For many people, buying a home is the single biggest investment they will make in a lifetime. The right time to buy is different for everyone. Before making a decision to buy a home, ask your Grand Home Loans Loan Officer to help you answer the following questions.
Qualification is based on your debt-to-income ratio. This is the amount of debt you have as it compares to your income. This can be determined by adding up all your monthly debt payments and dividing that number by your gross monthly income.
For example, if a loan program uses a 28/36 qualifying ratio, it means the homebuyer is allowed to spend no more than 28% of his or her gross income on monthly mortgage payments and no more than 36% on total debt. Total debt includes car and school loans, credit cards, child support and alimony. More specifically, if an individual earns $60,000 per year, his or her monthly gross income is $5,000. Under the 28/36 guidelines, that person's maximum monthly mortgage payment should not exceed $1,400 while his or her total monthly debt should not exceed $1,800.
A high debt-to-income ratio can imply that there might be an issue making monthly mortgage payments. A number below 43% is generally considered adequate when qualifying for a mortgage.
When you start the search for your new home, you'll save yourself a lot of time and frustration if you have a good idea of how much home you can afford. Putting pencil to paper, calculating the mortgage expenses and establishing a budget will give you a better idea of your specified price range.
Be sure to consider additional costs that might be involved above and beyond your monthly mortgage payment. In some instances, you'll encounter upfront and ongoing expenses.
Home Inspection costs: These cost can be anywhere from $200 to $900. The costs depend on the running rates in your area.
Down Payment: The down payment for homes usually ranges from 3% to 30% of the purchase price. Your monthly payments will be lower and you will acquire more equity in your home with a larger down payment. If your down payment is less than 20%, you will be required to have mortgage insurance.
Closing Costs: These are the expenses that fall above the price of the property which are incurred by buyers and sellers in the process of transferring ownership of a property. Closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. Typically, the cost of closing is about 2 to 7 percent of the mortgage amount. Closing costs will vary by property.
Your Grand Home Loans loan officer will be able to provide an estimate of your closing costs.
In addition to your monthly mortgage payment, as a homeowner you may incur the following potential expenses:
After you've considered these factors and established a preliminary budget, the next best step you can take is to obtain a prequalification* letter from your Grand Home Loans Loan Officer. Armed with this, your search will have the strength that comes from financial backing, and you will have the freedom to enjoy looking for your new home.
Your credit score is the most important number you need to know before starting the home-buying process. All lenders require a credit report that contains personal financial information such as loan payment information, bank and credit card accounts, and more. You are able to obtain a copy of yours by contacting any one of the credit bureaus throughout the United States.
*A prequalification is not an approval of credit, and does not signify that underwriting requirements have been met.
Taking the first step toward buying your home is both exhilarating and overwhelming. Before you dive too deep into the process, it is important to consider several factors. Buying a home will be one of the largest financial investments you make in your life, so you want to be well prepared for the adventure ahead.
As with anything in life, you'll find advantages and disadvantages to consider in regard to deciding if homeownership is the best option for you. It's important to look at both the rewards and realities of homeownership before you commit. Should you stop renting and buy a home?
Invest in your future
Your monthly mortgage payments are not going into the pockets of a landlord. Instead, with each payment, you build equity in your home and contribute to your own long-term, personal investment.
You will find homeownership opens up a world of potential tax savings*. Typically, the interest paid on your mortgage is tax deductible which can provide significant financial relief. To discover all the possible tax advantages available to you upon purchasing a home, it's best to consult with a trusted tax advisor.
Develop your credit further
Homeownership is one of the best investments you can make. Additionally, making monthly mortgage payments on time will further improve your credit history and help you with future investments.
When you become a homeowner, your monthly payments are no longer subject to increases by the renewal of a lease and the discretion of a landlord. This will help you make a long term budget plan and remove variable factors in your future financial decisions.
Make it your own
With the only potential parameters being homeowner association guidelines or city codes, you are able to remodel, renovate, and redecorate according to your own personal tastes. You are free to make your home your own - however you see fit.
*Everyoneâ€™s tax situation is different. Please consult a professional tax advisor.
Know the numbers
There are many significant homeowner costs to consider, such as, a down payment, property insurance, property taxes and maintenance and home improvement. As a renter, some or all of your utilities may have been covered and your landlord was ultimately responsible for maintenance. This is no longer the case when you are a homeowner. Any repairs or other routine maintenance required on the home will be your responsibility.
Owning a home is a long term investment and deciding to move out does not remove your financial responsibility as the home owner. Plus, the process of selling a home can be a time consuming and costly endeavor. It may not happen as quickly as you would like or hope. On the other hand, renting provides flexibility. You have the option to renew your lease (or not) and you suffer only minimal penalties if you decide to break the lease prior to the time of renewal.
The housing market is perpetually unpredictable. While the hope is that the home will appreciate in value over the time of ownership, this is not always the case in every market. If and when the time comes to sell your home, be prepared for whatever condition the market might be in at that time. Housing prices could be down, the market may be slow, and the home may have depreciated in value. Owning a home is typically a sound investment, but it provides no guarantees.
Buying a home can be an intimidating process, but if you surround yourself with the right team of professionals they can guide you towards reaching your dream of homeownership.
The best way to start your home search is to find a trusted and experienced Loan Officer â€“ Like the ones you will find here at Grand Home Loans! With just a little information from you, your Grand Home Loans Loan Officer can help you get prequalified for a loan. Making it much easier to calculate a housing budget that will serve as a well-grounded foundation for your house hunt.
Your Grand Home Loans Loan Officer is your best resource for mortgage industry related questions. When determining the best loan program for your individual situation, investigating how much of a down payment to make and calculating your closing costs, this is who can answer your questions and who will be there for you.
Understanding the real estate market can be a challenge, especially since it is incredibly dynamic and constantly changing. A knowledgeable real estate agent can provide valuable insight into the complex world of real estate.
You'll want to find a real estate agent who is aware of local information, as well as your personal needs. You will benefit from a real estate agent who is familiar with the neighborhoods and local school systems where you'll be looking, and who is up to date on recent sales and comps.
Buyers in certain areas and specific complicated situations may find it necessary to hire a real estate attorney. Involving legal counsel in the real estate transaction can further confirm that the contracts of the transaction are legally sound and meet all governing stipulations and requirements. It may be best if any unique or specific additions to the agreement are provided or refined by a lawyer specializing in real estate. Ask your real estate agent if bringing on legal counsel for your transaction is advised.
To get a better perspective of the tax deductions that might be available to you in your specific situation, you can consult with a professional tax advisor. He or she will be familiar with the most recent laws and changes and will help you approximate potential tax savings. The information this professional can provide will help you know which of your mortgage expenses will be tax deductible.
The best way to begin the home buying process is by being prepared. To do this, you'll want to consider all aspects of your finances and determine the current status of your savings, credit, debt, and income. All these elements set the stage for you to begin the buying process.
The amount you may or may not have available for a down payment will be one major deciding factor on which mortgage program best suits you.
In today's environment, there tend to be more opportunities available for those buyers who are able to provide a larger down payment. However, even if you may not have the funds available for a substantial down payment, you can still find loan programs that allow a low or no down payment option.
To prepare yourself to contribute a down payment towards the purchase of your home, there are a few simple things you can do:
Another concern will be which loan program fits your needs and how to structure your monthly mortgage payments. Before moving forward, you'll want to consider those items that make up your monthly payment and the factors that influence them.
Typically referenced as PITI, your monthly mortgage payment is comprised of Principal, Interest, Taxes and Insurance (PITI).
The initial amount you borrow to purchase the home and the remaining outstanding balance throughout the life of the loan is the PRINCIPAL.
The charge for borrowing money is the INTEREST.
Collected in an escrow account, your TAXES are assessed by your local government and typically paid to your lender as a portion of your payment. The lender will then pay them to the government upon their due date.
Established in a similar fashion as your taxes, INSURANCE is collected by the lender and put into an escrow account. Your insurance is composed of two prominent types of coverage. Homeowner's insurance provides you coverage for damages inflicted by hazards such as (but not limited to) wind and fire. Mortgage insurance is typically required for those making a smaller down payment on their loan; it provides protection for your lender in the instance that you are not able to fulfill the mortgage requirements and repay your loan.
One of the issues that most concerns homeowners is their mortgage interest rate. This is for good reason as the interest rate directly affects the monthly payments for the life of the loan. Because of this, homebuyers search for steps they can take to obtain the lowest rate available.
Contributing factors to the interest rate include whether the homebuyer decides to:
The final decision that you and your Grand Home Loans Loan Officer reach about your loan program is also affected by other special factors.
These special factors don't exclusively determine which loan program is best for you, but they definitely contribute to reaching the best decision.
Just like you wouldn't dive into a pool without knowing how deep it is, you wouldn't want to house hunt without knowing how much you could afford. That's why once you have decided buying a home is your best option and you've examined what your finances will allow, it's a good time to talk with your Grand Home Loans Loan Officer about being prequalified.
Knowing how excited many homebuyers can be, it can seem frustrating to add a step before the house hunt. However, there are several advantages to being prequalified that can make it worthwhile.
When you feel that the time is right and youâ€™re ready to start your search, be sure to make a list of everything you want and need in home and neighborhood.
As you consider your housing choices, also strongly consider your neighborhood options. The neighborhood you live in is as important as the house itself.
Is it important that you live close to work? Keep in mind short commutes limit your neighborhood options.
Do you prefer country, suburban or urban living?
If you have children, is the neighborhood in a good school district? Do you need to live near other family members?
Do you want to live close to your church or temple? What entertainment venues are nearby?
Is the park behind your house going to be developed in the future? Does this community have plans to build a large attraction of some sort?
What will the neighborhood look like in 10 years? Are you satisfied with an older neighborhood? Are you content with potential changes your neighborhood could make?
Does the neighborhood feel the same at night as it does during the day? Is weekend traffic heavier than during the weekday?
Can you afford the county or city taxes or any homeowners association fees?
What are the homeownerâ€™s association rules? Are they good for protecting home values?
Have the homes in this neighborhood held or increased in value?
Talk to the people who live in the neighborhoods in which you are interested. These individuals will know the most about the area and are your potential neighbors. More than anything, you'll want a neighborhood where you feel at home.
While there are a good number of housing styles out there, each one provides unique features. The type of house you choose will depend greatly on your lifestyle and personal goals.
With the purchase of a single-family home, homebuyers acquire ownership of the home as well as the surrounding lot. All maintenance expenses and property taxes would be the homeowner's responsibility. Of all housing choices, this one typically provides the most privacy and flexibility.
In purchasing a condo, the buyer owns the areas within the walls of the living space but not the surrounding lot of land or building. Typically, a condo is governed by guidelines from a homeowner's association. These associations require monthly dues or annual fees (which are not tax deductible). In turn, the condo owner does not hold sole responsibility for repairs and maintenance to the unit and has access to property management services. Condo units are evaluated individually to determine property taxes (which are the condo owner's responsibility and are tax deductible*).
Also called a PUD, a Planned Unit Development is structured so that the buyer not only owns the house and the surrounding lot, but the person also purchases and owns a portion of common space that is shared with others that live in the development. These common areas are maintained through the homeowner's association. As with condos and co-ops, these fees are not tax deductible.*
*Please consult with your tax advisor or attorney to discuss your specific situation.
Before you begin your search for a home, make a list of all the qualities you want in your home. Things like paint or new carpet are easily changed before or after you move in. Look for features that are already part of the homeâ€™s construction and design. Think about:
To begin the application process, we need to collect a variety of information that will help us to determine what type of loan will best suit your needs.
Grand Home Loans has provided a borrower required document checklist to make it a little easier on our customers when collecting the documents necessary for applying.
So you've found your dream home and now you're ready to buy it. Here's how to take those next steps that can make that home yours.
Purchasing a home is one of the few transactions that involves heavy negotiations. A real estate agent is a valuable resource to have on your side as you determine the appropriate initial offer to extend. During this portion of the process, you'll want to consider the following:
As you come to the closing stage, you've entered the final stretch. At this point, you'll want to be sure to you cover a few things:
A legally binding contract between the buyer and the seller of the property, the purchase agreement outlines all terms and features of the final transaction. This can include:
Because of special and unique features of every home transaction and the varying needs of each home buyer and home seller, purchase contracts are not exactly the same. A real estate agent, a title company or an attorney may assist in the negotiations and execution of a purchase contract; this is dependent on the state in which the transaction is being conducted.
*A prequalification is not an approval of credit, and does not signify that underwriting requirements have been met.
Out of the entire home buying process, closing costs are often the least understood pieces. At Grand Home Loans, we will take the time to address your questions and guide you to answers.
Although they tend to vary from lender to lender, closing costs are generally considered any costs tied to the purchases of a new home. Today, these costs range from 2 to 7 percent of the home's purchase price and include three basic categories:
Prepaid expenses include homeowner's insurance, mortgage insurance and the costs to set up an escrow account. An escrow account is when a lender will pay the annual insurance premiums and various taxes on the borrower's behalf. The amount that goes into this account is based on the first year's premiums. An additional amount also is included to pay for future premiums. Prepaid expenses are difficult to determine because they vary based on the type of property and the time of the closing.
A mortgage point is equal to 1 percent of the mortgage loan amount and actually helps reduce the loan's interest rate. For example, depending on prevailing rates, a $100,000 mortgage might be obtained at 7.75 percent with 2 points, or at 8.25 percent with no points. Obtaining the lower interest rate would cut the mortgage payment by about $35 a month, but would require $2,000, or 2 points, up front at closing.
Fees for appraisals, attorneys, credit reports, deed recording, tax services and other miscellaneous expenses make up the out-of-pocket expenses. Usually performed by a third party, these fees for services are directly charged to the borrower. The majority of out-of-pocket fees are necessary and legitimate. However, if the borrower encounters a fee that causes confusion, he or she should ask the mortgage professional about it.
Purchasing a home is one of the largest financials investments you can make. It's vital that you understand it fully and completely so that you avoid unwelcomed surprises and are confident in every step you take towards your new home.
The closing can be held at the title company, your lenderâ€™s office, a real estate attorneyâ€™s office or another location, depending on the situation.
What you can expect:
Donâ€™t forget that if you have any questions or concerns you can always contact your Grand Home Loans Loan Officer and they will be happy to explain everything.
The exciting experience of buying a new home can also be a stressful one. At Grand Home Loans, we want to be there to guide you and put your mind at ease. Thatâ€™s why we have developed a comprehensive set of online home loan mortgage calculators to help you predict your monthly mortgage payment and ensure that you choose the loan that is right for your unique situation.