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Ifyou’relikemosthomebuyers,buyingahomeisthemostimportant financialdecisionyou’llevermake.Soofcourse,you’regoingtohave questions.Isnowtherighttimetobuy?Howmuchshouldyouspend?
Whatamountshouldyousaveforadownpayment?
Icanhelpyoufindtheanswers.Asamortgageprofessional,I’ve guidedmanyfirst-timehomebuyersthroughtheprocess.Ican’ttell youwhichhousetobuy,butIcanexplainwhathappensateachstep oftheprocess,thecostsinvolved,andimportantdeadlinesyoudon’t wanttomiss.
Mygoalsaretofindtherightmortgageforyouruniquesituationand helpyoufeelconfidentandinformedaboutyourdecisionsalong theway.
Thisguideisagreatplacetostart Then,callme whenyou’rereadytotalkaboutfinancingyournew homeandgettingpre-approvedforamortgage
Let’s get you the keys to your happily-everafter home!
One-thirdofallhomebuyersarefirst-timers,justlikeyou
Mortgage FAQ’s
How much should I save for a down payment?
Most people don’t buy a home with cash Instead, they save up as much as possible for a down payment, then get a mortgage to cover the rest How much depends on the type ofmortgage
With a conventional loan, you may have to pay for private mortgage insurance (PMI) if your down payment is less than 20% of the home price PMI can add several hundred dollars to your monthly payment, but you can remove it once your payments bring your contribution to 20% Other types of loanshavelowornodownpaymentrequirements,andmany states offer first-time home buyer assistance programs to keepyourcostsdown
Should I get pre-approved for a mortgage?
Definitely Taking the time to get pre-approved offers three significantadvantages:
You’llknowexactlyhowmuchyoucanborrow,soyoucan targetyoursearch
Sellers will see that you’re serious, putting you ahead of thecompetition
Closing will go faster because you’ve already completed mostofthepaperwork
What is the mortgage interest rate?
The interest rate is a percentage of a loan that the lender charges you to borrow money. But there’s more to the story. Amortgagehasanannualpercentagerate(APR),whichisthe interest rate plus any points, fees, or other costs associated withtheloan.
What are closing costs, and how much are they?
Closing is the last step in the homebuying process It’s when you sign the legal documents for your new home and mortgage
Both the buyer and seller pay closing costs to cover such expenses as the home appraisal, property tax, title insurance, and mortgage insurance Your lender will list closing costs on your loanestimateandfinaldocuments,sotherewon’tbeanysurprises
Mortgage FAQ’s
What documents do I need to provide for a mortgage?
Formostloans,lendersaskfor:
•2yearsoftaxreturns
•2yearsofW-2forms
•30daysofpaystubs
•Documentstoshowotherincometobeconsidered
•2monthsofbankstatements
•Investmentportfoliostatements
FHA,VA,andothergovernment-backedloansmayhave additionalrequirements
How can I get a lower mortgage rate?
Raiseyourcreditscore.Ahighercreditscoreusuallyleadsto alowermortgagerate,whichcouldsavethousandsofdollars over the life of a loan Get a free credit report at annualcreditreportcom to check your score Then, focus on paying bills on time, and don’t open new credit cards or use morethan30%ofyourcurrentcardlimits
Saveupalargerdownpayment.Themoreyouputdown, thelessriskforthelender,sothey’llofferalowerrate.
Choose a shorter loan term, like 15 years instead of 30. Makesureyourbudgetcanswingitbecauseyourmonthly paymentsarehigherwithashorterloanterm.
Pay mortgage points. You can pay extra money upfront in exchangeforalowerinterestrate Typically,1pointcosts1% oftheloanamountandlowerstherateby025% Itcouldbe a good strategy if you have the money to pay for the points andplantostayinthehomelongenoughtorecoupthecosts (typicallyaround3or4years)
Lockinyourrate.Ifyou’vebeenapprovedfora mortgage,aratelockwillprotectyourinterestratefor30 daysorlonger.Ifratesincreasebeforeclosing,you’llpay thelower,locked-inrate.Somelenderschargeafeeforthis service,sobesuretoreadthefineprint.
How long will it take to process my mortgage application? Itcouldtakeafewweeksoraslongas60days Tospeeduptheprocess,checkanddouble-checkthatyou submit the correct financial and personal documents and respond quickly to any lender requests Other factorsthatcancauseadelayincludeasalarychange,newdebt,orachangeinmaritalstatus Ifpossible, putyourfinanciallifeinaholdingpatternuntilyoureachtheclosingtable
The Hidden Costs of Buying of Home
Many first-time homeowners are surprised by how much it costs to maintain a property.
Homeowners Association (HOA) Fees
Somecondominiums,buildings,and neighborhoodshavehomeowners associationsthatenforcecommunity standardstokeeptheareaclean,safe, andattractiveandprotectproperty values ManyHOAschargeafeefor landscaping,parking,clubhouses,and maintainingothercommonareas
Homeowners Insurance
Losingyourhometoafireorstormcan beemotionallyandfinancially devastating Homeownersinsurance canoffsettheseexpensestohelpyou startagain Thenationalaveragefor homeownersinsuranceis$149per month,butitvariesbystateandthe specificcoveragesonyourpolicy
Utilities
Untilyouknowyouractualcosts, budget$250amonthtocoverinternet, electricity,gas,water,garbagepickup, andcable.
Here are some hidden costs that you might pay in addition to your mortgage.
Home Maintenance and Repairs
Homerepairsareanormalpartofbeing ahomeowner,buttheycanbe expensive Expertsrecommendthatyou havearainy-dayfundbetween$5,000 and$15,000topayforaleakyroof, sputteringfurnace,orotherhomerepair emergencies Protectyourselfby securingahomeinspection Althoughit isnotaguarantee,agoodinspectorwill beabletoidentifypotentialissuesor costlyrepairsonahome
Property Tax
Propertytaxpaysforschools,police, firefighters,andotherstateandlocal services.It’ssoimportantthatlenders oftenrollthecostintoyourmonthly mortgagepaymentandthenpayiton yourbehalfwhenit’sdue.Theamount variesfromamedianof$587in Alabamato$8,300inNewJersey.Visit yourcity’swebsitetofindtheproperty taxforyourarea.
Questions to Ask Before Buying a Home
Whetheryoucallthenumberonafor-salesignortalktoarealestateagentatanopen house,rememberthattheagentworksfortheseller,notyou.However,youcanhirea buyer’sagenttolookoutforyourbestinterests.Bothagentscananswerthese questionstohelpyoulearnmoreaboutahouse.
What’s the home’s sales history?
Beforeyoumakeanoffer,findoutwhenthehousesoldlastandhow much the owners paid for it. This information can let you know if the sellers are asking for way too much Your real estate agent can also provide recent sales prices for comparable homes to help you finetuneyouroffer
Did the sellers make any major renovations or additions?
Ideally, you’ll get to see the receipts to know what the owners paid for their upgrades Your offer doesn’t have to cover their costs In fact, sellers recoup only a fraction of home improvement costs AccordingtoemodelingMagazine,theycanexpecttoreceive71%of newkitchencostsand675%ofexpensesforreplacementwindows
How much are property taxes?
Propertytaxisoftenincludedinthehomelisting,buttheamountcan change Localgovernmentassessorsevaluatehomevalueseveryfew years,whichmayleadtoahighertaxbill
What are the monthly maintenance and utility costs?
Ask about monthly heating, cooling, water, and trash pickup costs Your actual prices may vary based on the number of people in your homeandhowtheyusetheutilities
Has the home experienced any plumbing or sewer problems?
Plumbing problems can be expensive (and unpleasant) According to the Insurance Information Institute, broken pipes account for an estimated 20% of all home insurance losses Protect yourself by securing a home inspection. Although it is not a guarantee, a good inspectorwillbeabletoidentifypotentialissuesorcostlyrepairsona home.
More Mortgage Choices
Construction Loans
Ifthehomeofyourdreamsisn’tonthe market,whynotbuildit?Construction loanscanhavefixedoradjustable rates,andtheirinterest-onlypayments keepcostsdownduringconstruction.
Fannie Mae HomeStyle® Renovation Mortgage
Buyerscanpurchaseahomeandmake ittheirownwithoneconvenientloan TheHomeStyle®Renovationmortgage canfinancethehome’scostplus proposedrenovations,suchasrepairs, landscaping,energyupdates,and luxuryupgrades.
Fixed Rate Mortgage
Thisloanisapopularchoicebecause themonthlypaymentstaysthesame. Alongerrepaymentperiodmeansyou’ll makelowermonthlypayments, butyou’llpaymoreininterest.Ashorter repaymentperiodmeansahigher monthlypaymentandsubstantially lowerinterestcosts.
5/6, 7/6, or 10/6 Adjustable Rate Mortgage
Withanadjustableratemortgage (ARM),theinterestratestaysthesame forthefirst5,7,or10years.Thenit adjustsevery6monthstoreflect currentrates,whichcanbehigheror lower.Initialmonthlypaymentsare oftenlowerthanfixedratemortgages, allowinghomebuyerstoqualifyfor largerloans.
Purchaseorrate/termrefinanceofa1-to4-unitprimaryresidence Renovationprogramallowspurchaseorrefinancewithrenovation Renovation requiresafullbuilderthird-partycontract Incomelimitsapply Homebuyereducationmayberequired NotavailableinAlaskaortheUS VirginIslands Programforqualifiedborrowers Allborrowerssubjecttocreditapproval,underwritingapproval,andlendertermsandconditions Programssubjectto changewithoutnotice Somerestrictionsmayapply Notacommitmenttolend CONSIDERATIONS:Aloan-to-valueratioabove80%mayresultina needformortgageinsurance Ifmortgageinsuranceisrequired,theamountofyourpaymentwillincrease Interestontheportionofyourloanbalance thatisgreaterthanthefairmarketvalueofthedwellingisnottaxdeductibleforfederalincometaxpurposes Pleaseconsultyourtaxadvisorregarding thedeductibilityofinterest Importantinformationwillbeprovidedtoyouinthedisclosuresyoureceiveafterwehavereceivedyourapplicationand theloandocumentsyouareprovidedatloanclosing
One-close construction: Construction to permanent financing for primary residence and second homes. Conforming one-close 9- or 12-month constructiontermprogramallowingforpaymentofinterest-onlyduringconstruction Notetobemodifieduponcompletionofimprovementstoafully amortizedprincipalandinterestpayment Softcosts(architectural,engineering,andpermitfees)maybefinanced,closingcostsmaynot Fullthird partybuildercontractsonly NotavailableinUS VirginIslands CONSIDERATIONS:Borrowermusthaveanescrowwaivertobeeligibleforpayments ofinterest-onlyduringconstruction Borrowermusthaveputdownaminimumof30%andhaveasufficientcreditscoretoavoidrequalificationat completion of construction. A loan-to-value ratio above 80% may result in a need for mortgage insurance. If mortgage insurance is required, the amount of your payment will increase Important information will be provided to you in the disclosures you receive after we have received your applicationandtheloandocumentsyouareprovidedatloanclosing
Fixed:Purchase,rate/term,orcash-outrefinanceofaprimaryresidence Programtermsavailablemayvarybasedonthestateorcountyinwhichthe financedpropertyislocated.Mortgageinsuranceisrequired.
ARMs:Withanadjustable-ratemortgage(ARM),yourloanwillhaveaninitialfixed-rateperiod Afterthefixed-rateperiod,yourinterestratewilladjust upordownaccordingtomarketratesatthetimeofthereset Yourpaymentamountwillvarybasedonanyadjustmentintheinterestrateafterthe fixed-rateperiod,andyourmonthlypaymentmayincrease Yourvariableratecanadjustbiannually,orevery6months,fortheremaininglifeofthe loan
Fixed vs. Adjustable:
Which rate is right for you?
Choose a Fixed-Rate Mortgage if… Youdon’tliketheuncertaintyofanadjustableinterestrate Youwantapredictablemonthlypayment. Youplantostayinyourhomeformanyyears.
Choose an Adjustable-Rate Mortgage if… Youplantomovebeforeyourinterestrateadjusts. Youthinkinterestrateswillcomedowninafewyears,thenyou canrefinance
Youwanttobuildhomeequityfaster,withmoreofeachpayment goingtowardyourloanbalance,notinterest.
Whenitcomestothehousingindustry,thingsmovefast.Thisguideis meanttobeinformational,andIamheretohelp.Consultyourtax advisororattorneyfoquestionsaboutyouruniquesituation.
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