Many Services allow you to research listings (This is www.Zillow.com) Multiple Listing Service identifies each property with a unique number www.zillow.com
It is critical to do price research, not only for the home you like, but for the homes around it also. The value of neighboring homes affects your potential investment. www.zillow.com
So, you found a home, great!!!! Nowit’s time to bring in the professionals!!
You should like your Realtor, so conduct some interviews! You will potentially be spending many hours with this person and you need to communicate with them very well!This was my lastRealtor (Just anexample)Most reputableRealtors willhave a websitewith listings andfacts. http://www.cbbain.com/Pages/AgentDetail.aspx?AID=3253
Money MattersThe most confusing partof buying a home is alsothe most important part.
Most Common Types of LoansFixed-rate mortgage: This type of home loan carries the same interest ratefor the entire term (length) of the loan. The interest rate makes up part of yourmonthly payment. Its also the only component that has the potential tochange over time. So if you get a mortgage with a guaranteed fixed rate, yourmonthly payment is guaranteed to stay the same -- for the entire life of theloan. more: http://www.homebuyinginstitute.com/mortgagetypes.php#ixzz2DrQiAIa1Adjustable-rate mortgage: These are also referred to as ARM loans forshort. Unlike the previous option, this type of mortgage has an interest ratethat changes over time. This also means that the size of your monthlypayment will change over time. It might adjust up or down, depending onmarket conditions at the time of adjustment. But they usually adjust upward,resulting in a larger monthly payment. http://www.homebuyinginstitute.com/mortgagetypes.php#ixzz2DrRFaH8K Courtesy of: http://www.homebuyinginstitute.com/mortgagetypes.php
Fixed Rate LoanThe Fixed Rate Loan is the most common home loan issued due to theability of the home buyer to budget monthly expenses on a long termbasis. This loan is issued as a 30 year or 15 year loan.Payments on this type of loan stay the same over the length of the loanregardless if federal interest rates change.At the beginning of the loan, a large portion of the monthly paymentwill pay interest, and a much smaller portion of the payment will applyto the principal.Example: Fixed Rate 30 Year loan $200,000 4% Interest RateMonth 1 Payment $954.83 Interest = $666.67 Principal = $288.16Month 180 Payment $954.83 Interest = $432.03 Principal = $522.80Month 360 Payment $955.46 Interest = $3.17 Principal = $952.29Total Money Paid: $343,739.43 - $200,000 Loan Amount = Total Interest $143,739.43
Adjustable Rate Loan (ARM)The Adjustable Rate Loan is one of the least common home loan issued.This loan is a dangerous tool and is only for the financially disciplinedbuyer. The loan interest rate typically starts out lower than a fixed rate loan.If the payment on a fixed rate loan is $1500.00, then it is possible for theARM monthly payment to be $1100.00 initially. This allows some buyers topurchase a more expensive home initially, however many neglect toconsider the increasing interest over the life of the loan. This loan is issuedas a 30 year or 15 year loan.Payments on this type of loan change over the length of the loan. TheInterest amount paid will change with interest rate changes.Example: Fixed Rate 30 Year loan $200,000 3% Initial Interest RateMonth 1 Payment $843.21 Interest = $500.00 Principal = $343.21Month 180 Payment $1,197.81 Interest = $771.08 Principal = $426.73Month 360 Payment $1,365.54 Interest = $11.84 Principal = $1353.68Total Money Paid: $421,230.10 - $200,000 Loan Amount = Total Interest $221,230.10 http://www.bankingmyway.com/real-estate/mortgages/smart-way-use-adjustable- rate-mortgages
Down PaymentDown Payment Amounts vary significantly with numerous variables:• Credit Score• Type of Loan• Value of the Home•Etc…Although the amount necessary for down payment is affected by outsideinfluences, the most important factor to consider is the effect on yourmonthly house payment.The rule of thumb that has been passed down from generation togeneration is that a down payment for a home should be 20%. So, for a$200,000 home, the down payment would need to be $40,000.In the current economy, most families have a very difficult time savingfor a down payment that could amount to a full year salary.Lenders have recognized the need for alternatives to a large downpayment and have developed programs and products to assist withbuying a home.
Paper WorkThe home buying process comes with virtual mountains of paperwork.It is critical to understand that you have a team to help with paperworkand you do NOT have to accomplish this alone.RealtorLender Your TeamTitle CompanyIt is imperative that during the home buying process every piece ofpaperwork must be understood completely. If any part of the process is not completely crystal clear, a subject matter expert must be consulted.
Good Faith Estimate The Good Faith Estimate is supplied by the Lender to keep the home buyer informed of all estimated costs associated with the home purchase. It is considered a “Best Practice”, to sit down in person with a subject matter expert to have this document explained in great detail. The Good Faith Estimate is an “Estimate”. The numbers on the estimate are a best guess by the lender, based on lending experience.http://www.saintlouiscity.com/media/global/Sample_Good_Faith_Estimate.pdf
Good Faith Estimate The Good Faith Estimate is a summary of ALL estimated costs associated with a home purchase. This document comes in many different formats, but the information it contains is very close to the same between different versions. In addition to the loan summary. You should see Escrow information, a summary of Settlement charges, Origination charges, and Miscellaneous charges that will include Taxes, Filing Fees, Title Fees, etc. This document is not to be taken lightly. You will need assistance understanding all of the associated charges.http://www.saintlouiscity.com/media/global/Sample_Good_Faith_Estimate.pdf
Good Faith EstimateThe Initial portion of a Good FaithEstimate will contain the contactinformation and address for boththe Originator (lender) and theBorrower.On the HUD version of the GoodFaith Estimate, the purposestatement provides more helpfulinformation resources. www.hud.gov/respaIt is very important to note, thatthis is a time sensitive document.The terms of time are stated inthis portion of the document, sothat all parties understand thedeadlines that must be met inorder to prevent a change to theestimated cost. http://www.hud.gov/offices/hsg/rmra/res/gfestimate.pdf
GoodFaithEstimateThe Loan Summary portion of a Good Faith Estimate will contain the terms of the loan:•Initial Loan Amount Term (Length) of the Loan•Initial Interest Rate Initial Monthly Mortgage (Payment)Important Questions and Answers follow the initial summary :•Can your interest rate rise? Can your loan balance rise?•Can your monthly payment rise?•Does your loan have a prepayment penalty?•Does your loan have a Balloon Payment? http://www.hud.gov/offices/hsg/rmra/res/gfestimate.pdf
Good Faith EstimateThe Loan Summary portion of a Good Faith Estimate will also contain the terms of Escrow:What is Escrow in understandable terms?Escrow is a process that designates a neutral third party (Usually a title company employee, orescrow company) to collect all terms of the loan, all documentation, and all money to pay forthe terms.Essentially, the Escrow Officer (neutral third party) makes sure all parties meet the obligationsstated in the contract for the home transaction.It is possible that the terms of the loan will require a portion of the monthly payment to bedeposited into an “Escrow” account. This will usually be used for property taxes, homeownersinsurance, etc.This monthly deposit will be transparent to the homeowner. Simply making the monthlypayment to the Loan Servicer is the homeowner’s responsibility. For More Information see: http://www.realtor.com/Basics/Buy/ClosePossess/Escrow.asp?source=web http://www.hud.gov/offices/hsg/rmra/res/gfestimate.pdf
Good Faith EstimateThe Settlement Charges portion of a Good Faith Estimate will contain the terms that thehomebuyer will owe the lender for the loan:Origination Charge is very self explanatory. The homebuyer pays this amount for the servicesand using the lender’s money.Many people are involved in the loan process. This is a way for the Lender to pay theiremployees for working with the homebuyer to get the best servicing possible. http://www.hud.gov/offices/hsg/rmra/res/gfestimate.pdf
Good Faith EstimateThe second area in the Settlement Charges portion of a Good Faith Estimate will contain the information aboutinterest rate and points:Many times a lender will allow the home buyer the opportunity to “purchase” or “sell” points.To purchase 1 point, typically costs 1% of the mortgage amount. For example the loan amount will be $200,000.For $2,000.00 you can purchase 1 point. This will lower the interest rate about ¼ percent. The original loan was 4%interest, purchasing 1 point will drop the interest rate to approximately 3.75%.Considerations:If the homebuyer plans to live in the home for the life of the loan, buying down points can be significantlybeneficial in terms of amount paid for the loan. A home buyer planning to live in the home for a short time (5 yearsor less) will not see the significant benefits.The money to buy points is paid at closing, NOT built into the loan. It is part of closing costs. For More Information: http://www.ehow.com/about_6565090_explanation-mortgage-points.html http://www.hud.gov/offices/hsg/rmra/res/gfestimate.pdf
Good Faith EstimateThe third area in the Settlement Chargesportion of a Good Faith Estimate willcontain the information aboutmiscellaneous charges:•Appraisal Fee•Credit Report•Notary•Title Insurance•Recording Fees•Mortgage Insurance•Home Inspection•Pest Inspection•City, County and State Taxes•Etc.Although the list above is by no meanscomprehensive, the items listed aretypical of settlement costs.Depending on the form used for theGood Faith Estimate, this can be themost confusing part of the process. It iscritical once you reach this point, toconsult your Real Estate Team to haveyour questions answered. Theresponsibility of paying the loan andfees falls only on the new homeowner.Understand this document thoroughly orcontinue to ask questions until you do. http://www.hud.gov/offices/hsg/rmra/res/gfestimate.pdf
Good Faith EstimateGood Faith Shopping Chart:Many prospective home buyers sufferfrom fear at some point in thisprocess. Once the “Dream” home islocated, the shopper is many timesover cautious and becomesdependent on the Lender to “help”them get a home.It is important to remember that aLender wants your business.The home buyer is the consumer.Shop around for lenders, even if yourcredit is not great, shop around.In most cases, the home loan will besold from company to companymany times over the life of the loan,so the original lender that the homeowner built a relationship with and The ultimate responsibility fordepended on, will no longer be the paying for the new home fallsowner of the loan. directly and solely on the buyer alone. http://www.hud.gov/offices/hsg/rmra/res/gfestimate.pdf
Interesting FactsEvery three months, 250,000 new families enter into foreclosure.– Mortgage Bankers AssociationSix in 10 homeowners wish they understood the terms and details of their mortgagebetter.– Freddie Mac/Roper poll of 2,031 U.S. homeowners, conducted 2005.If home foreclosure were likely for you, what best describes how you would feel?38% Scared35% Depressed 9% Angry 8% Embarrassed 9% None of these– Harris Interactive poll of 1,334 U.S. homeowners, conducted October 5-7, 2005.Low- and moderate-income borrowers who enter a repayment plan are 68% lesslikely to lose their homes.– Dona Dezube, “Heroic Homeownership,” Mortgage Banking, (June 2006) p. 82. http://www.fdic.gov/about/comein/files/foreclosure_statistics.pdf
Summary •The home buying process is a long and difficult process with many questions and stressful situations along the way. •The home buyer has a team of dedicated professionals standing ready to assist with theprocess. If the home buyer doesn’t feel the team is helpful, the team must be changed. Do notbe held hostage to poor customer service by fear of losing the “perfect” house. The real estate team only exists because of consumer’s dollars. •Use the tools available to make the best possible decision. Home Search tools, Mortgage Calculators and Research centers are abundant online. Be well informed before, during and after this process.•The choices made in the home buying process are not short term choices. It is critical to take a long hard look in the honesty mirror before embarking on this path. Know your needs, desires and limits, and above all do not let anyone convince you to do something you will regret later. •Emotional Choices in this process cost more than you make. Consistently consult with your family, friends and colleagues to keep the dream grounded. •Communicate with the Lender Before, During and After the Home Purchase!!!!
Referenceswww.Google.com (2012, December 1). “How much of a home loan can I afford?”. Google search results.www.zillow.com (2012, December 1). “Homes in 98513”. Zillow search results.Kimberlee Calabazza. (2012, December 1). “Coldwell Banker Bain Agent Listings”. Retrieved fromhttp://www.cbbain.com/Pages/AgentDetail.aspx?AID=3253 .Know Your Mortgage Options. (2012). [Graphic Illustration Mortgage Types]. Retrieved fromhttp://www.imortgageguide.com/mortgageresources/home-financing-options.aspx .Cornett, Brian. (2011). “Home Loans 101 – The Different Mortgage Types Explained”. Retrieved fromhttp://www.homebuyinginstitute.com/mortgagetypes.php .Staff, www.mybankingway.com. (n.d.). “The Smart Way to Use Adjustable Rate Mortgages”. Retrieved fromhttp://www.bankingmyway.com/real-estate/mortgages/smart-way-use-adjustable-rate-mortgages .www.saintlouiscity.com/media/global. (n.d.). [Graphic Illustration Good Faith Estimate of SettlementCosts]. Retrieved from http://www.saintlouiscity.com/media/global/Sample_Good_Faith_Estimate.pdf .http://www.hud.gov/offices/hsg/rmra/res/gfestimate.pdf. (n.d.). [Graphic Illustration Good FaithEstimate (GFE). Retrieved from http://www.hud.gov/offices/hsg/rmra/res/gfestimate.pdf.Kennan, Mark. (n.d.). “Explanation of Mortgage Points”. Retrieved fromhttp://www.ehow.com/about_6565090_explanation-mortgage-points.html .www.FDIC.com. (n.d.). “Foreclosure Statistics”. Retrieved fromhttp://www.fdic.gov/about/comein/files/foreclosure_statistics.pdf .
References Given , Not Cited In Texthttp://www.fha.com/fha_programs.cfmhttp://www.makinghomeaffordable.gov/programs/Pages/default.aspxhttp://www.cityoftacoma.org/page.aspx?nid=454http://www.guidetolenders.com/new_home_loan/articles/fha-mortgage-down-payment-assistance.jsphttp://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/np/sfhdap01http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/affordablehousing/programs/home/addihttp://homebuying.about.com/cs/downpaymentgift/p/gift_money.htmhttp://www.realtor.com/Basics/Buy/ClosePossess/Escrow.asp?source=webwww.hud.gov/respa