What Will My Payment Be?

What Are The Steps Involved With Buying A Home?

Buyers Timeline

Rent Vs Buying

What Costs Are Involved With Buying A Home?

What Is A Lease Purchase?

Do I Have To Pay Full Asking Price?

What Are Some Of The Loan Options Available And Can You Explain Them To Me?

TIPS

Do you have another question that is not listed here? Email me any question at ChristinaA@remax.net and I'll reply right away.

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Q:What Will My Monthly Mortgage Payment Be?
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A: It depends on the type of mortgage loan you get. When you buy a home, your lender will require that you have homeowners insurance and they will also charge you taxes on your home. These payments are included into your mortgage payment and the lender is responsible to pay those premiums when they are due. Depending on which type of loan you get, the remaining portion of your mortgage payment after taxes and insurance are paid will be based on your interest rate and the principal amount owed. A huge majority goes to the interest in the beginning and after about 10 years or so, a larger portion of your mortgage payment will start going towards the paying the principal down and less of the mortgage payment will go to pay the interest. Some loans like interest only and ARM loans have lower rates than a fixed rate, but may not be the best option.  See the "Loan Options" question for more details on types of loans.

The chart below breaks down the specific dollar amount based on the interest rate and principal payment:

Simply divide the price of the home by 1000. Multiply the interest and dollar amount under the appropriate mortgage term, and that will tell you what your mortgage payment will be less the taxes and insurance.  For example, a $150,000 loan amount with a rate of 5.500% for a term of 30 years would be calculated as follows:

1.   $150,000 / 1000 = 150

2.   150 x $5.68 = $902 per month*

*You will also need to take your annual tax amount and annual Homeowners Insurance premium totals and divide by 12. Then you take that figure and add the amount to each month for your monthly mortgage payment. Homeowners insurance is usually around $350 and can go over $1,000 per year and you can usually get the annual tax information from your agent or from your local county website. If you're not putting down at least 20%, you will also have a PMI (Private Mortgage Insurance) fee, usually around $50 per month.

Monthly Principal and Interest Payment Factors (per $1,000)

Interest Rate	15-Year Term	20-Year Term	30-Year Term & ARM Loans
4.00%	7.40	6.06	4.77
4.13%	7.46	6.13	4.85
4.25%	7.52	6.19	4.92
4.38%	7.59	6.26	4.99
4.50%	7.65	6.33	5.07
4.63%	7.71	6.39	5.14
4.75%	7.78	6.46	5.22
4.88%	7.84	6.53	5.29
5.00%	7.91	6.60	5.37
5.13%	7.97	6.67	5.44
5.25%	8.04	6.74	5.52
5.38%	8.10	6.81	5.60
5.50%	8.17	6.88	5.68
5.63%	8.24	6.95	5.76
5.75%	8.30	7.02	5.84
5.88%	8.37	7.09	5.92
6.00%	8.44	7.16	6.00
6.13%	8.51	7.24	6.08
6.25%	8.57	7.31	6.16
6.38%	8.64	7.38	6.24
6.50%	8.71	7.46	6.32
6.63%	8.78	7.53	6.40
6.75%	8.85	7.60	6.49
6.88%	8.92	7.68	6.57
7.00%	8.99	7.75	6.65
7.13%	9.06	7.83	6.74
7.25%	9.13	7.90	6.82
7.38%	9.20	7.98	6.91
7.50%	9.27	8.06	6.99
7.63%	9.34	8.13	7.08
7.75%	9.41	8.21	7.16
7.88%	9.48	8.29	7.25
8.00%	9.56	8.36	7.34

Q:What Are The Steps Involved With Buying A Home?
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A: One of the first key steps in buying a home is to get pre-qualified through a lender. When you've made the decision that buying a home is right for you, getting pre-qualified is painless and takes just less than an hour in most cases. You really need to be looking for homes in your realistic price range. If the perfect home is out there and you are ready to make an offer, sellers and banks (especially in foreclosures) will not even consider an offer without a pre-approval letter. When I submit offers to sellers, I always include the pre-approval letter. One HUGE tip, be sure and use a LOCAL lender. If you want to use a nationally known bank with offices all over the country, that's fine, but make sure you're dealing with a loan officer at that bank that is local. Trust me!

The next step is finding a Real Estate agent. In most cases, you do not pay for a Real Estate agent, so using an agents knowledge and expertise is essential. Have your wishlist prepared and begin your search. An agent can find you a home as quickly as 1 weekend or it can take several weeks or even months, so give yourself enough time to find the right home.

Once the home is found, your agent should look for comparable properties in the vicinity of your desired home that are similar in size, recently sold and currently active homes. Your agent will make recommendations for you, but ultimately, you can start with any offer you want. Your agent will go over the contract with you and then you sign.

Negotiations take place and IF and when an agreement is finalized, your contract is ratified and the process begins. You'll need to decide on what lender you're going to use, your agent will assist you in locating an attorney or closing company, and a home inspector. If you already know of people you want to use, that is fine too. Your agent takes care of getting all of the paperwork to the lender and the closing agent/attorney.

The home inspection takes place relatively quick after contract ratification, and you need to know that paying for the home inspection is your expense. The typical home inspection will cost between $200-$400 on average based on the size of the home and if you're a first-time homebuyer, you can get a discount with some home inspectors. Your agent should be at your home inspection. If possible, you should too. It takes between 2-3 hours.  

Next, you'll need to get quotes on homeowners insurance and your lender will need that information asap. Don't spend too much time in this area. Most companies are similar in price. Check with your auto insurance company to see if they'll offer you a discount to add your homeowners insurance. You can always ask your agent for good insurance agents to work with too. Whatever it takes to make the process go smooth.

You'll be in contact with your lender often and you'll need to provide the lender any information they request as soon as you can. Understand that you may need to send the same information again (and again). It's a good idea to keep everything in a folder and have it close by incase the bank calls and needs something. Your agent will likely be contacting your lender weekly, making sure that your being taken care of properly.

Be very careful not to make ANY large purchases. Don't go crazy with your credit cards, don't buy a new car, etc... If you get any large amounts of money from ANYONE, you'll need to have record of who and why and possible gift letters which can be a hassle. If someone is planning on helping you, get the money in your account months in advance if possible or have a gift letter prepared and signed by the giving party. The bank will want to know where every penny other than normal income is coming from.

If there are any repairs that need to be made to the home that are found during the home inspection, your agent will need to make sure the seller fixes as many problems as possible or may negotiate a credit to you. More paperwork will need to be signed and submitted if any problems are found and your agent will await for receipts that show the work was complete.

A few days before closing, you'll do a walk-through with your agent to make sure everything is fixed, and the home is ready. Your attorney will also be in contact with you to tell you how much money to bring to closing. 

Closing Day comes and you, your agent, and the attorney or closing agent will meet to sign about 60 pieces of paper (no joke), and in most cases, your loan officer may show too. The money is exchanged, the money and papers go to the appropriate parties, the attorney/closing agent files the deed at the county recorders office and the house is yours. Your agent or attorney will give you the keys to your new home.
  

Q: What is the Buyers Timeline?
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A: The short answer is listed below. Feel free to call or email me and I'll be happy to explain the entire process.
 
- Get pre-qualified/Spend time with your agent searching for a home
- Once a home is found, negotiations take place and hopefully an offer is accepted
- An escrow check must be given as a good faith with the offer. Typically it's at least $1,000 and the seller may ask for more. Usually not more than $3,000
- You can or your agent will order a home inspection on the home.  You must pay for this out of pocket (typically $200-$400)
- If any issues show up in the home inspection report, negotiations of a credit to the buyer is given or the seller agrees to fix negotiated or all issues. *Banks will not agree to fix problems on foreclosure home sales and are considered as-is
- You deal directly with your lender providing them with whatever they need to get the loan through
- Your agent keeps tabs on your lender and attorney/closing agent, making sure the process goes smooth
- Your lender will order an appraisal on the home to make sure it's value is at or above selling price. If not, your agent should re-negotiate with the seller on the sales price of the home, you may pay the difference if you choose, or you can simply walk away from the deal. Make sure you have a home-inspection contingency on the contract.
- The seller will get a well & septice check (if applicable) and a termite inspection will be done and provided to your lender
- Your lender will provide a loan commitment to the seller's agent
- All home inspection items must be taken care of to satisfy your lender and the seller will need to provide receipts of all items fixed on the punchlist
- Your agent will schedule a final walk-through to make sure the home is ready to go and all items were indeed taken care of
- The attorney or closing agent will contact you in regards to how much money you will need to bring at closing
- A closing time is scheduled and you, your agent, and in some cases the loan officer will attend the closing
- Once you sign about 60 pages and initial about 30 pages (not kidding), your paperwork goes to the county recorders office
- Once the deed has been recorded, your agent will provide you with the keys to your new home!

CELEBRATE!

Q: Should I Rent or Buy? Which is best?
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A: That all depends on your personal situation really. If you have enough money saved to put down on a home and can qualify for a mortgage loan, it's generally better to buy. Especially if you plan on living in the area for at least 3 years.

With the interest rates as low as they are now and prices on homes favor buyers, now is the perfect time. Renting a home benefits you in no way. You're paying your landlord's mortgage, there are no tax benefits to renting, and in many cases, a mortgage payment is about the same as renting.

Buying a home does have more costs up front because you must have some sort of down-payment. If you don't have 10% or 20% to put down, you can get an FHA loan with 3.5% down. This will definately make it more affordable. Another great loan is the FHA Plus loan which requires only 1% down, however there are some restrictions. On top of your down-payment, you will need additional closing cost money which can sometimes be 3%-5% of the selling price, however I always negotiate that the seller pay for those closing costs for you, which keeps more money in your pocket and then you're only responsible for paying the down-payment at closing.

If you cannot put down 20%, you would have to pay something called PMI (Private Mortgage Insurance) and this would add another estimated $50 per month to your mortgage payment, but you would only have to pay that amount for a few years and then it would not be charged. However, there are very creative ways to eliminate the PMI simply by negotiating with the seller to pay the PMI up front. These are called seller consessions.

Renting is sometimes just easier. All you need is a deposit and pay the rent every month. Buying a home gives you so many benefits and it's a great investment for your future. Just be sure and stick to a comfortable monthly payment and understand that your first home may not be your dream home, but homeownership will eventually lead you there. 

Q: What Costs Are Involved With Buying A Home?
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A: You'll be expected to have an escrow check to be given as good faith to the seller upon submitting an offer. The escrow amount is usually at least $1,000 and higher. The escrow check you provide will be placed in an escrow account and held until your closing date and will go towards your down payment. If the deal falls through for any reason, the escrow check would be returned to you. You will also need to pay for a home inspection which typically costs about $250-$350. You will need to have a down-payment and provide it at closing. Your lender will likely need to see the down-payment amount in your bank account as soon as they start working on your loan. Your loan will also consist of closing costs which typically are 3%-5% of the purchase price. In many cases, the closing costs can be paid by the seller. Be sure and discuss this with your real estate agent if closing costs are a concern. If you're buying a short sale property, the banks cannot pay more than 3% in closing costs. With foreclosure properties, the banks can pay higher than 3%.

Q: What Is A Lease Purchase?
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A: A lease purchase allows you to live in a home for a period of 1 or more years. If you really like the home and want to buy it, you would choose a lender just as you would in a normal sale. There are a few things that you must do on a lease purchase. One thing is a deposit. Just like in a normal lease, you would need to provide a deposit to the real estate agent, usually in the amount equal to 1 months rent and any pet deposits if applicable. You may also need to provide a deposit as a good faith offer to purchase in the future. In most cases, this amount can be anywhere from a couple thousand dollars and can go up to 10% of the purchase price. This amount is typically not refundable if you choose not to buy the home when the lease ends, it will however go towards your down payment should you decide to buy the home. You would still receive your initial first months rent deposit back provided there was no damage to the home or it may be used as an additional escrow payment. Lease purchase is great for people that want to try before they buy so to speak. It also allows people with a much smaller downpayment to reserve funds and gives them another year to save for the remaining down-payment. It also helps people that need to build up their credit. Even if they have enough to make a down-payment on a traditional purchase, but their credit may need to be improved, this allows them to hold the house they really like, save more money, and build their credit so that when their lease is up, they'll have a chance to buy the home.

Q: Do I Have To Pay Full Asking Price?
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A: It depends on the seller's situation and if they're willing to negotiate. In most cases, I am able to negotiate the price on a home. I've sold homes where the seller cannot accept a lower offer but is willing to assist with closing costs, I've sold homes where the seller accepted a lower price and also paid closing costs, I've sold homes that the seller took as little as $3,000 off of the asking price or as much as $20,000 off of the asking price. Once we find the home you want to buy, we will go over the comparable homes and see if the asking price is right, but we never will go in at a full asking price. We will find a home that is in a comfortable price range, not the top of your price range so if we are dealing with a seller that simply won't negotiate, you'll still be able to afford the home if you want it. If not, we can move on to another home. Right now, we're in a "buyers market" and buyers are typically getting the asking price lowered. In a "sellers market", you will likely have competition with other buyers and you may actually have to increase your offer above the asking price.


Q: What Are Some Of The Loan Options Available And Can You Explain Them To Me?
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A: Conventional Fixed Loan - A conventional fixed loan is the most popular type of loan, your payment will consist of Principal & Interest, Taxes, and Insurance. All of these fees will be combined into one single monthly mortgage payment. The lender will take a portion of the mortgage payment and apply it to paying your property taxes and your homeowners insurance on your behalf. The rest will go towards interest and of course paying your principal down.

Interest Only Loan - If you finance with an interest only loan, a portion of your mortgage payment will go towards paying your property taxes and insurance, which is paid by your lender. The remaining amount of your mortgage payment just pays your interest portion until your interest only period ends (1,3,5,7, or 10 years), your mortgage payments will increase and at that point your payment will start going to pay down your principal amount owed on the home. It is only wise to get an "interest only loan" if you intend on staying for a short period of time. Re-financing just before your interest only term ends may not work if the market is bad and your home may not appraise at the current value, therefore, you would not be able to refinance, plus you'll have to pay closing costs again which will increase your amount owed by several thousands of dollars.

ARM (Adjustable Rate Mortgage) Loan - If you finance with an ARM (Adjustible Rate Mortgage), you will have a very low rate for a period of time. For example, 1, 3, 5, or 7 years. Your mortgage payment will consist of Principal and Interest, Taxes, and Insurance. For the initial low rate period, the amount of interest from your monthly payment will be much lower, making your mortgage payment much smaller, but once that initial rate period comes to an end, your rate will adjust to a higher rate. There are limitations per year on how high the rate will go up, but regardless, your payment could increase by hundreds of dollars. Again, refinancing as your ARM terms comes to an end may not work in your favor. If the market is bad, your house may not appraise at the value it appraises today and the banks won't refinance your loan. Plus, if they do refinance your loan, you'll end up spending thousands of dollars in closing costs making your loan payoff higher. This is a great option if you only plan on living in the home for a few years or if you can afford to pay a few hundred more per month if you had to in the future.

TIPS:
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1. Work with a Real Estate Agent - It's FREE and you need an agent to get you into homes to view, negotiate a fair price, keep tabs of all other parties involved in the process, handle the paperwork and legal requirements that go into buying a home, and take care of any problems that may take place.

2. Get pre-qualified as soon as you're ready to start your house search. Sellers usually won't consider an offer without receiving a pre-qualification letter from a lender. You don't have to choose the lender you get a pre-qualification with. You can still shop rates while you look for a home. Once your offer is accepted, you'll need to decide on a lender right away. Don't be scared of a pre-qualification. Your letter is good for at least a month. Sometimes two months. Don't feel like your going to be pressured to buy a home if you have a pre-qualification. Get it only when you're ready to buy a home.

3. Buying a home can usually take a couple of months. Once you find the right home, it generally takes 30-45 days until closing, so allow yourself at least a month to look for a home and count on another 30-45 days to close.

4. Pay some debts off if you can to build your credit score. Do not buy any major purchases like a car or flat screen TV before you get your pre-approval. Don't use your credit cards if you can help it.

5. Save yourself time and search for homes online. Driving through neighborhoods takes a long time. Confirm your list with your agent to make sure the home is still available. Anything listed online can be handled by your agent and even homes listed as for sale by owner can be seen if you provide your agent with the address of the home. Your agent can show you any home on the market. You don't need to deal with multiple agents. You should only work with one and one you're comfortable with.

6. If friends or family members are assisting you with money, be sure and document that incase your lender questions were the money came from. You may have to have them sign a gift letter. Be prepared for that. Usually if they money is already in your bank account prior to submitting an offer, the bank doesn't question it. It's only when the bank pulls your most recent bank statement to see that 3 days before closing you put an extra $5,000 dollars in your account. This can and will likely raise a red flag, cause delays and headaches. Banks are very different these days when it comes to how you get your money. Everything must be noted and can become a big issue. 

7. Always use a local lender in the area you're buying. Using a large lender that's nationwide WILL definately be problematic. Local lenders are familiar with the county your buying in and each bank has it's own rules and regulations for different counties. You also want your agent to be able to reach your loan officer. When the loan officer is located in another state, they seem to avoid calls and emails. If I have problems reaching a local loan officer, I'll go straight to their office if they don't respond. I can't do that if they're far away. If you want to use a large national bank, make sure you go to your local branch and get a loan officer that's in the area your're buying the home in. They should be located within an hour of the area that your home located.

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