A
steady work history - continuous employment at the some company
or line of business with consistent or rising income - helps the
lender determine your ability to maintain the responsibility of
a mortgage.
3. Make It Understood, Your Credit Is Good Looking at your
credit history is another way mortgage lenders determine your
obligation to pay back a loan. Good credit history consists of a
two-year history of prompt payments, a good record of on-time
payments and no outstanding judgments or liens. Your mortgage
consultant can help you address and correct any past credit
problems in such a way that your chance of credit approval will
be greater. For example, if you have ever encountered some
credit problems due to a lengthy illness, proper explanation for
the problem can go a long way to rectify the negative perception
created by a temporary set back.
4. The Program Is Key - Not The Rate You See Don't be misled by
a lowball rate; be sure to check out the details of the loan
program. Most mortgages have either a fixed rate (payments
remain the same for the life of the loan) or an adjustable rate
(payments adjust up or down in accordance with national interest
rates) and a term (amount of time you have to repay the loan) of
either 15 or 30 years. Downpayment requirements differ from
program to program. There are many first-time buyer programs
that require as little as 3% down, as opposed to conventional
programs that require up to 20% of the new home's sales price.
Easier qualifying guidelines and reduced closing cost options
are features of many of the programs available.
5. Pick A Real Estate Pro, Someone In-The-Know Find a
well-established Realtor who is familiar with the areas of your
choice. Ask real estate professionals if they will be
representing you as a sub-agent or as a buyer-broker agent.
Selecting a qualified agent, who is able to answer your
questions regarding the area, population, school districts,
taxes, etc., will be a big time-saver, since he or she will save
you a trip to the local records department.
6. Know What You Need And What You'll Concede What is essential
to one homebuyer may be of no value to another. Creating
"need-to-have" and "nice-to-have" lists can be helpful. Your
first "need-to-have" list may be very different from your final
version; still, it serves as a starting point for you to discuss
and decide upon those features that are the absolute essentials.
For instance, public transportation to shopping areas might be a
"need-to-have" if you do not own a car, while it is another
person's "nice-to-have." If someone in your family is disabled,
a one-level home with wheel chair access may be a necessary
feature. However, you may decide that adding a customized ramp
after the home purchase is more cost effective. Identifying what
you want and what you need helps your real estate agent pinpoint
your ideal home.
7. Keep Score Of The Houses You Tour After inspecting a home,
record its positive and negative aspects and write down your
overall impressions. Eliminate those homes which do not measure
up to your satisfaction. Review your "nice-to-have" list to see
how many additional positive points each property may possess.
These scorecards will be very helpful in narrowing the field for
your final selection. Continued from previous page
8. Maneuver The Maze In Just Seven Days A firm understanding of
the mortgage process will help mini- mize delays and ensure your
smooth transition from house hunter to homeowner. At
pre-qualification, a list of required documentation is
presented, and as you approach the application process this
documentation must be produced. At application, the loan officer
collects the documentation, and assists you in completing an
application form. You receive a Truth in Lending Statement and a
Good Faith Estimate outlining the costs and estimated fees
involved in your mortgage. Loan registration assures that money
is available at a set interest rate if and when your application
is approved. With proper documentation, most lenders should be
able to provide a letter of committment, subject to appraisal,
in as little as seven business days.
The property must be adequately collateralized to secure the
loan once an appraisal is performed. Processors organize your
information and may verify your employment status, bank balances
and other information from your application. An underwriter
reviews all the information in your loan file to determine if
the application meets lending guidelines. At this point, the
loan is either approved or denied. Closing is when the ownership
of the property is transferred. All fees are paid, the remainder
of the downpayment is remitted, as are closing costs such as
title insurance and taxes.
9. If At First They Deny, Give It A Fresh Try The loan for which
you apply may not be the loan for which you are ultimately
approved. Sometimes a mortgage lender offers a program with
different terms or a counter offer. They may grant your loan,
but with certain conditions to be met prior to closing (such as
a termite inspection). If your application is denied, you will
receive an adverse action notice stating a specific reason(s)
for the denial. Many of the reasons for denial such as
insufficient funds, excessive debt or poor credit history can be
improved over time.