Helpful hints for buying a new home!

• Avoiding the 10 most common mistakes
• How much do I qualify for?
• Understanding the 20 most common mortgage terms
  
  

1. Inspect! - Make sure you get a thorough inspection done by a professional. Once the inspection is done, go through it very carefully. Inspect everything!
2. Imagine the property vacant - Don't be overly influenced by beautiful furniture, it leaves with the owners. Instead, try to imagine your own furniture and decorations in the new home.
3. Evaluate your mortgage payment - Sit down with a professional and realistically discuss your income level and living expenses. Also take into account future considerations and circumstances. Obtaining your dream home should not jeopardize your financial future.
4. View several homes - At minimum, view 7 to 10 properties. Don't move slow and chance loosing your dream home, but don't jump on the first property you see. Working with your agent, you should be able to view enough properties to get a good overall perspective of the home market. When you find the right home, all of the leg work will be worth it.
5. Utilize your team - The right real estate professional will come with an entire team at your disposal. Utilize their lender, title representative and the agent as well. Each team member will work hand in hand for your benefit.
6. Be Columbo - Be sure to check ALL costs such as utilities, taxes insurance and home maintenance before signing documents. Also make sure that the utilities are on in the home during your final walk-through so you can check their working order as well.
7. Do a final walk-through - View the property after all furnishings have been removed to ensure that their are no surprises. Be absolutely sure the property has been left exactly as you had agreed upon in the contract. You might spot something in the final walk through that would have been easy to miss before.
8. Plan for flexibility - Although you have a closing date, they are not written in stone. Allow for contingencies and have a back up plan. Do not let delays upset or frustrate you. Often times in real estate transactions the buyers or sellers need more time to conclude final arrangements.
9. Put everything in writing - If it's not in writing, it doesn't exist. All promises and discussions should be in writing. Do not make any assumptions. Even the best intentions can be misinterpreted. Make sure to get the sellers written approval on all agreements.
10. Loyalty breeds loyalty - Be open, honest and up front with your real estate team. Hard feelings and disloyalty can cause delays and even keep you from getting into the home of you worked so hard to locate. Selecting the right team in the beginning will make your home purchase a memorable experience
    
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How much home do I qualify for?

Where to start:

Find a lender! - A lender can usually do a verbal pre-qualification in about twenty minutes and a full pre-qualification in about five days.

Getting pre-qualified not only allows you to focus your search in the correct price range, saving a lot of wasted time and frustration, but it can also give you an edge when competing with other offers on a home that you find. If a seller is debating between two offers, they are much more likely to go with the one that has been pre-qualified. It essentially makes you a cash buyer. The amount of home that you qualify for will determined by three key factors:

1.Your down payment

2.Your ability to qualify for a mortgage

3.Closing costs

1. The down payment - Current homeowners can rely on equity in their home for a down payment. A first time homebuyer is limited to the money that they can save for a down payment. Putting a large amount of money down does make it much easier to qualify for a home loan and get the lowest interest rates, but you are no longer required to put down 20%. With the various home buying programs that are available, you can put down as little as 3% on the purchase of your new home.
2. Qualifying for the mortgage - There are two basic guidelines that lenders use to determine what size mortgage you are eligible for:
   1. Your monthly mortgage payment of principal, interest, taxes and insurance should not exceed 25 - 28% of your monthly gross income.
   2. Your monthly housing cost plus other long-term debt should not exceed 33 - 38% of your monthly gross income.
   S pecifically, most lenders will consider 4 key factors to determine your ability to qualify for a home loan:

1. Income - This can include not only your gross monthly income and secondary income, but also your history of employment, stability of income, education, even potential for future earnings.
2. Credit History - This encompasses your history of debt repayment, total outstanding debt, highest balance, and your highest monthly debt balance. >
3. Assets - Your assets consist of cash on hand, savings and checking accounts, CD's, stocks, bonds or any other type of liquid asset.
4. Property - The home you are planning to purchase will be appraised to determine the market value. The estimated value must be sufficient to secure the loan. Lenders will loan you no more than a certain percentage (usually 95%) of this value.

• Closing costs generally will range between 2% and 6% of the mortgage loan, depending on the loan and lender. You will be provided with a "Good Faith Estimate" of closing costs so you can know what to expect.
• "Points", which are one-time charges equal to one percent of your loan amount, may be required by your lender at closing.
• Your closing agent will charge a fee at the close of the sale.

Understanding the 20 most common mortgage terms.

Adjustable Rate Mortgage (ARM) - Also referred to as a Variable Rate Mortgage. A mortgage in which the interest rate is adjusted periodically based on a pre-selected index.

Annual Percentage Rate (APR) - An interest rate that reflects the cost of a mortgage as a yearly rate. This rate takes into account any points and fees and is based on the loan going to it's full-term.

Assumption - An agreement between buyer and seller in which the buyer assumes responsibility for the seller's existing mortgage. This agreement usually saves the buyer money because closing costs and the current interest rate, possibly higher, do not apply.

Buy-down - A method of lowering the buyer's monthly payment for a short period of time. The lender or homebuilder subsidizes the mortgage by lowering the interest rate for the first few years of a loan.

Caps - A limit in the amount the interest rate or monthly payments for an adjustable rate mortgage that may change.

Debt-to-Income Ratio - The ratio, expressed as a percentage, which results from dividing a borrower's monthly payment obligation on long-term debts by the borrower's gross monthly income.

Discount Points - Prepaid interest assessed at closing by the lender. A point is equal to 1 percent of the loan amount.

Down Payment - Cash paid by the buyer at closing that makes up the difference between purchase price and the mortgage amount.

Earnest Money - Money given by a buyer to a sellers as a deposit to commit the buyer to the future transaction. Earnest money is subtracted from closing costs.

Equity - The value an owner has in real estate over and above the obligation against the property. Equity is fair market value minus the current indebtedness.

Escrow - Funds given to third party which will be held to cover payments such as tax or insurance payments and earnest money deposits.

Fixed Rate Mortgage - A mortgage in which the interest rate remains constant throughout the life of the loan.

Loan-to-Value Ratio - The ratio between the amount of the mortgage loan and the appraised value of the property.

Market Value - The price that a property could possibly bring in the marketplace.

Mortgage Insurance - Insurance that protects lenders against loss if a borrower defaults. This is require when the loan-to-value ratio is greater than 80%.

Origination Fee - A fee charged by a lender for processing a loan application; usually computed as a percentage of the loan.

PITI - Refers to Principal, Interest, Taxes, and Insurance.

Underwriting - The decision-making process of granting a loan to a potential homebuyer.

Variable Rate Mortgage - Also referred to as Adjustable Rate Mortgage. A mortgage in which the interest rate is adjusted periodically based on a pre-selected index.

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