Why Buy With Us?
Home. It’s the most important purchase you’ll ever make and the process can be challenging. Let us show you how to make the process of buying a house go smoothly and trouble-free. In today’s fast-paced market we have the experience, knowledge and wisdom to help you find what you’re looking for.
Pre-qualification Vs. Pre-approval
A mortgage pre-qualification can be useful as an estimate of how much you can afford to spend on your home, but a pre-approval is much more valuable because this means the lender has actually checked your credit and verified your documentation to approve a specific loan amount (usually for a particular time period such as 90 days). Final loan approval occurs when you have an appraisal done and the loan is applied to a particular property.
1. Proof of Income
“No verification” or “no documentation” loans are a thing of the past, so all borrowers need to be prepared with W-2 statements from the past two years, recent pay stubs that show income as well as year-to-date income, proof of any additional income such as alimony or bonuses and your two most recent years of tax returns.
2. Proof of Assets
You will need to present bank statements and investment account statements to prove that you have funds for the down payment and closing costs, as well as cash reserves. An FHA loan requires a down payment of as low as 3.5% of the cost of the home, while conventional home loans require 10% to 20%, depending on the loan program. If you receive money from a friend or relative to assist with the down payment, you will need a gift letter to prove that this is not a loan.
3. Good Credit
Most lenders today reserve the lowest interest rates for customers with a credit score of 740 or above. Below that, borrowers may have to pay a little more in interest or pay additional discount points to lower the rate. FHA loan guidelines have tightened in recent months, too, so that borrowers with a credit score below 580 are required to make a larger down payment. Most lenders require a credit score of 620 or above in order to approve an FHA loan. Lenders will often work with borrowers with a low or moderately low credit score and suggest ways they can improve their score.
4. Employment Verification
Your lender will not only want to see your pay stubs, but is also likely to call your employer to verify that you are still employed and to check on your salary. If you have recently changed jobs, a lender may want to contact your previous employer. Lenders today want to make sure they are loaning only to borrowers with stable employment. Self-employed borrowers will need to provide significant additional paperwork concerning their business and income.
Your lender will need to copy your driver’s license and will need your Social Security number and your signature allowing the lender to pull a credit report. Be prepared at the pre-approval session and later to provide (as quickly as possible) any additional paperwork requested by the lender. The more cooperative you are, the smoother the mortgage process will be.
Once you have gathered all the required documentation, it is time to look and apply for the best mortgage rates in your area.
Escrow and Closing Costs
Closing Fee or Escrow Fee: This is paid to the title company, escrow company or attorney for conducting the closing. The title company or escrow oversees the closing as an independent party in your home purchase.
Points: Points are a percentage of a loan amount. For example, when a loan officer talks about one point on a $100,000 loan, this is 1 percent of the loan, which equals $1,000. Lenders offer different interest rates on loans with different points. You can make three main choices about points. You can decide you don’t want to pay or receive points at all. This is a zero-point loan. You can pay points at closing to receive a lower interest rate. Alternatively, you can choose to have points paid to you (also called lender credits) and use them to cover some of your closing costs.
Underwriting: Paid to the lender, this fee covers the cost of researching whether or not to approve you for the loan.
Appraisal: This charge pays for an appraisal report made by an appraiser.
Credit report: This fee covers the cost of a credit report, which shows your credit history. The lender uses the information in a credit report to help decide whether or not to approve your loan and how much money to lend you.
Flood determination: This is paid to a third party to determine if the property is located in a flood zone. If the property is found to be located within a flood zone, you will need to buy flood insurance. The insurance is paid separately.
Home inspection: Fee to verify the condition of a property and to check for home repairs that may be needed before closing.
Pest inspection: This fee is to cover inspections for termites or other pest infestation of your home.
Survey: The lender may require that a surveyor conduct a property survey. This is a protection to the buyer as well. Usually the buyer pays the surveyor’s fee, but sometimes this may be paid by the seller.
Title insurance binder: Commitment to issue a title insurance policy at future date.
Lender’s title insurance: The cost of the lender’s policy, which protects the lender’s investment.
Owner’s title insurance: The cost of the owner’s policy, which protects the homeowner’s investment for as long as they, or their heirs, own the property.
Settlement: This fee is paid to the settlement agent or escrow holder. Responsibility for payment of this fee can be negotiated between the seller and the buyer.
Title search: The fee to search the public records of the property you are purchasing.
Document Preparation: This fee covers the cost of preparation of final legal papers, such as a mortgage, deed of trust, note or deed.
Notary: This fee is charged for the cost of having a person who is licensed as a notary public swear to the fact that the persons named in the documents did, in fact, sign them.
Attorney fees: Both the homebuyer and the seller might have their own legal representation to prepare and record legal documents. Frequently, however, where an attorney is acting as a settlement agent, there may only be one involved in the closing. Who pays for those services is a matter of contract negotiation.
Recording fees: These fees may be paid by you or by the seller, depending upon your agreement of sale with the seller. The buyer usually pays the fees for legally recording the new deed and mortgage.
Transfer tax: This tax is collected in some localities whenever property changes hands or a mortgage loan is made, can be quite large and are set by state and/or local governments. City, county and/or state tax stamps may have to be purchased as well.
Homeowner’s insurance premium: This insurance protects you and the lender against loss due to fire, windstorm, and natural hazards. Lenders often require the borrower to bring to the settlement a paid-up first year’s policy or to pay for the first year’s premium at settlement.
Mortgage insurance premium: The lender may require you to pay your first year’s mortgage insurance premium or a lump sum premium that covers the life of the loan, in advance, at the settlement.
Prepaid interest: This is money you pay at closing in order to get the interest paid up through the first of the month.
Property taxes: Usually six months of county property taxes.
Home warranty: Fee for an insurance policy to protect you from cost of unexpected failures to the major systems and appliances in your home.
Real estate commission: This is the total dollar amount of the real estate broker’s sales commission, which is usually paid by the seller. This commission is typically a percentage of the selling price of the home.
A home warranty is an annual service contract that covers the repair or replacement of important appliances and systems components that break down over time.
As an exclusive buyers agent I know about special programs to make home buying easier for the first time buyer. Let me help you get into a new home with little to no cost. Below is a link to all first time or down payment assistance programs.