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A: Although there isn’t a single sign that can point to whether or not you’re ready to own your first home, there are some questions you can ask yourself to determine whether it’s the right move for you. Do you love the area you’re living in and want to stay for a while? Are you currently on a savings plan that allows you to pay down your debt while saving a little for the future? Are you handy? Homeownership can entail a lot of maintenance over time. These questions can all help shed some light on whether you are in a position to purchase a home.
A: The real estate market is always changing, but purchasing a home is often more cost-efficient than renting over time. Purchasing a home means investing in your future while renting a home means you’re investing in your landlord’s future. Tax deductions and things like home equity are some other financial benefits of purchasing and owning a home.
A: It’s possible to find a rent-to-own property, but these opportunities are few and far between. This is because rent-to-own properties carry a high risk for owners.
A: Meeting with a banker or lender before purchasing is a wise move, as they can help you determine which range of home prices you may be most comfortable in. Factors like how much you make, the amount of debt you have, and any assets and credit history are all fair game when lenders are determining how much they will allow you to borrow.
A: Just like with any other major purchase, it’s a wise idea to shop around before choosing a mortgage lender. Different lenders can offer different terms. Consider starting with your personal bank or a credit union. The federal government also offers competitive loan rates for many first-time homebuyers.
A: There are many lenders that will work with homebuyers with average credit or no money down. Although your credit score and the amount of down payment you can afford will impact how much you can borrow, there are mortgage options for a wide variety of financial situations.
A: The amount you’ll need for a down payment depends on the cost of the home you want to buy, as well as the mortgage terms you’ve been approved for. Some lenders may even offer down payment options of as little as 3-5%, or perhaps even less. You may also be asked to contribute to private mortgage insurance, which will be added onto your monthly mortgage payment until the insurance is paid off.
A: PMI stands for private mortgage insurance, and it’s something lenders may require in order to protect themselves against buyers that default on their loans. A PMI is paid by the buyer and is added onto their principal and interest so that lenders are repaid in case of a default. PMIs are typically canceled after a mortgage is around 80% paid off.
A: It’s important to note that monthly mortgage payments don’t cover the entirety of monthly expenses tied to homeownership. Typically, monthly mortgage payments cover the principal amount that’s been borrowed, property taxes, homeowners insurance, interest fees, and PMI. Things like utilities, internet service, cable and homeowners association fees, if applicable, won’t be included.
A: Although it’s possible to purchase a home without the help of a professional real estate agent, going through a skilled agent can make the process much easier for you, the buyer. A trained real estate agent will keep up-to-date about current market trends, procedures and the closing process. Their connections with other professionals in the industry, such as lenders and appraisers, can save you a lot of extra legwork. Not to mention, negotiating the best deal may not come as easy to a buyer new to the home buying process.
A: Once a home’s buyer and seller come to an agreement on price, the closing process can begin. A typical closing can take between 30-60 days, during which a contract will be drawn up and signed, and financial documents will be finalized. Home inspection, appraisal, and other legalities are handled during this time. On closing day, both parties meet to sign final documentation and exchange keys.
A: Your debt-to-income ratio plays a significant role in how much a lender will allow you to borrow. Although most lenders may look for a ratio of around 36% or less, the number may be higher or lower.
A: While most mortgage lenders prefer credit scores of 600 or higher to borrow, the answer is not set in stone. The required score may be more or less, depending on the lender.
A: With a 15-year mortgage, the debt is amortized (spread out over) a period of 15 years, after which the loan is paid in full. This type of loan generally has a fixed interest rate, meaning that the mortgage rate you receive when you first take out the loan will be the same for the entire term.
A: Several factors may impact your mortgage rate. Some of these include your credit score, the size of your down payment, the amount you borrow, and what type of home you’re purchasing.
A: While the minimum down payment for a conventional home loan typically falls somewhere between 3% to 5%, there are some credit unions and other lenders that offer 100% financing, which requires no down payment at all.
A: A conditional mortgage approval occurs when the underwriter is mostly satisfied that a borrower meets a particular set of loan guidelines, but there are one or more “conditions” that need to be resolved.
A: If your down payment is less than 20% of the cost of the home, you may be required to pay for Private Mortgage Insurance (PMI).
A: The more educated you are about the different types of mortgage options available, the better. Most people use a fixed-rate mortgage, which is typically set for a period of 30 years. Others like an adjustable-rate mortgage are more appropriate for other buyers. There are also government programs available that you may qualify for. Talking to your real estate broker about the various kinds of loans you qualify for can help you choose the best mortgage for you.
A: Coming prepared can save you a lot of time and effort. You should have things like your social security number (yours and spouse), copies of your checking and savings account statements for the past 6 months, evidence of assets, a recent paycheck stub, a list of credit card accounts and amounts owed, copies of income tax and other similar information.
A: Yes! Talking with a bank can help you understand what type of home you can afford and what kind of options are available in terms of homebuyer programs. A bank can also help you further understand what type of costs you’ll incur while purchasing a home, as well as explain the variety of terms you’ll encounter throughout the process, such as escrows, pre-paid items, down payments and more.
A: Although there are no guarantees, in most cases, the seller pays for the Realtor fees.
A: A short sale is the sale of a property in which proceeds from the sale are less than the balance of the debts secured by liens against the property and the homeowner can’t afford to pay the liens in full. There are several things to consider before purchasing a short sale, including the fact that a foreclosure may still be possible.
A: A foreclosure is a property that is owned by a lender as the result of a borrower’s failure to pay.
A: There isn’t a specific number of homes you should look at before making an offer.
A: Yes. When purchasing a home, you have the option to perform several kinds of inspections, such as home inspection, pest inspection, radon test, and chimney inspection, to name a few. The purchase offer you put in can be contingent upon these things.