Why
should I buy, instead of rent?
- Answer: You’ll love the feeling of having something that’s
all yours - a home where your own personal style will tell the world who you are. A
thriving vegetable garden in the backyard, a tiled entryway, a yellow kitchen...when you
own, you can do it all your way! But there’s more to owning a home than personal
satisfaction. You can deduct the cost of your mortgage loan interest from your federal
income taxes, and usually from your state taxes, too. And interest will compose nearly all
of your monthly payment , for over half the number of years you’ll be paying your
mortgage. This adds up to hefty savings at the end of each year. And you’re also
allowed to deduct the property taxes you pay as a homeowner. If you rent, you write your
monthly check and it’s gone forever. Another financial plus in owning a home is the
possibility its value will go up through the years. TOP
I’ve had bad credit, and don’t have much for a
down-payment. Can I become a homebuyer?
- Answer: You may be a good candidate for one of the federal mortgage
programs that are available. Your realtor can also help you sort through your options. In
addition, contact your local government to see if there are any local homeownership
programs that might work for you. Look in the blue pages of your phone directory for your
local office of housing and community development or, if you can’t find it, contact
your mayor’s office or your county executive’s office. TOP
I’m a single parent. How would I go about buying
a home?
Answer: Although you won’t have the benefit of two
incomes on which to qualify for a loan, there’s no reason that you can’t become
a homeowner. Become familiar with the process, pick a good real estate broker, and think
about getting pre-qualified for a loan. Talk through your options. You also might want to
think about buying a HUD home - they can be very good deals. Also, contact your
local government to see if there are any local homebuying programs that could help you.
Look in the blue pages of your phone directory for your local office of housing and
community development or, if you can’t find it, contact your mayor’s office or
your county executive’s office. TOP
Should I use a real estate broker? How do I find one?
Answer: Using a real estate broker is a very good idea!
All the details involved in home buying, particularly the financial ones, can be
mind-boggling. A good real estate professional can guide you through the entire process
and make the experience much easier. A real estate broker will be well-acquainted with all
the important things you’ll want to know about a neighborhood you may be
considering...the quality of schools, the number of children in the area, the safety of
the neighborhood, traffic volume, and more. He or she will help you figure the price range
you can afford and search the classified ads and multiple listing services for homes
you’ll want to see. With immediate access to homes as soon as they’re put on the
market, a broker can save you hours of wasted driving-around time. When it’s time to
make an offer on a home, a broker can point out ways to structure your deal to save you
money. Your broker will explain the advantages and disadvantages of different types of
mortgages, guide you through the paperwork, and be there to hold your hand and answer
last-minute questions when you sign the final papers at closing. And you don’t have
to pay the broker anything! The payment comes from the home seller - not from the buyer.
TOP
How much money will I have to come up with to buy a
home?
Answer: Well, that depends on a number of factors,
including the cost of the house and the type of mortgage you get. In general, you need to
come up with enough money to cover three costs:
earnest money - the deposit you make on the home when you submit your offer, to prove to
the seller that you are serious about wanting to buy the house; the down payment, a
percentage of the cost of the home that you must pay when you go to settlement; and
closing costs, the costs associated with processing the paperwork to buy a house.
- When you make an offer on a home, you’re real estate broker will put your earnest
money into an escrow account. If the offer is accepted, your earnest money will be applied
to the down payment or closing costs. If your offer is not accepted, your money will be
returned to you. The amount of your earnest money varies. If you buy a HUD home, for
example, your deposit generally will range from $500 - $2,000.
The more money you can put into your down payment, the lower your mortgage payments will
be. Some types of loans require 10-20% of the purchase price. That’s why many
first-time homebuyers turn to FHA for help. FHA loans require only 3% down - and sometimes
less.
Closing costs - which you will pay at settlement - average 3-4% of the price of your home.
These costs cover various fees your lender charges and other processing expenses. When you
apply for your loan, your lender will give you an estimate of the closing costs, so you
won’t be caught by surprise. TOP
How do I know if I can get a loan?
Answer: Use our simple mortgage calculators to see how
much mortgage you could pay - that’s a good start. If the amount you can afford is
significantly less than the cost of homes that interest you, then you might want to wait
awhile longer. But before you give up, why don’t you contact a real estate broker or
a HUD-funded housing counseling agency? They will help you evaluate your loan potential. A
broker will know what kinds of mortgages the lenders are offering and can help you choose
a lender with a program that might be right for you. Another good idea is to get
pre-qualified for a loan. That means you go to a lender and apply for a mortgage before
you actually start looking for a home, here again your real estate broker can assist you
in getting pre-qualified. This way you’ll know exactly how much you can afford to
spend, and it will speed the process once you do find the home of your dreams.
TOP
How do I find a lender?
Answer: You can finance a home with a loan from a bank,
a savings and loan, a credit union, a private mortgage company, or various state
government lenders. Shopping for a loan is like shopping for any other large purchase: you
can save money if you take some time to look around for the best prices. Different lenders
can offer quite different interest rates and loan fees; and as you know, a lower interest
rate can make a big difference in how much home you can afford. Talk with several lenders
before you decide. Most lenders need 3-6 weeks for the whole loan approval process. Your
real estate broker will be familiar with lenders in the area and what they’re
offering, or you can look in your local newspaper’s real estate section - most papers
list interest rates being offered by local lenders. You can find FHA-approved lenders in
the Yellow Pages of your phone book. If you are looking to buy a HUD home be aware that
HUD does not make loans directly. Also you must use a HUD-approved lender if you’re
interested in an FHA loan. TOP
In addition to the mortgage payment, what other costs
do I need to consider?
Answer: Well, of course you’ll have your monthly
utilities. If your utilities have been covered in your rent, this may be new for you. Your
real estate broker will be able to help you get information from the seller on how much
utilities normally cost. In addition, you might have homeowner association or condo
association dues. You’ll definitely have property taxes, and you also may have city
or county taxes. Taxes normally are rolled into your mortgage payment. Again, your broker
will be able to help you anticipate these costs. TOP
What will my mortgage cover?
Answer: Most loans have 4 parts: principal: the
repayment of the amount you actually borrowed; interest: payment to the lender for the
money you’ve borrowed; homeowners insurance: a monthly amount to insure the property
against loss from fire, smoke, theft, and other hazards required by most lenders; and
property taxes: the annual city/county taxes assessed on your property, divided by the
number of mortgage payments you make in a year. Most loans are for 30 years, although 15
year loans are available, too. During the life of the loan, you’ll pay far more in
interest than you will in principal - sometimes two or three times more! Because of the
way loans are structured, in the first years you’ll be paying mostly interest in your
monthly payments. In the final years, you’ll be paying mostly principal.
TOP
What do I need to take with me when I apply for a
mortgage?
1) social security numbers for both your and your spouse, if both of you are applying for
the loan;
2) copies of your checking and savings account statements for the past 6 months;
3) evidence of any other assets like bonds or stocks;
4) a recent paycheck stub detailing your earnings;
5) a list of all credit card accounts and the approximate monthly amounts owed on each;
6) a list of account numbers and balances due on outstanding loans, such as car loans;
7) copies of your last 2 years’ income tax statements;
8) the name and address of someone who can verify your employment. Depending on your
lender, you may be asked for other information. TOP
There are lots of types of mortgages, how do I know
which one is best for me?
Answer: You’re right - there are many types of
mortgages, and the more you know about them before you start, the better. Most people use
a fixed-rate mortgage. In a fixed rate mortgage, your interest rate stays the same for the
term of the mortgage, which normally is 30 years. The advantage of a fixed-rate mortgage
is that you always know exactly how much your mortgage payment will be, and you can plan
for it. Another kind of mortgage is an Adjustable Rate Mortgage (ARM). With this kind of
mortgage, your interest rate and monthly payments usually start lower than a fixed rate
mortgage. But your rate and payment can change either up or down, as often as once or
twice a year. The adjustment is tied to a financial index, such as the U.S. Treasury
Securities index. The advantage of an ARM is that you may be able to afford a more
expensive home because your initial interest rate will be lower. There are several
government mortgage programs that might interest you, too. Most people have heard of FHA
mortgages. FHA doesn’t actually make loans. Instead, it insures loans so that if
buyers default for some reason, the lenders will get their money. This encourages lenders
to give mortgages to people who might not otherwise qualify for a loan. Talk to your real
estate broker about the various kinds of loans, before you begin shopping for a mortgage.
TOP
When I find the home I want, how much should I offer?
1) is the asking price in line with prices of similar homes in the area?
2) Is the home in good condition or will you have to spend a substantial amount of money
making it the way you want it? You probably want to get a professional home inspection
before you make your offer. Your real estate broker can help you arrange one.
3) How long has the home been on the market? If it’s been for sale for awhile, the
seller may be more eager to accept a lower offer.
4) How much mortgage will be required? Make sure you really can afford whatever offer you
make.
5) How much do you really want the home? The closer you are to the asking price, the more
likely your offer will be accepted. In some cases, you may even want to offer more than
the asking price, if you know you are competing with others for the house. TOP
What if my offer is rejected?
Answer: They often are! But don’t let that stop
you. Now you begin negotiating. Your broker will help you. You may have to offer more
money, but you may ask the seller to cover some or all of your closing costs or to make
repairs that wouldn’t normally be expected. Often, negotiations on a price go back
and forth several times before a deal is made. Just remember - don’t get so caught up
in negotiations that you lose sight of what you really want and can afford! TOP
What will happen at closing?
Answer: Basically, you’ll sit at a table with your
broker, the broker for the seller, probably the seller, and a closing agent. The closing
agent will have a stack of papers for you and the seller to sign. While he or she will
give you a basic explanation of each paper, you may want to take the time to read each one
and/or consult with your agent to make sure you know exactly what you’re signing.
After all, this is a large amount of money you’re committing to pay for a lot of
years! Before you go to closing, your lender is required to give you a booklet explaining
the closing costs, a "good faith estimate" of how much cash you’ll have to
supply at closing, and a list of documents you’ll need at closing. If you don’t
get those items, be sure to call your lender BEFORE you go to closing. Be sure to read our
booklet on settlement costs . It will help you understand your rights in the process.
Don’t hesitate to ask questions. TOP
I’ve heard of HUD homes. What are HUD homes, and
are they a good deal?
Answer: HUD homes can be a very good deal. When someone
with a HUD insured mortgage can't meet the payments, the lender forecloses on the home;
HUD pays the lender what is owed; and HUD takes ownership of the home. Then we sell it at
market value as quickly as possible. Read all about buying a HUD home - one might be right
for you! - Listings of HUD homes - as well as homes being sold by other federal
agencies. TOP
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