How much money will I have to come up with to buy a home?
- Well, that depends on a number of factors, including the cost of the house and the type of mortgage you get. In general, you need to come up with enough money to cover three costs: earnest money– the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house; the down payment, a percentage of the cost of the home that you must pay when you go to settlement; and closing costs, the costs associated with processing the paperwork to buy a house.
When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies. If you buy a HUD home, for example, your deposit generally will range from $500 – $2,000.
The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. That’s why many first-time homebuyers turn to HUD’s FHA for help. FHA loans require only 3% down – and sometimes less.
Closing costs – which you will pay at settlement – average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won’t be caught by surprise. If you buy a HUD home, HUD may pay many of your closing costs.
Can I become a homebuyer even if I have I’ve had bad credit, and don’t have much for a down-payment?
You may need credit repair, first evaluate your credit score online with a quality credit company. If you need credit repair or if you are in doubt, contact a reliable company that can help you decide. If you need assistance it’s okay. Clean up your issues then keep following the steps below.
How do I know if I can get a loan?
- Answer: Use our simple mortgage calculators ( visit bankrate.com click on mortgage calculator) to see how much mortgage you could pay – that’s a good start. If the amount you can afford is significantly less than the cost of homes that interest you, then you might want to wait awhile longer.
- A broker will know what kinds of mortgages the lenders are offering and can help you choose a lender with a program that might be right for you. Another good idea is to get pre-qualified for a loan. That means you go to a lender and apply for a mortgage before you actually start looking for a home. Then you’ll know exactly how much you can afford to spend, and it will speed the process once you do find the home of your dreams.
How do I find a lender?
- Answer:You can finance a home with a loan from a bank, a savings and loan, a credit union, a private mortgage company, or various state government lenders. Shopping for a loan is like shopping for any other large purchase: you can save money if you take some time to look around for the best prices. Different lenders can offer quite different interest rates and loan fees; and as you know, a lower interest rate can make a big difference in how much home you can afford.
- Talk with several lenders before you decide. Most lenders need 1-3 weeks for the whole loan approval process. You can find FHA-approved lenders in E-TOWN. If you need a mortgage broker or lender again visit 5 banks and 3 mortgage brokers(DO NOT LET THEM PULL YOUR CREDIT) Sit back evaluate who can offer the better deals, then make a decisions which is going to also help you save more money!
- Remember HUD does not make loans directly – you must use a HUD-approved lender if you’re interested in an FHA loan.
- In addition to the mortgage payment, what other costs do I need to consider?
- If your utilities have been covered in your rent, this may be new for you. In addition, you might have homeowner association or condo association dues. You’ll definitely have property taxes, and you also may have city or county taxes. Taxes normally are rolled into your mortgage payment however the ESCORW if paid outside your mortgage you may have to pay .25 bps higher in interest rate. Again, your broker will be able to help you anticipate these costs.
- So what will my mortgage cover?
- Most loans have 4 parts: principal: the repayment of the amount you actually borrowed; interest: payment to the lender for the money you’ve borrowed; homeowners insurance: a monthly amount to insure the property against loss from fire, smoke, theft, and other hazards required by most lenders; and property taxes: the annual city/county taxes assessed on your property, divided by the number of mortgage payments you make in a year.
- Most loans are for 30 years, although 15 year loans are available, too. During the life of the loan, you’ll pay far more in interest than you will in principal – sometimes two or three times more! Because of the way loans are structured, in the first years you’ll be paying mostly interest in your monthly payments. In the final years, you’ll be paying mostly principal.
- What do I need to take with me when I apply for a mortgage?
- Good question! If you have everything with you when you visit your lender, you’ll save a good deal of time. You should have: 1) social security numbers for both yours and your spouse, if both of you are applying for the loan; 2) copies of your checking and savings account statements for the past 6 months; 3) evidence of any other assets like bonds or stocks; 4) a recent paycheck stub detailing your earnings; 5) a list of all credit card accounts and the approximate monthly amounts owed on each; 6) a list of account numbers and balances due on outstanding loans, such as car loans; 7) copies of your last 2 years’ income tax statements; and 8) the name and address of someone who can verify your employment. Depending on your lender, you may be asked for other information.
- When I find the home I want, how much should I offer?
- Again, your real estate broker can help you here. But there are several things you should consider: 1) is the asking price in line with prices of similar homes in the area? 2) Is the home in good condition or will you have to spend a substantial amount of money making it the way you want it? You probably want to get a professional home inspection before you make your offer. Your real estate broker can help you arrange one. 3) How long has the home been on the market? If it’s been for sale for awhile, the seller may be more eager to accept a lower offer. 4) How much mortgage will be required? Make sure you really can afford whatever offer you make. 5) How much do you really want the home? The closer you are to the asking price, the more likely your offer will be accepted. In some cases, you may even want to offer more than the asking price, if you know you are competing with others for the house.
- What if my offer is rejected?
- They often are! But don’t let that stop you. Now you begin negotiating. Your broker will help you. You may have to offer more money, but you may ask the seller to cover some or all of your closing costs or to make repairs that wouldn’t normally be expected. Often, negotiations on a price go back and forth several times before a deal is made. Just remember – don’t get so caught up in negotiations that you lose sight of what you really want and can afford!
6. So what will happen at closing- you actually are getting ready to sign for your new home?
- Basically, you’ll sit at a table with your broker or banker, the broker/banker for the seller, probably the seller, and a closing agent. The closing agent will have a stack of papers for you and the seller to sign. While he or she will give you a basic explanation of each paper, you may want to take the time to read each one and/or consult with your agent to make sure you know exactly what you’re signing. After all, this is a large amount of money you’re committing to pay for a lot of years! Before you go to closing, your lender is required to give you a booklet explaining the closing costs, a “good faith estimate” of how much cash you’ll have to supply at closing, and a list of documents you’ll need at closing. If you don’t get those items, be sure to call your lender BEFORE you go to closing. Be sure to read settlement costs. It will help you understand your rights in the process. Don’t hesitate to ask questions.