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Information

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Buyer Agency
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Questions to ask

Getting Qualified
Determine the price
Types of loans
Loan application

Finding a home
Your needs
Your desires
The price range
Finding listings
Looking at property

The buying process
The right home
Making an offer
The right price
Earnest money
Closing process
Finalizing the sale
Making the move

Getting Pre-Qualified

Paying Cash: When paying cash, insure that you have access to the funds to close. If someone has promised you the money to purchase your home, find out if they have any special requirements or conditions before you start looking at homes that are for sale. Once you find the home you want to purchase, you should be in position to make your offer and follow through with it.  Top

Determine your price range:  There are several factors involved in determining your price range, here's just a few:

• Know your limit. How much are you willing to pay for your new home? Whether paying cash or obtaining financing, you should set a limit for yourself.
• Find out your income to debt ratio. Mortgage companies use this to determine your monthly payment limit.
• If obtaining financing, determine what monthly payment you will be comfortable with. Your down payment will also effect your final monthly payment.
• Decide what type of home you want to purchase. Location, size, amenities, construction type, and condition, will all play a factor in the final price you pay for your new home.

A good real estate agent can help you put the pieces of this puzzle together. Top

Types of loans: Things change everyday in the real estate. That statement also definitely applies to the mortgage loan industry. There are several basic types of loans and hundreds of different programs that are designed to help each individual. After all, we are all different and have different financial circumstances. There are many programs for "First Time Home Buyers", people "Completing Professional Training (like medical students)", for people "Purchasing one home while selling another", "New Construction", the list goes on and on. Speak with your mortgage loan officer to determine if they offer any special programs that would benefit you. Here are a few basic types of loans:

• Fixed Rate Mortgage- With a fixed rate mortgage the interest rate will stay the same throughout the term of the loan. These loans are usually 15 or 30 years in length. The principal and interest portion of your payment remains the same. Payments are stable but initial rates tend to be a little higher than adjustable rate loans, and often cannot be assumed by a buyer when it's time to sell. Your monthly payment may vary a little from one year to another as your taxes and insurance rates change.
• Balloon Mortgage- This is a loan which must be paid off after a certain period of time. The advantage they offer is an interest rate that is lower than a mortgage that is made for 30 years. This means that you have to pay the entire balance after 5 or 7 years (a pre-determined time). The loan usually is amortized for 15 or 30 years so you enjoy lower payments, however you must pay the balance when due. If you plan to move after a few years this would be a good choice. The balance can be paid several ways: refinancing, selling the home, paying a lump sum of money, etc.
• Adjustable-Rate Mortgage (ARM)- The interest rate on this type of loan is linked to a financial index, such as a Treasury security or a cost of funds. Your monthly payments can vary up or down over the life of the loan, usually 25 to 30 years. Interest rates can change monthly, annually, or every 3 or 5 years (usually annually). Some ARM's have a cap on the interest rate increase as well as the overall rate, to protect you the borrower. Other terms relating to adjustable-rate mortgages are:
  • Adjustment period: The length of time between interest rate changes. Example: one year ARM-interest changes annually.
  • Cap: The limit on how much an interest rate or monthly payment can change at each adjustment or over the life of the loan.
  • Conversion clause: A provision in some loans that enables you to change an ARM to a fixed rate loan, usually after the first adjustment period. This may require additional fees.
  • Index: A measure of interest rate changes used to determine changes in the loan's interest rate over the term of the loan.
  • Margin: The number of percentage points a lender adds to the index rate to calculate the ARM's interest rate at each adjustment.
• VA Loan- The VA does not lend money, it guarantees a portion of the loan so that lenders who originate the loan have less risk in the event of a foreclosure. Qualified veterans can obtain loans up to $203,000 with no down payment requirement. The VA has a funding fee that is charged when a loan is originated. This fee is reduced if the veteran puts a 5 or 10 percent down payment. VA-guaranteed loans can be combined with second mortgages and are assumable upon qualifying by any future buyer.
• FHA Loan-  FHA also, does not lend money or make loans, they insure loans. The down payment requirement is usually low, as low as 2.25%. Discount points may be paid by either buyer or seller to help lower the initial interest rate. FHA charges a 2.25% up front Mortgage Insurance Premium (or as little as 2% for a first time home buyer) that can be financed in the mortgage amount or paid in cash (no premium is required for condominiums). The borrower must also pay an annual Mortgage Insurance Premium (MIP) or .5% which is collected monthly. FHA does require a minimum initial investment of 3% of the purchase price.
• Seller Assisted Second Mortgage- This is where the seller of the home being purchased lends the buyer enough to make up the difference between the purchase price, the down payment and first-mortgage balance (a commercial lender may also make this kind of loan). The terms, including the interest rate, are based on buyer/seller agreement. It is often a short-term (5 to 15 year) loan, sometimes "interest only" payments until the term date when the balance is due in full. A buyer can then refinance the home to pay off the loan/second mortgage.
• Assumable Mortgage- Buyer "takes over" or assumes the mortgage obligation of the seller (with concurrence of the lender). The interest rate doesn't change and is sometimes lower than current rates. Often the loan fees are less as well. Usually you will need a large enough down payment to purchase the sellers equity. Top

Your Loan Application: When you meet with your mortgage loan officer, they will need a lot of your financial information to properly process your loan. It's a good idea to be prepared for your meeting, being properly prepared will save you a lot of time and frustration in getting your loan approved for your home purchase. Here's a list of items you may need for your meeting:

• Money for your credit report and property appraisal.
• Home address for the previous two years, including the landlord's name, address and phone number if you were renting.
• Your social security number(s).
• Employment information for the previous two years including employer name, address and phone number.
• If self employed, you'll need the last 2 years complete federal tax returns and current year-to-date profit and loss statement.
• Income information including salary, overtime, bonuses, commissions, dividends, interest, retirement and any other source of ongoing income. Take your most recent pay stub. If you're military, take your LES.
• Liquid assets including bank name, account type, balance, and source of down payment. Take your most recent bank statement if possible.
• Other assets including the value of bonds, stocks, life insurance, retirement funds, jewelry, automobiles, etc.
• Information about your current financial obligations including creditor names and outstanding balances for all debts including notes payable, 401(k) loans, life insurance loans, stock pledges, alimony, child support, co-sign loans, credit union loans, and other liabilities.
• Real estate owned including property address, market value, outstanding liens, rental income, mortgage payments, taxes, insurance and maintenance dues.
• Divorce Decree, if applicable.
• If you are receiving a gift (money from a third party) for any portion of your down payment, closing cost etc., inform your loan officer. They will have a certain form that will need to be completed.
• If you have been discharged in a bankruptcy, take your discharge paperwork, if within the past 7 years.

Getting your loan: Getting a mortgage is a very complex process. But don't worry, mortgage companies want to make home loans. If your lender needs any additional information, provide them with it as soon as possible.  Top

Meet with a mortgage loan officer.

Getting pre-qualified is very important.  If properly qualified, you'll be making an offer just like a cash buyer.