Common Questions from 1st time home buyers

Common Questions from First-time
Homebuyers

  1. Why should I
    buy, instead of rent?

    • Answer: A home
      is an investment. When you rent, you write your monthly check and that money is
      gone forever. But when you own your home, you can deduct the cost of your
      mortgage loan interest from your federal income taxes, and usually from your
      state taxes. This will save you a lot each year, because the interest you pay
      will make up most of your monthly payment for most of the years of your
      mortgage. You can also deduct the property taxes you pay as a homeowner. In
      addition, the value of your home may go up over the years. Finally, you’ll enjoy
      having something that’s all yours – a home where your own personal style will
      tell the world who you are.

  2. What are
    “HUD homes,” and are they a good deal?

    • Answer:
      HUD homes can be a very good deal. When someone with a HUD insured mortgage
      can’t meet the payments, the lender forecloses on the home; HUD pays the lender
      what is owed; and HUD takes ownership of the home. Then we sell it at market
      value as quickly as possible. Read all about buying a HUD home. Check our
      listings of HUD homes and homes
      being sold by other federal agencies.
  3. Can I become
    a homebuyer even if I have I’ve had bad credit, and don’t have much for a
    down-payment?

    • Answer:
      You may be a good candidate for one of the federal mortgage programs. Start by contacting one
      of the HUD-funded housing
      counseling agencies
      that can help you sort through your options. Also,
      contact your local government to see if there are any local homebuying programs that might work for
      you. Look in the blue pages of your phone directory for your local office of
      housing and community development or, if you can’t find it, contact your mayor’s
      office or your county executive’s office.
  4. Are there
    special homeownership grants or programs for single parents?

    • Answer:
      There is help available. Start by becoming familiar with the homebuying process
      and pick a good real estate broker. Although as a single parent, you won’t have
      the benefit of two incomes on which to qualify for a loan, consider getting
      pre-qualified, so that when you find a house you like in your price range you
      won’t have the delay of trying to get qualified. Contact one of the HUD-funded
      housing counseling agencies in
      your area to talk through other options for help that might be available to you.
      Research buying a HUD home, as they can be very good deals. Also, contact your
      local government to see if there are any local
      homebuying programs
      that could help you. Look in the blue pages of your
      phone directory for your local office of housing and community development or,
      if you can’t find it, contact your mayor’s office or your county executive’s
      office.
  5. Should I use
    a real estate broker? How do I find one?

    • Answer:
      Using a real estate broker is a very good idea. All the details involved in home
      buying, particularly the financial ones, can be mind-boggling. A good real
      estate professional can guide you through the entire process and make the
      experience much easier. A real estate broker will be well-acquainted with all
      the important things you’ll want to know about a neighborhood you may be
      considering…the quality of schools, the number of children in the area, the
      safety of the neighborhood, traffic volume, and more. He or she will help you figure
      the price range
      you can afford and search the classified ads and multiple
      listing services for homes you’ll want to see. With immediate access to homes as
      soon as they’re put on the market, the broker can save you hours of wasted
      driving-around time. When it’s time to make an offer on a home, the broker can
      point out ways to structure your deal to save you money. He or she will explain
      the advantages and disadvantages of different types of mortgages, guide you
      through the paperwork, and be there to hold your hand and answer last-minute
      questions when you sign the final papers at closing. And you don’t have to pay
      the broker anything! The payment comes from the home seller – not from the
      buyer.
      By the way, if you want to buy a HUD home, you will be
      required to use a real estate broker to submit your bid. To find a broker who
      sells HUD homes, check your local yellow pages or the classified section of your
      local newspaper.


  6. How much
    money will I have to come up with to buy a home?

    • Answer:
      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.

       

  7. How do I know
    if I can get a loan?

    • Answer:
      Use our simple mortgage
      calculators
      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. But before you give up,
      why don’t you contact a real estate broker or a HUD-funded housing counseling agency? They
      will help you evaluate your loan potential. 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.
  8. 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 3-6 weeks for the whole loan approval process.
      Your real estate broker will be familiar with lenders in the area and what
      they’re offering. Or you can look in your local newspaper’s real estate section
      – most papers list interest rates being offered by local lenders. You can find
      FHA-approved lenders in the Yellow Pages of
      your phone book. HUD does not make loans directly – you must use a HUD-approved
      lender if you’re interested in an FHA loan.
  9. In addition
    to the mortgage payment, what other costs do I need to consider?

    • Answer:
      Well, of course you’ll have your monthly utilities. If your utilities have been
      covered in your rent, this may be new for you. Your real estate broker will be
      able to help you get information from the seller on how much utilities normally
      cost. 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. Again, your
      broker will be able to help you anticipate these costs.
  10. So what will
    my mortgage cover?

    • Answer:
      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.
  11. What do I
    need to take with me when I apply for a mortgage?

    • Answer:
      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 your 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.
  12. I know there
    are lots of types of mortgages – how do I know which one is best for me?

    • Answer:
      You’re right – there are many types of mortgages, and the more you know about
      them before you start, the better. Most people use a fixed-rate mortgage. In a
      fixed rate mortgage, your interest rate stays the same for the term of the
      mortgage, which normally is 30 years. The advantage of a fixed-rate mortgage is
      that you always know exactly how much your mortgage payment will be, and you can
      plan for it. Another kind of mortgage is an Adjustable Rate Mortgage (ARM). With
      this kind of mortgage, your interest rate and monthly payments usually start
      lower than a fixed rate mortgage. But your rate and payment can change either up
      or down, as often as once or twice a year. The adjustment is tied to a financial
      index, such as the U.S. Treasury Securities index. The advantage of an ARM is
      that you may be able to afford a more expensive home because your initial
      interest rate will be lower. There are several government mortgage
      programs,including the Veteran’s
      Administration’s programs
      and the Department of Agriculture’s
      programs
      . Most people have heard of FHA mortgages. FHA doesn’t actually make
      loans. Instead, it insures loans so that if buyers default for some reason, the
      lenders will get their money. This encourages lenders to give mortgages to
      people who might not otherwise qualify for a loan. Talk to your real estate
      broker about the various kinds of loans, before you begin shopping for a
      mortgage.

  13. When I find
    the home I want, how much should I offer?

    • Answer:
      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.
  14. What if my
    offer is rejected?

    • Answer:
      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!
       
  15. So what will
    happen at closing?

    • Answer:
      Basically, you’ll sit at a table with your broker, the broker 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 our booklet on settlement costs. It will help you
      understand your rights in the process. Don’t hesitate to ask questions.
       
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About Ryan&Real Estate

Born and raised in Fort Worth, after graduating high school I began my quest for self-employment. I started out in Cosmetology. Learning how to wrap, perm, color and cut. I began practicing, but with the crash of the economy my family and I had to move and I had to leave my beloved clients. After the slow rise of normalcy in day-to-day life, a career in real Estate fell in my lap. As I begin my new life as an agent, I'm constantly searching for more and more information, and what better way to share my findings, than by blogging about it? Enjoy!
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