Home buying tips

[WebLady]

Looking to buy that first home? I found these tips that may help you plan ...

Before you start looking for a home, get pre-qualified for a loan. Banks, Credit Unions, Mortgage Bankers, and Mortgage Brokers make home loans. These lenders will take an application, process the loan documents, and see the loan through to the funding stage.


If you have marginal or bad credit, consult your lender. You may be able to qualify for a loan depending on how long ago and what reason(s) caused the bad credit. A lender should be able to advise you on whether your credit history will prevent you from qualifying for a home loan.


You will need a downpayment. Downpayment requirements vary between 3 to 20% or more depending on the type of loan. Many downpayment assistant programs exist. These programs may loan or grant you the funds necessary for the downpayment. Consult with a lender about programs available in your area.


You will need funds for closing costs Closing costs are charges for services related to the closing of your real estate transaction. They include, but are not limited to:

Escrow fees charged by company handling the transaction
Title policy issuance fees charged by the title insurance company
Mortgage insurance fees
Fire and homeowners insurance
County Recorder fees for recording your deed
Loan origination fees

Consult your lender for an actual estimate of these costs, as well as information about loan programs which can assist in financing your closing costs.


Some loans have "points" and some do not. A point is a loan origination fee equivalent to 1% of the loan amount. Together with the interest rate they constitute the yield on your loan for the lender. Some lenders charge a higher interest rate to compensate for charging no points. It is important to comparison shop lenders to make sure your loan is at a competitive yield.


Should you select a mortgage with a fixed rate or an adjustable rate? The answer to this question depends on whether mortgage rates are at a high or a low point when you purchase, and on how long you plan to live in the home. If rates are high, an adjustable rate might be attractive since subsequent rate drops could reduce your monthly payments. Additionally, lenders may offer a below-market rate during the first few years of an adjustable mortgage to make it appealing to you. If interest rates are low you might want to take a fixed rate to protect yourself against the possibility of rising interest rates.


Be aware of the two main types of loan categories.


Conventional Loans. Conventional mortgage loans are available up to a maximum of 97% loan-to-value. Interest rates may be fixed or adjustable for the term of the loan. Loans with high loan-to-value may require mortgage insurance.
Government Loans. These include Federal Housing Administration (FHA) fixed and adjustable rate mortgage loans, and Veterans Administration (VA) fixed rate mortgage loans. FHA loans are available up to 97.65% loan-to-value. Eligible U.S. veterans can receive up to 100% loan-to-value financing through VA loans.


If you are a low or moderate income homebuyer, there are special programs designed to help you. These loans are available through private lenders, as well as local and state housing agencies, like the California Housing Finance Agency (CalHFA). Most lenders specializing in real estate mortgage loans are aware of these types of loan programs.


Why might I have to pay mortgage insurance? Mortgage insurance protects the lender from potential loss if you should default on your mortgage loan payment. Generally, conventional loans that are less than 80% loan-to-value do not require mortgage insurance. For FHA mortgage loans, mortgage insurance is always required. It is referred to as a Mortgage Insurance Premium (MIP) and is collected regardless of the Loan-to-Value.


Many organizations offer home loan counseling to prospective homebuyers. These organizations provide classes for homebuyers to cover the steps to homeownership. They will cover home selection, realtor services, lenders, loan programs, homeownership responsibilities, saving for a downpayment, and other important pieces of information. Many first-time homebuyer programs require homebuyers to attend this type of class to be eligible for selected programs.
-Source - www.consumer-guides.info (http://www.consumer-guides.info/housing/ten_tips_for_homebuyers.html)

[dawsmi]

Wow those are some great tips and information!! That is a lot to think about to buy a house!! My head kinda hurts now!! LOL!! Thanks for the info of what to think about!!

[sweetvenus]

This site was also really helpful to me when I was going through the process: http://michaelbluejay.com/house/basics.html

[flyerso6]

For those thinking of buying a house, the process isnt as hard or as scary as it seems.. Just make sure you do your research and know what is going on at each step of the process.

[Whitewater]

There is so much you have to know!!!!! And I really do mean HAVE to know -- if you don't know it, there are a gazillion ways to get screwed :( Sorry for the language, but that's really what it's like.

My advice? Take a first time homebuyer education class. Sometimes loan companies offer them, sometimes your community center might have them, the Internet is a great resource to find them. Also -- find a *good* realtor. Don't just go with cousin Jimmy's friend Ralph! And finally, research, research, research! Learn the difference between a good realtor and a bad one, learn what all those home buying terms mean, study your local real estate market, and don't buy a house that can't pass a thorough home inspection! Learn what are ok problems and what are big red flags, and if your instincts tell you to keep looking, listen to them! Everybody has a house out there that's right for them, but (like dating) you'll have to kiss a LOT of frogs to find your prince -- particularly if your neighborhood has alot of bank-owned properties out on the market.

We wound up looking at close to 30 homes. Friends of mine looked for six months!

As for the money, go to the bank or whoever and get pre-approved (not just pre-qualified) FIRST before you ever start looking.

Then, you'll need to have somewhere between $3k-10K for closing costs -- which are generally 3% of your purchase price. Sometimes the seller will pay them. Sometimes you'll split them. Sometimes, YOU the buyer will have to pay them. Be prepared. Closing costs are in ADDITION to your down payment, they're not the same thing. Banks typically do NOT finance closing costs, though your state or your community may have money available -- search the Internet (try phrases like closing cost assistance Your State).

You'll also have to think about costs like moving, and the home inspection ($250-500 per inspection) and fixing the stuff that you find after you move in -- because there will be stuff to fix. You won't be able to call your landlord anymore! Also think about stuff like buying a lawnmower, a garden hose, paying for garbage pick-up and the other costs that you haven't been responsible for as a tenant that you will have to pay as a homeowner.

Also, don't believe real estate sites when they show you a fantastically low "You can buy this house for only $400 a month! Let Us Show You How!" type offer because A) they're using a program like only pay interest for the first two years (after the two years, your payment could triple . . . .) and they aren't counting things like homeowners insurance (required ) and mortage insurance (required if you have less than 20% down payment) OR the taxes on your property, which (at least in my state) are due twice a year.

In our case all that stuff costs close to $200 a month. So forget a $400 mortgage payment, our payment is now $600! That's a big difference.

Oh, and if you want to get a home mortage loan, figure out your debt-to-income ratio and remember, it's not about the size of the mortage, it's about your ability to pay the monthly payments. It's not worth getting approved for $250 grand if you can't afford the $1500/month payment. And speaking of money, don't do anything like open up a new credit card or buy a car or switch jobs once you've been pre-approved, because each of those things can negatively affect you, sometimes enough to have your approval taken away. Keep everything where it is, and don't do any changes until after you've closed on the house and have moved in.

As for buying your house, figure out what's important to you and stick to it. Is safety an issue? Don't be fooled by lower prices, if the neighborhood is poor. And realtors can't tell you what a neighborhood is like, so you'll have to do your research yourself. Since you're going to be in this house for a good long time, making sure you know what you want is vital. Figure out what's a deal-breaker and stick with it. The house for you will eventually come along.


Whitewater (who wishes somebody had told ME all these things a few months ago!)