Home Buyers Guide

Purchasing a home is the largest, and most rewarding, investment you will ever make. Unfortunately, there is also much uncertainty surrounding the home buying process. This often scares potential home buyers away from an otherwise very beneficial opportunity. Hopefully, the following information will help to ease your mind and get your ready to make the jump into home ownership.

5 Common Home Buyer Mistakes
  1. They don’t ask enough questions of their lender and miss out on the best deal.
  2. They don’t act quickly enough to make a decision and someone else buys the house.
  3. They don’t find the right real estate professional who is willing to help you through the homebuying process.
  4. They don’t do enough to make their offer look good to a seller.
  5. They don’t think about resale before they buy. The average first-time buyer only stays in a home for four years.

Selecting An Attorney
When choosing an attorney, you should shop around and ask what services will be performed for what fee. Find out whether the attorney is experienced in representing home buyers. You may wish to ask the attorney questions such as:
  • What is the charge for negotiating the agreement of sale, reviewing documents and giving advice?
  • Will the attorney represent anyone other than you in the transaction?
  • Will the attorney be paid by anyone other than you in the transaction?

Pre-Qualifaction and Pre-Approval
Many buyers apply for a loan and obtain approval before they find the home they want to buy. Why?

Pre-Qualifying will help you in the following ways: Generally, interest rates are locked in for a set period of time. You will know in advance exactly what your payments will be on offers you choose to make. You won’t waste time considering homes you cannot afford.

Pre-Approval will help you in the following ways: A seller may choose to make concessions if they know that your financing is secured. You are like a cash buyer, and this may make your offer more competitive. You can select the best loan package without being under pressure.

How Much Can You Afford?
There are three key factors to consider:
  1. The down payment
  2. Your ability to qualify for a mortgage
  3. The closing costs associated with your transaction

Down Payment Requirements:
Most loans today require a down pay ment of between 3.5% and 5.0% depending on the type and terms of the loan. If you are able to come up with a 20-25% down payment, you may be eligible to take advantage of special fast-track programs and possibly eliminate mortgage insurance.

Closing Costs:
You will be required to pay fees for loan processing and other closing costs. These fees must be paid in full at the final settlement, unless you are able to include them in your financing. Typically, total closing costs will range between 2-5% of your mortgage loan.

Qualifying For The Mortgage:
Most lenders require that your monthly payment range between 25-28% of your gross monthly income. Your mortgage payment to the lender includes the following items:
  • The principal on the loan (P)
  • The interest on the loan (I)
  • Property taxes (T)
  • The homeowner’s insurance (I)

Your total monthly PITI and all debts (from installments to revolving charge accounts) should range between 33-38% of your gross monthly income. These key factors determine your ability to secure a home loan: Credit Report, Assets, Income, and Property Value.