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What is the difference between "pre-qualified" and "pre-approved"?
If you are "pre-qualified" you have determined, with a loan
officer, what price you can afford based on the down payment, your debts
and the amount the mortgage company will approve for your mortgage. Being
"pre-qualified" is only a determination of your probable credit.
If you are "pre-approved", your credit, employment and funds have
been approved by the lender.
What are closing costs?
Closing costs are an accumulation of charges paid to different entities
associated with the buying and selling of real estate. For buyers, they
are usually about 4-6% of the total sales price of a property. Some of the
closing costs you might encounter are: application fees, appraisal fee,
county taxes, credit report, discount points, documentation fee, escrow
fees, homeowners' association fees, loan fees, mortgage insurance, origination
fees, tax registration and title insurance premium.
What is a point?
One point is equal to 1% of the new loan amount. Whenever government
regulation, state usury laws and/or competitive practices prohibit the lender
from charging a rate of interest that would make the real estate loan competitive
with other fields of investments, the lender must seek some method of increasing
the yield for the investors. By charging "points", the lender
can bring the real estate loan up to those other investments.
What is earnest money?
When you make an offer, you will need to put up an earnest money deposit
as a sign of good faith that you are seriously interested in buying a home.
That deposit becomes a part of the purchase price and is held in a trust
account until there is full acceptance of the offer. Typically, an earnest
money is 3-5% of the offer amount.
What is title insurance?
Title insurance protects the named insured against loss because of defects,
liens, encumbrances, adverse claims or other matters not shown or disclosed
to the new owner that attach before date of policy.
Is VA or FHA financing unfair to sellers?
FHA and VA loans provide purchasers the opportunity to buy homes with
minimal cash investment and at lower interest rates. The result is a larger
market for sellers, who also benefit by receiving all cash for their equity.
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Tips For Home Buyers
How Much Home Should You Buy?
You may have heard a real estate Agent or someone else say, "Always buy the biggest home you can afford. It is a good investment and the larger the investment the larger the return on investment will be".
But is that good advice for you? Maybe, maybe not.
When deciding to buy a home the first thing you need to do is get a loan. Yes, get the loan before you shop for homes. The lender will give you a letter stating how the maximum amount they will lend you given your income, debts, and the amount of cash available for down payment and closing costs.
Now that you know the maximum amount you can borrow and what the monthly payment will be on that amount, ask yourself some questions about your "comfort level". We all have a different comfort level when it comes to debt.
Some things that affect each individuals comfort level are:
Do I worry a little or a lot about money I owe?
Am I comfortable that my job is secure and my income will be stable for the next few years?
Do I reasonably expect to have a considerably larger income in the near future?
Am I willing to change my lifestyle (travel less, eat out less often, keep our car for a few more years) in order to make a house payment?
Think about all of that and then decide what payment you are comfortable with. If it is the maximum amount the lender has stated, fine. But if it is less than that amount, then buy less home.
The new home should be a place of comfort, not a place to sit in and worry about how you are going to pay for it!
Besides, you can always "move up" later if you situation or comfort level changes.
Buyer
Information
Are You Ready To Buy?
Most people who rent
the home in which they live could afford to buy a home with
the right planning.
In order to know about
your homebuying potential, it will be useful for you to
take a look at your income, savings, monthly expenses, and
debt. All of these are important factors in how much mortgage
you can afford and also in how purchasing a home can affect
your monthly budget.
Together the following
four categories are a guide that will give you a
better understanding of your financial situation. Just print
this page, and fill in the blanks for each of the categories
listed. Use this information when you visit the Affordability
Calculator.
1) Review your
income. Purchasing a home may require that you have
a certain amount in savings that can be applied to your
down payment and closing costs. If you don't have a lot
of cash available, there are loan programs available (especially
through FHA and VA mortgage programs) that do not require
much cash payment at closing. Some questions to consider:
- On average, what is
your monthly income?
- Will your income remain
stable in the near future?
- Are you expecting any
increase or decrease in income in the near future?
Here is an example
of some income categories to help you estimate your monthly
income.
|
Income Category
|
Monthly
|
|
Borrower's Salary
|
$ |
| Co-Borrower's Salary |
$ |
| Taxable Interest |
$ |
| Investment Dividends |
$ |
| Other Income |
$ |
2)
Review your savings.
A little savings can help a great deal when planning to
purchase a home. There are some costs that you cannot finance
through your loan; you have to pay those at closing,
the day that you buy your home. Some questions to consider:
-
What portion of your income are you saving?
- Can
you save more money than you are now?
Here is an example of some savings categories to help you
estimate your monthly savings.
|
Savings
Category
|
Monthly
|
| Savings
Account |
$ |
| Checking
Account |
$ |
| Retirement
Fund Contributions |
$ |
| Stocks,
Mutual Fund Investments |
$ |
| Other
Savings |
$ |
3)
Monthly expenses may increase. The
purchase of your home will likely change how much you will
need to spend on expenses every month. If you have trouble
saving now, your finances may be too tight with the purchase
of a home. Some questions to ask yourself:
- How will the purchase
of a home affect my monthly budget and my ability to save?
- Can I support the
additional expenses that the purchase of a home will bring?
- Do I expect to maintain
a stable income for the foreseeable future?
Here is an example
of expense categories to help you estimate your monthly
expenses. This can be useful to determine your current monthly
expenses and to estimate how these expenses will impact
your budget.
|
Expense
Category
|
Monthly
(current)
|
| Utilities |
$ |
| Car
Expenses |
$ |
| Insurance |
$ |
| Medical
Expenses |
$ |
| Clothing |
$ |
| Taxes |
$ |
| Entertainment/Purchases |
$ |
| Child
Support |
$ |
4)
Review your debt responsibilities.
Consider how your debt in relation to your income will influence
a lender's decision on your mortgage loan amount. Carefully
consider how additional debt from house payments, on top
of your existing debt, will restrict your lifestyle. Some
questions to ask yourself:
- How much debt
can I afford to manage comfortably?
- Will I be able to
manage my debt responsibilities through the life of my
loan?
|
Debt
Category
|
Monthly
|
| Credit
Card |
$ |
| Car
Loans |
$ |
| School
Loans |
$ |
| Alimony |
$ |
| Child
Support |
$ |
| Other
Personal Debt |
$ |
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