First Time Home Buyers
Do You Really Want a House? When the toilet starts mysteriously flushing itself in the middle of the night and your water bill rises to $100 in one month, you won't have a landlord to call. Oh, and do you like to mow grass? You will find out when you own your own home how good you had it when there was someone else taking care of issues that arise out of normal wear and tear. You will also find out how expensive keeping property up can be. For example, condo fees are based on the cost of keeping up the exterior of a property, but not the interior. So if you look at condos and wonder why they charge so much, believe me the expenses are there. So... do you want to buy a home....sure you do! See Seven Reasons why now is the best time to buy a house.
Get Qualified. Everyone should find a lender and get qualified to buy a house. It is a good exercise and it gives you a snapshot of where your finances are, and, if you need it, a good lender will tell you what you need to do to get them in order. Listen carefully, If you fall in love with a house and it is a foreclosure, the offer will not be accepted without an approval letter from a lender. While you are scrambling to get one, someone else will end up with the house of your dreams. Pick out a few lenders to talk to. If too many people pull your credit at the same time, it will lower your score. Beware of online lenders. They have a disconnect with the area and all of their information is "virtual". They offer all kinds of bargains that probably won't apply to you but will get your attention. Their financing falls through more often than a stable firm with a local physical office.
Banks make their money on the closing costs. Loans are commodities basically like a stock. They are bought and sold. So usually, all the bank makes is part of the closing costs and other fees they may tack on and then they sell your mortgage to some other entity.
I think the best results come from a company where the loan officers are paid on commission. Local bankers are usually paid the same regardless of whether or not they make your loan. A commission based lender has more incentive to get your loan processed. They make loans or don't eat.
Mark Arnold
How Much House Should You Buy.Ok, you got qualified, great. Now you not only know that you can buy a house, but you also know how much you can spend on one. Do not buy as much house as your lender approves you for unless you are really comfortable with it. Make sure that you have the lender escrow your taxes and insurance so that they are part of your payment. Remember that now you need a lawn mower and you really ( I mean really) need to save money every month for those unexpected expenses down the road. You are also not going to be able to get out of Lowe's or Walmart without going through the home and garden section. It will be your house, you will put plants in the yard and you will paint the rooms. You can't help it.
How Much Cash Will I need
to Close a House. First time home buyers may get closing costs and down payment confused. Closing costs are all of the fees involved to process the loan and a down payment is money you buy the principle amount of the house down with. Today a typical down payment for an FHA loan is 3.5% of the purchase price of the house. So if you buy a $100,000 house you will be required to pay $3500 dollars down, so your loan with be for $96,500 dollars. Closing costs, on the other hand, are expenses essential to getting everything done necessary to transfer the ownership of the house. For example, common charges are, the origination fee (cool name for what the lender makes), transfer taxes, recording charges, appraisal fee, mortgage insurance premium, home owner's insurance, prorated property taxes, title insurance and attorney fees. Closing cost may run about 3.5% also.You may be in luck. That crafty realtor bunch and their lender accomplices have a few tricks up their sleeves. First, if you don't mind being in a small town or a rural area, there is a USDA or RD loan that offers 100% financing. You can't get out of the closing costs but you can get in a house with no down payment, There are income limits but this is an option. The other option is to ask the seller to pay some or all closing costs. This is very common. When negotiating the price of a house the seller will be looking at their bottom line. They will deduct any closing costs you ask for from the purchase price in your offer to determine how much they will net out of the sale. The only way you can get seller paid closing costs is if the seller has the cash to do it. Figuring out how to handle these situations can be tricky. It pays to have an experienced realtor and lender.
Few people buy a house without having a grace period in the contract to check the house out to see if there is some underlying problems that would make the house undesirable. This is the time I call "Kicking the tires and slamming the doors". Most buyers use a property inspector. They have an itemized system to check a large number of items in a few hours. They don't fix anything, they just look for problems. Their fees start at around $300 and are based on square footage. Other inspections that a home buyer may have to spring for are a termite inspection, septic tank inspection, heat and air, or a survey. You may have time and money invested early in the process and you may spend money on a house you do not buy. You really need some cash on hand to handle upfront costs.
Do you still want a house? Please read Seven Reasons why now is the best time to buy a house.