Home Buyer’s Guide
Whether this is your first home or you’re a seasoned home- buyer, I’ve put together a simple guide that will help you understand and manage the home buying process. This guide will help you:
- Pinpoint a comfortable price range
- Understand up front closing costs
- Help you understand APR and what determines interest rates
- How your credit score impacts your interest rate
- Mortgage Do’s and Don’ts as you prepare for home ownership
- Understand how to properly prepare for a mortgage
- Learn how important it is to select the right Real Estate Agent
Your Top 5 Success Factors: my guide will help you gain an understanding on these important questions:
- Are you ready to buy a home
- What should you be looking at prior to applying for a mortgage?
- What checklist should I follow prior to beginning my home search?
- Identifying your ideal home and making the right offer
- What happens after the offer is accepted: How to ensure a smooth process and avoid common mistakes
Are You Ready To Buy A Home?
- Know your total cost of the mortgage: this includes one- time fees and down-payment requirements of your mortgage. A solid loan originator will help you gain a clear picture and offer solutions that best fit your situation. Employment history, credit score, amount you have saved, whether you’re a first time home-buyer, veteran or self employed; know which products you qualify for to determine your fees, interest rates, and how much of a down payment is required. I work with top loan originators that can help you should you need assistance. If you do, please click this link and I will recommend my mortgage team.
- Cash Reserves- depending on what you qualify for, you may qualify for a no down payment mortgage or a mortgage that allows 100% of your down-payment to be gifted funds. Regardless of what mortgage product you select and/or qualify for you should also have cash reserves entering into home ownership. Unexpected costs to maintain the home, home improvements and unexpected changes in employment are all reasons you should be prepared for unforeseen circumstances.
- Financial Stability- If one spouse was suddenly laid off, could you pay for your mortgage with the other spouses income? If you’re self employed, do you have residual income from many clients or do you rely on a few clients for your income? If the economy took a slide, how would that impact your business? Take a good look at your income and determine the risk factor of a sudden change of employment or decrease in your business revenues.
- Understanding your credit? Credit is your personal track record of your ability to pay back, on-time, your personal debts. While most people have encountered some form of set back; its important for you to be financially healthy when owning a home. If you’ve encountered credit difficulty, click here for my video that will show you how to improve it. Some people decide to get a mortgage now with so-so credit and are able to refinance once their credit score has improved to obtain a better interest rate. Getting solid advice from your Realtor and mortgage loan originator is highly recommended.
What should you be looking at prior to applying for a mortgage?
- Credit- the higher the score, the lower the rate. Also, is your credit score getting better or getting worse? A Declining credit score doesn’t necessarily mean: “don’t get a mortgage”. It just means you should take measures, which in many cases are simple measures to boost your credit score. Click here for help on improving your credit
- Your Debt To Equity Ratio: This means how much debt do you carry between credit cards and revolving accounts vs. how much income you have. This is how banks determine how much of a loan they are willing to give you.
- Collateral- the appraisal of your home will provide the bank with its market value should you default on your mortgage and that liability came back to the bank. What you qualify for will include such factors as: amount of downpayment, your income/assets and your credit
- 2 year work history including W2’s (self employed 1-2 years tax returns depending on the products available to you) * self employed year to date profit/loss statement
- 1-2 years tax returns
- Most recent pay stub that reflects a minimum of 30 days income or other proof of income
- Proof of pension income (if applicable)
- Social security and disability payments (if applicable)
- Dividend earnings
- Child Support (optional)
- Alimony (optional)
- Asset verification
- Bank statements (last 2/3 months)
- Earnest money deposit copy
- Car loans, student loans, credit card, auto payments, personal loans
Selecting the right Mortgage Professional– Its critical to work with someone that asks the right questions and is able to provide you with options. In many cases, the traditional 30 year fixed mortgage may not be your best option. It is worth meeting someone you can trust and I would be delighted to assist you. I believe in a team approach to handling your needs and my team is solid and trustworthy. Click here for a link of my Real Estate Team
- Shop ARP (click here for interest rate education video we created)
- Pre Qualification: This is an excellent start if you’re considering home ownership. This is simply an estimate of what you would qualify for should you proceed with a formal application to obtain a mortgage. Pre-qualification is non binding; meaning, you nor the bank is liable to proceed.
- Once you receive a pre-qualification letter, then its time to work with me so I can help you crystallize exactly what you want for your new home.
Identifying your ideal home and making the right offer
Identify the type of home and features you really MUST have
Type: single family, condo, gated community, duplex
Features: Open floor plan, big lot/small lot, wooded lot
Other features to consider: school district, taxes
The Value of The Real Estate Agent:
For 99% of people, this is the biggest purchase they will ever make. As such, selecting an agent that truly knows the market, and is capable of helping you negotiate the best possible price is critical for your overall financial landscape.
A good real estate agent is your partner. You do not pay commissions to the agent when you buy a home. Real estate commissions are paid by the seller of the home.
Buyer’s agents work for the buyer
Seller’s agents work for the seller.
My value proposition includes:
- Leveraging my technologies to help you find exactly what you are looking for
- Knowledge of the local market including neighborhoods, schools, pricing, public safety and taxes
- Helping you negotiate a fair price
- Doing the research for you and providing you with options that fit what you’re looking for
- Proactive communication, honesty and integrity
What happens after the offer is accepted
Step 1: Working closely with your mortgage loan originator to complete your application
- Full income and asset documentation: watch this short video “Documentation stage” for a list of do’s and don’ts
- Rate lock: a qualified mortgage loan originator will advise you when he/she believes the best time to lock your interest rate
- Rate Lock? This means as you are waiting for final approval, your interest rate will not move. The decision to lock is based on your risk posture and the advise given to you by your loan originator.
Step 2: Submitting your Loan Package/Application
- The loan processor may contact you with additional information they may need. This is a normal part of the process. What’s important is for you to get them what they need as quickly as possible.
- Homeowners Insurance- it will be required to have homeowners insurance, which covers the cost of repairing or rebuilding the home in the event of damage or catastrophe. I have an insurance agent as part of my Real Estate Team to make this part of the process easy and seamless. You may of course obtain the services by an insurance agent that you know and are comfortable with
- Should you buy down your interest rate? As a rule of thumb, 1% of the loan amount is equal to one discount point ($1,000 paid on a $100,000 mortgage to earn one discount point on interest). With rates currently being so low, it typically doesn’t pay to buy down your interest rate. Your loan originator will provide you with scenarios to help you make your own educated decision.
Step 3: Underwriting
- Underwriters are the people that use your information as well as financial formulas to make a decision on your mortgage.
- Once approved, the loan processor will schedule your closing
- Closing is when the title of the house is transferred from seller to buyer.
- GFE (Good Faith Estimate): this will be mailed to you within three business days of application submission
- You will either need to wire funds or bring a cashiers check or bank check to pay for your closing costs at the date of closing
Step 4: Closing
- I attend all of my client’s closings. Once a closing date has been established I meet with you with a checklist to ensure a smooth closing