1 - What is the process for buying a house?
At our initial consultation, I meet with you to discuss your “wish list” of what you are looking for in a residence. Once we decide to work together, you will sign a Buyer Agency Agreement so that I can represent your interests in the transaction.
The next step is to meet with a lender to decide which financing options are the best and what your buying power is. The lender will review your credit score, employment, and other factors and issue you a Lender Letter of Approval. This reassures the seller that you do have the money to afford that property.
I will enter your “wish list” on Listing Book, the software I use to locate properties in the MLS that meet your requirements. You can let me know, using Listing Book, which properties interest you. We then begin the process of looking at properties in person to find the home that is the best match. I will guide you through the process and ask you questions and look at how values have changed – up or down – in the areas you are interested in buying.
Once you have found a home that meets your criteria, I write an offer for you and present it to the listing agent. There may be some negotiating back and forth before everything is agreed to. But once everything has been agreed to, the contract is ratified and we begin the work of scheduling inspections and providing the lender with any other information required. There’s about 30-40 days between contract ratification and settlement.
We will conduct a home inspection, radon, termite, and any other necessary inspection. Most of these are paid for by the purchaser. If items need fixing, we prepare a written list for the seller to address. You will order your home owner’s insurance, set up utilities in your name, and schedule a settlement time (the date is specified in the contract). The final walkthrough is conducted just before settlement. You will sign your loan documents and other papers at settlement and meet the seller. Keys to your new home will be given to you at settlement.
2 - What types of loan are available?
Your lender will recommend the best loan for you. The type of loan will depend on the amount of down payment, your credit scores, your debt ratios, your income, and other considerations.
These are some of the loans available in today’s market:
- Conventional Loan: Purchaser contributes 20% of the sales price as the down payment
- VA Loan: for military personnel
- FHA Loan: designed for low-to-moderate income borrowers who are unable to make a large down payment. They allow the borrower to borrow up to 96.5% of the value of the home)
- VHDA Loan: A loan program offered by Virginia to assist first-time buyers in purchasing a home in the state. Purchaser must take a homebuyers class and agree to other terms in order to purchase a home.
- Balloon Loan (a large payment of the principal at the beginning or end of time period).
- Seller Financing: In slower markets, the seller may provide financing or be the “bank”. The purchaser will pay a higher interest rate to get the loan.
- Interest Only Loans: the principal doesn’t change; the purchaser is paying the interest on the loan. This can be problematic if the value goes down and the loan is due.
- 203 (K) Loans: A loan that allows the purchaser to borrow more than the price of the property in order to make improvements.
The interest rate on a loan can be either fixed or adjustable. Once you find a property to purchase, you will “lock in” the interest rate which is usually good for 60 days. Fixed rates can be for 15 year loans or 30 year loans. Adjustable rates are tied to economic conditions and are offered for 3, 5, 7, or 10 years.
|
3 - How many lenders should I meet with before I decide who to use?
Meet with two to three lenders in person to get an idea of your buying power. I will give you names of reputable lenders who will work diligently on your behalf. The lender needs to demonstrate a strong record of getting to buyers to settlement and knowing what options are best for you. Remember, the lender is NOT a party to the contract…but you are! If you don’t choose a lender carefully and that lender doesn’t have your loan package ready by settlement, you are in default and will lose your deposit – and the property! A lender may offer you a lower interest rate to entice you to choose him/her. You will need to check the fine print to see what other fees are involved and how much they are. Also, if you switch lenders after a contract is ratified and that lender can’t get the paperwork done in time, you are in default and will lose you deposit!
4 - What should my credit score look like & how do I find out what it is?
The lender of your choice will conduct a credit report as part of the pre-approval process in getting a loan. Higher credit scores will have lower interest rates. You should know what your credit score is. The most important score is your FICO score (Fair Isaac score). Your score is based on whether you make payments on time, the amounts you owe, the length of your credit history, the number of new accounts and credit inquiries, and the types of credit you use. A FICO score above 700 will generally get you a lower rate. A score below 600 could mean that you’ll pay 2 or 3 percent more.
If you are behind on your payments, get caught up. If you have balances near the maximum credit limit, pay them down. The number of credit lines you have matters too.
5 - What are closing costs & how are they figured?
Your HUD-1 statement (prepared by the settlement company) will show the closing costs for the buyer. It includes the lender’s fees, appraisal fee, your earnest money deposit, title fees, recording fees and any other miscellaneous fees.
6 - How much of a down payment should I make?
The down payment is the difference between the selling price and the amount of money you borrow to buy the property. With a conventional mortgage, you're usually expected to make a down payment of 10% to 20%. But you may qualify for an FHA mortgage that requires only a 3.5% down payment.
7 - How do I know how much I can afford?
When you meet with your lender, he or she will determine your gross monthly income. Then he/she will calculate your monthly debt load. This includes credit card debt, installment loans, car loans, alimony, child support and other similar debts. Typically, your monthly housing expenses, including payments for taxes and insurance, should not exceed about 28% of your gross monthly income. Your monthly housing expenses and your total monthly debt combined cannot exceed about 36% of your gross monthly income.
8 - What will I need to apply for a loan?
Here’s a list of what your lender will need:
- Contract for the property: ratified contract, copy of the earnest money deposit check, and a copy of the listing property data sheet
- Employment: Name, address, and phone numbers for employers
- Previous Employment: If you have been with your present employer for less than two years, provide the name address and phone number for previous employers
- W-2 forms: Provide for the past two years
- Tax Returns: Needed for the past two years if overtime, commission, bonus, or tip income is to be used for qualification purposes
- Self-Employed or part owner: year-to-date profit and loss statement complete personal and business tax returns and 1099s for the past two years
- Other income: Such as alimony, child support, disability, VA benefits, social security benefits, rental income
- Paystub: Usually the two most recent ones are required
- Checking and Savings Accounts: Name, address, account numbers, and balances (3 months worth)
- Other assets: Stocks, bonds, cash value of life insurance, vested interest in retirement plans, household items
- Vehicles owned: year, make, and value. If vehicle is less than five years old and has no liens, provide title as evidence
- Current mortgage: Name, address, account number, monthly payments and balances, including any recently paid out accounts
- Charge accounts: Name, account numbers balances
- Other Loan accounts: Personal, student loans, installment loans
- Auto loans: name, address, account numbers, monthly payment, balance
- Alimony, child support
- Photo ID: Driver’s License
- VA applicants: Certificate of eligibility, DD-214 or Statement of Service
|
|
 |
| Click on Link to Search for Homes |
|
| |
|
