Now comes the fun part for first-time homebuyers. Now you get to put together your wish list for the house that you really want. You will want to have two lists to work from. One list is your list of needs:
Specific Number of Bedrooms, Specific Number of Bathrooms, Square Footage, Location, Etc.
These are the things that you cannot budge on. These may include a lot of other things like specific school districts or distance from your place of employment. That is your primary list. Your second list is your wants; things that you would love to have but are not a deal-breaker if they are not included. Things like: Pool, Attic Bedroom, Finished Basement, Multi-Car Garage, Etc.
After you have completed these steps, it is at last time to call in a pro. You have everything you need to give your agent a good idea about what you are looking for. Now let your agent take you through the next exciting steps! Contact TRE now to discuss your goals for buying a home.
Most buyers are going to need some type of financing to purchase their new home. Understanding the different types of mortgages out there can help you figure out just which one will work best for your situation. Here are the different mortgage types, how they work, and how to choose the right one.
The fixed-rate mortgage is the most standard type of mortgage for those who intend to stay in their homes. The benefit of this type of mortgage is that the monthly payments do not change. The downside is that neither the interest rate nor monthly payment amount ever goes down. Whatever the interest rate is at the time that your loan starts is the rate that you will have over the life of the loan.
These types of loans are most attractive when interest rates are low so that buyers can lock in that interest rate. As with all home loans, your particular situation will dictate which loan is best for you. Here is how each type of fixed-rate mortgage stacks up against the other: - * 15-Year Fixed Rate Mortgage: Monthly payments are the highest for 15-year mortgages; however, equity builds faster too. The loan is paid off in half the time of other FRMs.
This is the type of loan for buyers who want the stability of a regular monthly payment but want to pay the loan off quicker. - * 20-Year Fixed Rate Mortgage: As you might suspect, the 20-year loan is the middle ground between the other two FRMs. The loan is paid off quicker than a 30-year loan. That means that the amount of interest paid over the life of the loan is significantly less than for a 30-year mortgage. - *30-Year Fixed Rate Mortgage: Most buyers who choose fixed-rate mortgages go for the 30-year loan. It’s the most stable FRM, with lower monthly payments than either a 15 year or 20 year mortgage. It is easier to qualify for a 30-year mortgage and you can claim a bigger tax deduction each year. This loan is for people who plan to live in the same place for a long time.
Just as the name implies, the rates on adjustable rate mortgages change. The introductory rate for an adjustable-rate mortgage or ARM is usually lower than a fixed-rate mortgage. However, over time, the rate fluctuates with interest rates. That means that even if you get in at a low rate, you could end up paying a really high monthly mortgage payment when interest rates go up. The bank that supplies your loan calculates your interest rates based on a particular index. It is very important to understand the formula your lender will use and to get it in writing when choosing an ARM. Lenders are capped at a certain amount of interest that they can charge you. Still, when rates go to their highest level, will you be able to afford the monthly payment? That is a very important question to figure out the answer to before you take out an ARM.
Convertible ARMs offer a low introductory rate and convert to a fixed-rate mortgage after a specified number of years. When interest rates are low, this can be a very affordable option. However, be aware that when the loan converts, your fixed rate will be set at the future interest rate, not at the lower introductory rate.
Finally there are two main government loans that homebuyers can take advantage of. They offer easy qualification, low fixed interest rates, and affordable monthly payments. However only certain people will qualify:
FHA Loans: Made for low-income Americans. Qualifications for this loan are based on income.
VA Loans: Service members, veterans and their spouses are eligible for VA loans. The qualifications differ depending on the branch of service and length of time in the service. VA loans are capped based on a calculation of average home prices from state to state.
Choosing the Right Mortgage
A qualified agent can help you to decide which mortgage type is best for you. Many agents like TRE can help you navigate the process and advise you along the way. Speak to TRE today about choosing the right mortgage for you!
You’re interested in buying a home, which means you probably have a lot of questions about the process. While there are dozens of questions that any first-time homebuyer has, this is a quick rundown of the most common questions about home buying. Below you will find the answers to those questions to help you get a better understanding of what to expect.
Is it cheaper to buy than to rent?
That is the 20,000 dollar question! The short answer is yes – kind of. If you pay rent for the same length of, say, a 15-year fixed-rate mortgage, your monthly rent payment is likely less than the monthly mortgage payment on a 15-year mortgage. But at the end of those 15 years, as a renter you don’t own the property; while as a homeowner, you do.
One advantage of being a renter is that you do not have to pay for upkeep and maintenance. If you bought a home that needed massive amounts of repairs, you may end up spending more than the renter over those 15 years. Still, even after paying more, you have an extremely valuable asset when the home is paid off. It can be resold for more than what you paid for it and you have equity that you can borrow against that a renter does not.
Can I buy a home even if I have bad credit?
Today, since the housing collapse, lenders have tightened up credit standards. However, it is always best to speak with a mortgage lender to determine exactly what you can be approved for. There are a number of different loan types that don’t require a sterling credit score. In short, don’t rule out buying a home until you’ve talked to a professional.
Generally a lender will require at least a 5% down payment on your home. That number increases the more expensive the home is. A good rule of thumb is to only buy a home when you are able to put at least 20% down up front. That will reduce your monthly mortgage payment, give you some equity right away, and will help you pay off the loan faster. Also, with a down payment of 20% and up, you likely won’t have to pay Private Mortgage Insurance (PMI). There are some programs, such as the VA Loan, that can require 0% down.
What costs are involved with buying a home besides the down payment?
First of all, there are closing costs, which typically are less than 5% of the price of the home. You’ll also want to factor in inspection and appraisal costs. If you buy a condo or buy a home in a planned community, you may have to pay HOA fees or condo board fees. Lastly, you will now have to pay property taxes…on the plus side you will be able to deduct those costs on your taxes at the end of the year!
Should I use an agent?
Yes! It is possible to buy a home without using an agent, but why not get an expert advice if you can get it? An agent negotiates the deal on your behalf, assists you through the financing process, and has up-to-date market information to get you the best deal. You can save yourself a lot of stress and wasted energy by finding a trustworthy experienced agent. TRE is more than qualified to help you with the entire home buying process. Give a call now to get answers to your specific questions!
After you have found the home that you want, made the offer, and gotten the seller to accept it, you have two more hurdles left to clear before the home is yours. It can be a very tense period for both buyers and sellers – but it doesn’t have to be! One way to survive escrow and closing is to understand the process. If you are using an agent for the transaction, they will help guide you through the process. If you are doing it on your own, you have to have a clear understanding of all of your and the seller’s obligations. Either way, it doesn’t hurt to know what to expect. Here is what you need to know in order to not only survive escrow and closing, but to close the deal smoothly.
By the time you are ready to put your earnest money deposit into escrow, you and the seller already have an agreement in place for the purchase of the house. That agreement includes contractual obligations that must be satisfied before the deal is finalized. While those things are being done, a neutral third party will hold your down payment in escrow until all terms are satisfied.
This is the step where money starts to change hands, specifically your money. Whatever earnest money deposit you settled on will go into escrow, and the process typically takes 30 days (sometimes more, sometimes less). A title company, escrow officer, or attorney usually is used as the intermediary who holds the money in escrow. Funds do not get deposited until after all of the terms of your agreement have been satisfied. Still you will have to keep funds available in your account so that when you are ready to close, the deposit goes through. A bounced check could ruin the deal and give the seller an out if they are looking for one.
Two of the main contingencies written into almost all home purchase agreements are financial contingencies and inspection contingencies. There may be many other requirements listed in your contract. These are the hurdles that must be cleared before your escrow check gets cashed, the deal is closed, and the home is yours. Inspection Contingency: The inspection contingency basically allows you to back out of the deal if after the home is inspected some major issues that were not disclosed are discovered. This clause protects the buyer.
Financing Contingency: The financing contingency is designed to guarantee that you have the funds to purchase the home. If you are waiting on a loan approval and your loan is not approved, the deal is off. That is why it is best to get pre-approved long before you get to this step. This clause protects the seller.
At the closing you meet with your agent, the seller’s agent, the seller, and all other interested parties. This is called the settlement or the closing. This is where all contingencies are verified, final documents are signed, and the deed is transferred. There are fees associated with the close, which are paid at the settlement. Typically closing costs are less than 5% of the cost of the home. It is a good idea to get a title search done – in fact, this is often a requirement if you’re getting a mortgage – so that you can verify the validity of the title and make sure that there are no issues of ownership or liens on the property. Different localities have different requirements for transfer of ownership. Your agent will be able to help verify that you have met all of them.
If you are obligated to pay HOA fees, those will usually have to be paid before close. You will need to get the utilities turned on in your name. And you will have to have homeowners insurance in place. This can take some time; therefore, you should do it as soon as your agreement is in place. Proof of insurance is required at the settlement. Once all parties have agreed that everything is copacetic, your escrow check gets deposited and you get the keys! You are now a homeowner – congratulations!