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New
Home
If
you are in the market for the first time and don't know where to
start, you've come to the right place. Below you will find answers
to many common questions.
How do I
find the best mortgage?
First you need
to ask yourself these following question, "What are my assets?"
Examples being your primary and supplementary sources of income,
investments, etc... all of which will convey to your loan officer
that you'll be able to make the monthly mortgage payments on your
new home. You need to include such sources of income as any
overtime pay, bonuses, commissions, alimony, child support,
disability, weekend jobs, and so on into this equation. You'll
also need to prove to your loan officer that you've established a
steady history at work -- that you've remained at your current and
previous places of employment for a respectable period, and that
your income is steady and not subject to cyclical or seasonal
factors.
Also, most first-time buyers are renters. The best time to close on
a house is when your current lease ends. Don't sign another
year-long lease if you expect to buy a home before that lease
period expires; otherwise you'll end up with a dent in your
pocketbook from writing rent and mortgage checks. If you can't
time your closing correctly, approach your landlord about a
shorter lease — say, three to six months in length. One
alternative is a month-to-month lease. Or you can ask your
landlord to include an escape clause in your new lease that will
allow you to get out of your lease with 30 or 60 days' notice.
Take time to research!
This is one of the most important financial decisions that you and
your family will ever make. Next to buying a new car or sending your
kids to college your mortgage could be with you for sometimes up
to 30 years. Research the neighborhood, research the rates,
research various lenders and brokers- RESEARCH!!!
Remember buying a house covers many areas and has legal, financial
and emotional considerations to think about. It's good to learn
from the mistakes other home buyers have made so that you won't
find yourself being disappointed and spending $1,000's on the
wrong house. There are far too many variables--type of mortgage,
term, lender and amount of points to mention a few--not to
investigate all of your options. Don't simply accept the first
plan presented to you, whether it is from a mortgage broker, an
Agent or on the recommendation of a friend or relative. Spend time
comparing to get the most advantageous plan for your requirements
and financial situation. Don't get us wrong, owning a home can be
a great and rewarding experience. Take the time needed to make the
best and wisest decision. I know you'll be glad you did!
Wait for
the "right" home!
Many first time buyers
make the mistake that they will, if they look around long enough,
find a home that has a full 100% of their needs and wants. With
the thousands of variables available in housing, including
location, style, size, amenities and condition, this is almost
always an unrealistic goal. There are two potential problems with
this strategy: First, these buyers pass by homes that meet 90% or
more of their requirements only to eventually give up (often
purchasing homes with less of their requirements because they are
worn out!) and second, while they are waiting for the "perfect"
home, housing market prices (and often mortgage rates) continue to
rise, adding expense to their purchase. Instead, it makes sense to
determine the most important of your needs and the most desired of
your wants and selecting a home that meets the majority of them.
Buying in a neighborhood you know nothing about.
We're already
touched on this but again it is a very important factor to think
about. Sometimes first-time buyers will fall in love with a house
in a neighborhood that is inappropriate for them. Even though
you'll live in the house, you'll have to travel through the
neighborhood to get there. Is it a nice neighborhood? Is there
graffiti on every wall? Are there gangs? Is there a neighborhood
crime watch group? Are the neighbors your age? Are there families
around the same age as yours? Is it a transient neighborhood, or
do families stay there forever?
To avoid
making this mistake, spend a lot of time in the neighborhood
before you buy. Drive to and from the house. Sit in your car and
watch your future neighbors come home from work. Listen to how
loudly their children play their favorite rock music. Walk to the
local bar, restaurant, grocery store, and cleaners. Think about
whether or not this neighborhood will make you as happy as the
house.
Buying a
property that's difficult to resell.
Although you say you
don't mind that the house sits next to the local railroad, you
will when it comes time to sell the home. And it's unlikely you'll
be able to easily convince another buyer just how quiet and
peaceful life is there. When buying a home, try not to buy one
that will be difficult to resell because even though you think
you'll be there forever, you won't. Most first-time buyers sell
within five to seven years. Think hard about how you would sell
this home before you buy it. Walk yourself through and point out
all the negatives.
Over-buying the first time. . .
Being "house poor" is a
very uncomfortable existence. A large and beautiful home with
little or no furniture tends to be empty and cold. A life where
almost every dime of your earnings goes to the support of your
house wears thin very quickly and is a frequent cause of family
stress. Pushing yourself right up to--or beyond--your limits
leaves you highly exposed when the inevitable changes to the
national or your personal economy occur. Leave yourself some
breathing room!
Don't take shortcuts with the inspection process.
This can involve
skipping a whole house inspection completely in order to save the
relatively small amount of money involved or it may involve using
a friend or relative with limited experience to conduct the
inspection. In either case, you run the risk of not exposing
potentially expensive or even hazardous defects in the property.
Protect yourself and invest the $200 to $500 for a professional
inspection.
Okay I'm
ready. How much of a down payment do I start with?
One of the first
questions that almost every first time home buyer asks is, "how
much of a down payment am I going to need to start with?" Since
every case is different there is no correct standard answer. Down
payments will vary from 0% (with a VA--Veteran's Administration
loan) to upwards of 25% (with certain "non-conforming" loans). On
an average, most home buyers make down payments in the 5%-15%
range, although your own personal situation may dictate more or
less down payment. When you are factoring money for a down
payment, don't forget about closing costs, which will total in the
2-5% range, payable in cash at the time of closing.
Don't
overextend your budget.
Although the
lender who pre-qualifies you for your loan tells you you're able
to afford a $350,000 home, buying in that price range may stretch
your budget beyond the comfort zone. To avoid feeling pinched,
it's important to understand how you spend your money. You may be
comfortable spending 35 percent of your take-home pay on rent, or
you may prefer to spend less — say, 25 percent.
Write down
everything you spend (down to that last cup of coffee) for
two months. Can you live without buying your favorite group's
latest CD? Would you feel uncomfortable knowing you can go out to
dinner only once a month? That you must eliminate your yearly
vacation? That your children can't have camp or piano lessons and
so on . . .
Don't
choose the wrong mortgage.
Many first-time buyers
have heard from their parents that the only mortgage to get is a
30-year fixed interest rate loan. That's because the generation
ahead of you didn't have the tailor-made financial options buyers
have today. Consider choosing an adjustable-rate mortgage (ARM) to
take advantage of super-low interest rates. Or pick a 10- or
15-year fixed interest rate loan to maximize your deduction, and
save you hundreds of thousands of dollars in interest. Or you
might want to look into a two-step mortgage, which combines a
little of the risk of an ARM with the dependability of a
fixed-rate loan. Explore all the options. Have your lender show
you on paper how much they'll cost you and how they compare with
each other.
What is
Pre-qualification? Does it mean that the loan is approved?
Pre-qualification is the initial step in securing a mortgage. A
lender will analyze your current income, debt and basic credit
history situation in order to qualify you for a maximum loan
amount. This gives you a clear picture of your financial
parameters and a maximum housing price (the mortgage amount plus
your down payment). With pre-approval, the lender verifies your
income, debt and financial picture, approving the loan subject to
a favorable appraisal of the property you select.
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