The home buying season is heating up and if you're thinking about buying your first home, you'll want to be prepared. Here is a "Checklist" from realtor.com and Move Inc. to see if you're ready and your dream is in reach.
1. Get your financial house in order
Before you decide to buy a home, it’s essential to make sure your credit is in good shape and repair any damage previously done.
Have enough money set aside for a down payment. You will need at least 3.5% of the sale price if you are getting an FHA loan. a 20% down payment will do away with mortgage insurance, but it's not worth it if you are living on the edge. Also, expect to pay 2.5% in closing costs.
2. Don't fall in love with a house you can't buy
Find out how much you can afford to spend by getting prequalified with a lender.
Look for special loans available from FHA and government sponsored loans for first-time home buyers. That can reduce the amount of money you'll need to get into a home.
3. Learn the lingo
It’s important to get familiar with the processes and terminology associated with home buying. Here are a few key terms from MortgageMatch.com to add to your vocabulary:
- Bait Rate: Misleading mortgages with low rate promises and no contingencies generally for those with extraordinary credit. Rates are based on: credit, debt-to-income and loan-to-value ratios, the size and type of loan, property location, and the day you lock your rate, etc. The loan isn’t locked until the application is accepted. By then, it may be too late to find a better rate from another lender.
- Basis Point: A term used in the mortgage industry which simply means 1/100th of 1 percent.
- Closing Costs: The fees required to process and close your loan. They’re a cash obligation running from three to five percent of the purchase price. Motivated sellers might pay a portion of these costs.
- FHA: Federal Housing Administration, the Federal Government Agency that oversees the US Housing market. FHA Loans are loans insured by the Dept. of Housing and Urban Development.
- FRM and ARM: A Fixed Rate Mortgage Loan (FRM) is a loan where your interest rate stays the same for the life of the loan. ARMs are Adjustable Rate Mortgages with variable interest rates that fluctuate based on an agreed-upon index.
- GFE: The Good Faith Estimate (GFE) is a document explaining all costs involved in getting a loan.
- TIL: The Federal Truth-in-Lending Form is a document that spells out the costs and fees of the loan.
- Per Diem Interest: Interest you pay per day, from the day you close to the last day of the month.
- Underwriting and Underwriting Fees: Underwriting is a process the lender performs to qualify a borrower for a loan and the fee is what you pay the lender at closing to cover evaluating the risk involved with loaning you money.
- Warranty Deed: A legal document guaranteeing the seller has a right to sell a property, which is very important if you are considering a distressed or discounted property.
4. Check rates and find the right mortgage
There are a number of websites, such as MortgageMatch.com, that post mortgage rates in real time.
Sue Stewart, senior vice president for Move, Inc says you'll have the best chance of succeeding in your home purchase if you prepare early. “If you want to land the best mortgage that fits your needs, educate yourself on your financial situation, get your documentation together and find a lender you trust."
5. Find a REALTOR® and go shopping
Finding a licensed real estate professional will make the process smoother and easier to understand. I am a full-time full-service agent who will assess your needs and narrow in on those homes that fit those needs. I will identify potential obstacles and tackle them before they become issues and I will be with you every step of the way from contract to close. My service includes communication, education and satisfaction. If you are in the market for a real estate professional who will work for you, contact me at 503-318-1918.
6. Not ready now? Here's how to prepare
If now isn’t the right time to buy a home, make a plan with a target date for when you expect to be ready. Improving your credit, paying down debt, stabilizing your work history, and calculating exactly how much you can afford, are the best ways to prepare for your future home purchase. It’s also important to refrain from making any new large purchases or applying for new credit.
7. Visit my website for hassle free, no obligation shopping and find out more about my services at jolynnwinter.kwrealty.com
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