Understanding The Process Is Power

The Home Buying Process- Step by Step

Buying a home can be a very intimidating process, especially if you’ve never done it before. So the first thing you should do before you start the home buying process is to figure out whether owning a home is right for you. It may or may not be and this decision depends on you and what your circumstances are. Take into account that if you do buy a home, there are extra responsibilities and costs that go along with owning a home-such as lawn care, home maintenance and repairs, etc. Step 1: Check Your Credit Report & Score Before getting a mortgage or any kind of loan, you should always check your credit. According to the law, you’re allowed to receive one free copy of your credit report per year. You can do this by visiting Annualcreditreport.com. Scores range from approximately 300 to 850; generally, the higher your score, the better loan you’ll qualify for. Don’t forget to check your report for errors. If there are any, dispute them. It may help your credit score.    However you should always keep in mind that your lender will have to pull their own report as they typically cannot use the report from a third-party.  Often the scores do not match exactly.  Still you should monitor your free report so as not to be substantially surprised. . Step 2: Figure out How Much You Can Afford You can calculate how much you can afford by starting online. There are several online mortgage calculators that will help you calculate an affordable monthly mortgage payment. My favorite is http://www.ApprovedByGerrmaioud.com as it comes in the form of a mobile App and with a  direct link to a mortgage expert for advice.    Remember that you don’t always have to put down 20 percent as your parents once did. There are loans available with little to no down payment. An experienced home loan expert can help you understand all your loan options, closing costs and other fees. Step 3: Find the Right Lender and Real Estate Agent To find the right mortgage lender It’s best to shop around. Get recommendations from your friends and family and check with the Better Business Bureau. Talk to at least three or four mortgage lenders. Ask lots of questions and make sure they have answers that satisfy you. Make sure to find someone who you are comfortable with and who makes you feel at ease. I recommend this guy : Once you have the right mortgage lender, make sure you at least get a pre-approval. Pre-qualifications are only a guess based on what you tell the lender and are no guarantee, whereas a pre-approval will give you a better idea of how big a loan you qualify for. The lender will actually pull your credit and get more information about you. However, you could even take it one step further by getting an actual approval before you start home shopping. That way, when you’re ready to make an offer, it will make the sale go much quicker. Besides, your offer will look more appealing than other buyers since your financing is guaranteed.  In fact some lenders are capable of getting you a Loan commitment even before you find a property. Step 4: Look for the Right Home Make a list of the things you’ll need to have in the house. Ask yourself how many bedrooms and bathrooms you’ll need and get an idea of how much space you desire. How big do you want the kitchen to be? Do you need lots of closets and cabinet space? Do you need a big yard for your kids and/or pets to play in? Once you’ve made a list of your must-have’s, don’t forget to think about the kind of neighborhood you want, types of schools in the area, the length of your commute to and from work, and the convenience of local shopping. Take into account your safety concerns as well as how good the rate of home appreciation is in the area. Step 5: Make an Offer on the Home Now that you’ve found the home you want, you have to make an offer. Most sellers price their homes a bit high, expecting that there will be some haggling involved. You can  get a list from your real estate agent to find out how much comparable homes have sold for. Once you’ve made your offer, don’t think it’s final. The seller may make a counter-offer to which you can also counter-offer.  Once you’ve agreed on a price, you’ll make an earnest money deposit, which is money that goes in escrow to give the seller a sign of good faith. Step 6: Get the Right Mortgage for Your Situation There are many different types of mortgage programs out there, but as a first-time home buyer, you should be aware of the three basics: adjustable rate, fixed rate and interest-only.

• Adjustable rate mortgages (ARMs) are short-term mortgages that offer an interest rate that is fixed for a short period of time, usually between one to seven years. After that, the interest rate can adjust every year up or down, depending on the market. These are good for people who don’t plan on living in their home very long and/or are looking for a lower interest rate and payment.
• Fixed-rate mortgages are more traditional and offer a fixed interest rate (and thus a fixed monthly payment) for a longer period of time, usually 15 or 30 years, though they’re available in 20 or 25 year terms. These are good for people who like a predictable payment and plan on living in their home for a long time.
• Both fixed and adjustable rate mortgages can have an interest-only payment. What this means is that for a certain amount of time during the loan term, you’re allowed to pay only enough to cover the interest portion of your payment. You can still pay principal when you wish, but don’t have to if your budget is tight. There is a myth that with interest-only mortgages, you don’t build equity. This is not necessarily true, since you can build equity through home appreciation. The benefit to interest-only mortgages is that you increase your cash flow by not paying principal.

Remember to ask your mortgage lender or mortgage banker lots of questions about which mortgage is right for you and your situation. Step 7: Close on Your Home Make sure you get a home inspection before you close. It will be well-worth the money spent since it ensures the property’s structural soundness and good condition. Setting the closing date that is convenient to both parties may be tricky, but can certainly be done. Remember that you may have to wait until your rental agreement runs out and the seller may have to wait until they close on their new house. Be sure you talk to your mortgage banker to understand all the costs that will be involved with the closing so there are no surprises. Closing costs will likely include (but are not limited to) your down payment, title fees, appraisal fees, attorney fees, inspection fees, and points you may have bought to buy down your interest rate.

Step 8: Move In!

You’ve got your mortgage, closed the deal and now it’s time to move in! Whether you use a mover or not is up to you, depending on your financial situation and how much stuff you have to move; perhaps also, whether you have a lot of friends willing to help you move. Either way, you’re done with the home buying process! Just start unpacking and start enjoying your first home! Buying a home for the first time doesn’t have to be a hassle if you’re prepared and you know what to do and when to do it. Choose an experienced home loan lender and a friendly, knowledgeable real estate agent-they are the key to helping you have a smooth home buying experience!

Edit By Gerrmaioud Chape Original By Diane Tuman

Knowing is half the battle !

How Much House Can I Afford?

If you wonder how lenders determine how much house you can afford and would like to run your own numbers then you’re in the right place.

Believe it or not, the qualification calculations are so simple a financial calculator is not necessary; you’ll need your monthly debt, monthly income and a basic calculator – or you can run your numbers manually.

Mortgage professionals use debt-to-income (DTI) ratios to qualify you for a mortgage. This ratio takes into account all of your monthly obligations, your monthly income and the monthly payment of your new home (as you can see everything is based on monthly numbers).

To get a visual take a look at this :

First we will begin with a few mortgage terms:

Monthly Gross Income: This is your monthly income before any deductions (i.e. taxes, 401k, insurance) and includes any bonuses, commission, child support and/or alimony received.**

Monthly Debt: This is anything found on your credit report such as cars, credit cards and other loans – only the minimum payments are used. Utility bills being reported do not count as a monthly debt.**

**If you are paying child support, add the monthly child support payments to your monthly debt. If you are paying alimony, the majority of the time alimony will be added to your monthly debt; however, there are some lenders that will require alimony to be deducted from your gross monthly income. You’ll need to discuss the details with your chosen mortgage professional. 

Proposed Housing Payment:  This is the amortized principal and interest payment, property taxes and homeowners insurance for the house you are purchasing.

Now let’s look at the numbers:

For this example we will assume the purchase of a single family home with no mortgage insurance. The purchase price is $200,000 with a 20 percent down payment. Also, the payment calculated includes monthly taxes of $250 and homeowners insurance of $66.

Monthly Gross Income: $4,166 (this is $50,000 annually)

Monthly Debt: $650

Monthly Housing Payment: $1068

We now have all of our pertinent information, let’s do the math!

$1068 (mortgage payment) / $4166 (income)  = 25%

$1068 (mortgage payment) +$650 (debt) / $4166 (income)  = 41%

Your DTI is 25%/41% –  these are good ratios. Ideally your back-end ratio (this is the 41%) should not exceed 43%, but there is some room as DTI limits will vary slightly from lender to lender.

You don’t want to become a slave to your mortgage so be realistic about how much you can afford and be very clear about your financial goals.

Edited By:  Gerrmaioud Chape

By Selena Garcia

The Mortgage Brokers Bag Of Tricks

 

These four loans may be off your radar, but they can save you big bucks depending on your home-buying situation and the Broker you chose to Acquire your mortgage. 

Buying a home is one of the biggest investments you’ll ever make, so it’s no wonder there are plenty of mortgage options for financing your purchase.

Unfortunately, some loan officers or bank employees may be less forthcoming with your mortgage options, ( Not I ) especially if the loan requires extra steps for securing approval, says Gerrmaioud Chape  loan officer with Absolute Home Mortgage Inc. in New Jersey.  Sometimes programs are new and misunderstood by lenders as well.

Whatever the reason, you deserve to have all the cards on the table when deciding what home loan is best for you. The good news? We’ve targeted a few of the lesser-known loans and asked lending pros to explain their terms and suggest who might benefit from them.

Read on for a list of loans you may have overlooked – and why you may want to pay closer attention to them.

Mortgage #1: The FHA 203 (K) Loan

Have you always wanted to turn a fixer-upper into a dream home, but don’t exactly have the extra cash lying around to make it happen? If so, the FHA 203 (K) loan could be right for you.

According to Doud, the FHA 203 (K) program is a rehabilitation loan made through government-approved lenders, but insured by the FHA. The loan allows borrowers to rehabilitate a home and include the renovation  costs in the mortgage. This loan is great if you’re tight on dough, says Doud, because down payments are often lower in this program and those approved often qualify for a larger loan sum since the home appraisal is calculated using the price of the home after the renovation work is completed. (Note : Gerrmaioud at Absolute Home Mortgage is an expert with these loans and can even go as far as helping you to secure a contractor that fits your specific needs.) 

Why it’s under-the-radar: “The FHA 203 (K) loan is intimidating to many loan officers because of the extra steps during the mortgage process,” says Doud. “Therefore, many do not want to bring this option up.” So if you’re looking at a house that’s got a great price tag, but needs major work to be habitable, or you’re a current homeowner whose house needs a repair or addition and you could refinance with this loan, best to bring up the FHA 203 (K) instead of assuming your loan or bank professional will.

Who benefits and how big: “The FHA 203 (K) is a great option,” says Doud, particularly for someone who wants to buy a home, make repairs, and needs to borrow money to do it. “Prospective buyers can buy a home at a reduced cost [because it needs work] and improve the value of it by fixing the property up.”

Mortgage #2: The 10-Year Loan

In the world of mortgages, two numbers tend to get all the attention – 30 and 15. These figures refer to the duration of payments for two of the most common mortgages. That is, one payment plan that spans 30 years and one that’s half as long at 15 years. But have you ever heard of the 10-year plan? Think of it as the 30- and 15-year loans’ faster brother.

Why it’s under-the-radar: “To pay a mortgage off in 10 years is going to greatly increase the monthly payment,” says Doud.  This may prevent loan officers from bringing it up in the first place, particularly for clients who may be first-time homebuyers who are not used to making sizeable monthly payments. “Typically most people can’t afford it.”

Who benefits and how big: If you’re thinking of refinancing and are comfortable with a short-term loan – meaning you have the job security and cash flow to afford larger monthly payments – this loan option could be for you, says Doud.

“A 10-year dramatically reduces the interest paid over the term of the loan, even beyond what a 15-year offers,” says Robert Spinosa, a home loan professional.

Additionally, if you’re headed for retirement, this mortgage may be especially advantageous. “I think it’s a great tool when a borrower is nearing retirement and has also addressed the other categories pertinent to financial well-being,” says Spinosa. In other words, if you have more money saved up from working, paying off your home at a faster rate may be easier as you get closer to retirement.

Mortgage #3: Conforming Adjustable-Rate Mortgage (ARM)

You may have heard of adjustable-rate mortgages, or ARMs, where the interest rate at which you pay back your loan can fluctuate (based on the market) throughout the duration of the loan. If you’ve overlooked this loan due to fear of the volatile market, you may want to take a step back. Depending on your circumstances, ARMs could be the most cost-effective option for you.

Why it’s under-the-radar: Quite frankly, after the last housing crisis, ARMs got a bad rap after rates shot up and homeowners were unable to pay their new, higher monthly payments. But there are various ARM products available that may offer less risk for borrowers. Hybrid ARMs, for example, have a period of fixed interest rates, while conforming ARMs actually have caps on the amount that rates can go up or down.

Who benefits and how big: “The lower initial payments are the biggest benefit,” says Doud. So, if you’re only planning on being in your home for a short period of time, taking advantage of the lower initial rates could be extremely beneficial for you.

“Someone that plans on moving during the fixed-rate period of a hybrid ARM would benefit most because they will pay less interest than the fixed rate,” adds Doud.

Mortgage #4: Equity Share Down Payment Funding

If you’re having trouble coming up with a down payment, you may want to consider an equity share down payment funding.

With this option, Spinosa says a lender will match the borrower’s down payment funds up to 12.5 percent in exchange for a percentage of future gains when the home is eventually sold.

“The equity share company provides funding with no payments or interest charged on the matched down payment,” says Spinosa. “But the lender will capture a percentage of the appreciation when the home is eventually sold.”

But be aware that the equity share arrangement works both ways. If there is depreciation over time, Spinosa says, it is shared between the homeowner and the equity share company at the time of sale.

“Homebuyers are informed up front that should they sell within the first three years, there are limitations on what can be realized both up or down,” says Spinosa. “The equity share arrangement’s purpose is to be a longer-term solution. It is not intended for investors or those who wish to flip the property quickly.”

Why it’s under-the-radar: “The equity share is fairly new, and that’s why most do not know about it,” says Spinosa. “It’s something that would clearly not be marketed in an environment where home prices could be declining.”

Who benefits and how big: “This program benefits those who either don’t have the funds needed for the down payment or who don’t wish to part with all of those funds for whatever reason,” says Spinosa. “They do have the income to support the loan, however.”

He sees this type of loan helping those who want to purchase in desirable neighborhoods where the down payment can keep some on the sidelines, even when they may be earning great salaries and bonuses.

 Original By Danielle BlundellMarch 14, 2014 8:55 PM

Edit By Gerrmaioud Chape

Spring Into A New Home

The spring and summer months are traditionally the busiest times of year for the residential real estate market. Weather is more cooperative and many families like to move while the kids are on their summer break.

But in recent years spring, for many regions, has meant more homes on the market, but also more buyers, fierce competition and an increase in prices.

If you’re in the market for a house this spring, there are a number of steps you can take to try to give you the advantage over other homebuyers, including:

• If you’re going to work with a Realtor or real estate professional, get started early. Interview three or four, get references and let the person you choose know exactly what you’re looking for.

• Get your loan pre-approved. This will give an advantage on several fronts. First, it will be done and out-of-the-way. Second, you’ll know how much the bank is willing to loan you so you know in which price range to look. And third, it shows sellers that you’re serious and ready to buy when you make an offer.

• Figure out how much you have for a down payment. NAR says first-time buyers typically make a down payment of 6 percent on a home purchase, and 24 percent of down payment funds were gifts from relatives or friends. If that’s not an option, there are many loan programs that accept down payments of five or three percent. And don’t forget closing costs, which will often run two to seven percent of the property’s purchase price.

• Be ready at a moment’s notice. If you’re in an especially tight market, your Realtorwill be reviewing new listings as soon as they’re available. If he or she finds something that matches your criteria, you’ll want to look at the house and be ready to make an offer — quickly.

• When looking at houses, look at the potential. There are major factors you won’t be able to change — the neighborhood, proximity to work and schools, the basic floor plan of the house (unless you plan on completely renovating), and size of the back yard, among other things. If you’re put off by paint or carpet color or old linoleum floors, envision what the walls will look like with your color of choice and the floors in a material you prefer.

                                                           

• If you’re buying in a seller’s market, listen carefully to your Realtor or agent about how much you should offer. If there’s competition you may want to offer more than the listing price and you shouldn’t try asking for things like carpet allowances or a long closing date. If you know sellers may have several offers in front of them, you’ll want to make yours the best.

• Begin thinking about homeowners’ insurance now. Begin by making sure your credit report is accurate — credit histories are sometimes used to determine whether a company will ensure you, and, if so, at what rate. Also, the Insurance Information Institute says you should get a copy of your loss history report, such as a CLUE report from ChoicePoint or an A-PLUS report from Insurance Services Office. This is a record of home insurance claims you have filed. If you have not filed any insurance claims in the past five years, you won’t have a loss history report. The better your report, the better chance you’ll have of obtaining reasonably priced insurance on the house you buy. And if you’re renting, make sure you have renter’s insurance — it’s helpful to have insurance history when you obtain insurance for your new house.