15 Sep 2014
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TIPS For HOME BUYERS

This year's home buying season has already begun! This rush to buy a home  has been precipitated by increases in mortgage rates, more confidence by consumers in our economic recovery, the recent large increases in home values and prices, and a low inventory of available homes.

If you are considering buying a home, there are several Buying Tips that may help you.

1) Obtain a Tri-Merge Credit Report that includes your
    3 credit scores through Equifax.com TranUnion.com or
    Experian.com. The middle credit score of these
    oftentimes determines the amount of mortgage vs.
    the home's price that you'll be able to finance, as
    well as, the mortgage interest rate that you'll be
    offered, if the credit score is high enough to grant
    a loan approval. Each mortgage lender can set
    credit and property requirements higher than the 
    underwriting requirements of the type of mortgage
    you might choose, ie. FHA, VA, USDA, and Fannie Mae
    Conventional Loans. Generally, a mid-credit score of
    620 will allow you to be approved for the maximum 
    loan-to-value of a government loan and a mid-700
    credit score for a Fannie Mae Conventional loan.
    The Credit Bureau website provides information to
    help you improve your credit record and you credit
    score. You need to do that before you shop for a
    mortgage loan and/or a home.

2) Government mortgage loans are easier to qualify for
     and can finance up to $240,000 and sometimes
     more. VA loans. Government loans are FHA, VA,
     USDA, and Georgia's Down Payment Assistance
     Georgia Dream Program. Government loans either
     do not require a down payment or charge the
     least down payment. VA & USDA offer 100%
     Financing, FHA offers a $100 Down Payment loan
     to buy a FHA/HUD Foreclosure, and FHA's normal
     financing program requires a 3.5% Down Payment.
     The 3.5% Down Payment can be paid by the
     Georgia Dream Program which can be a forgivable
     second mortgage that does not charge interest and
     does not require payments, unless the property is
     sold prior to beginning of the forgivable period.
     All the government loans allow Gift Funds from
     relatives and others for any and all costs the
     buyer/borrower needs. Thus, the buyer/borrower
     may not have to pay any out-of-pocket costs to-
     ward a down payment.

3) The Property Seller can pay up to 6% in Seller
     Concessions/Contributions to help pay for the
     buyer's Closing and/or Settlement Loan Costs
     with a government loan, even if there's 100%
     financing. Normally, 5% will pay all of the buyer's/
     borrower's Loan Costs including all Closing Costs
     and Escrow for property taxes and homeowner's
     insurance and Pre-Paids Costs for mortgage inter-
     est, 1st year's homeowner's insurance policy, and
     mortgage insurance. Thus, if you want to pay the
     bare minimum in loan costs, you would request
     the seller to pay 5% in Seller Concessions. Most
    Sellers will pay up to 3%. In order to convince them
    to pay the other 2%, you can allow them to raise
    the sales price by 2%.  In most caes, the home
    will appraise for the higher price, because there
    will be a higher demand for the home, because
    more buyer's can afford to buy the home.

4) By utilizing the mortgage programs, down payment
    assistance, Gift Funds and Seller Concessions des-
    cribed above, a buyer may not have to pay very
    much to buy a home up to a sales price of $240,000!

5) Apply for a mortgage Credit Pre-Approval with a   
     Licensed Mortgage Lender before you start shopping
     for a home. Those Mortgage Pre-Approvals are
     good for up to 3 months. The Mortgage Credit Pre-
     Appoval verifies your employment, credit, savings,
     and rental or mortgage histories. The Lender
     can specify in their Mortgage Credit Pre-Approval
     the maximum sales price, mortgage loan, interest
     rate, and estimate of out-of-pocket costs, the
     buyer is likely to experience based on the Seller's
     Concessions that the seller will pay.

6) Don't apply for any new credit, don't make any
    withdrawals from your savings, and keep paying
    all your credit on time before you close your home's
    mortgage.

7. Now it's time to select a realtor and start shopping
    for a home. Ask you friends, relatives, co-workers,
    etc. to recommend realtors to you. Interview them
    and decide who you want to use. Show them a
    copy of your Mortgage Lender's Credit Pre-Approval
    so they know that you have been pre-approved
    and the conditions of that approval, ie. Seller
     Concessions, Maximum Sales Price and Maximum
     Loan Amount, etc.

     In most cases if you don't have a lot of credit debt,
     you can qualify for a mortgage that is 2.5-3 Times
     your annual gross allowable income.

8) Don't be afraid to negotiate the sales price. seller
     concessions, home repairs, items, ie. appliances,
     to be left in the home, etc.

9) Always, always obtain a Home and Termite Inspect-
     ions and require the seller to correct the items that
     need to be repaired. If the home is a foreclosure,
     you may need to pay for those repairs yourself or
     obtain a FHA or Conventional Renovation-
     Rehabilitation loan to buy and repair, upgrade,
     and/or renovate the property.

10) Once the property appraisal is done and the
       the property's value is equal to or higher than
       the sales price and the property's condition is
       OK. Your lender will re-run your credit report
       and re-verify your employment, savings, rental
       and mortgage histories and issue a Final Loan
       Approval. A Loan Closing Date is set and the lender
       verifies the Seller has "clear title to the property"
       so that they have a legal right to sell the property
       to you. The lender and Closing Attorney will verify
       any liens against the property, property transfer
       costs, new title insurance and other costs. etc.
       and, then, their ready to close your loan. You
       are instructed to bring a 1 year prepaid home-
       owners insurance policy + a Certified Check for
       items you'll need to pay for at Closing. You'll
       be offered a Home Owner's Title Policy at closing
       by the Closing Attorney and I recommend you
       purchase it. Likewise, I recommend that you set-up
       a Termite Bond with your Termite Inspection
       Company.

11) Tax Deductions - You can obtain a lot of tax
       deductions during your first year of home
       ownership, as well as, as long as you own
       your home. I recommend that you obtain a
       Publication 17 through IRS.gov and learn
       those deductions. Normally, those deductions
       might might save you $2400 per year or more
       in the federal taxes you might normally pay.
       If you choose to claim your deductions early
       and take-home more pay out of each pay check,
       you can estimate (using the Publication 17's
       allowable deductions for homeownership) on
       a new W4 provided by your employer. Then,
       claim the "extra deductions/exemptions" and
       your net pay will increase on your next pay period,
       maybe $200 per month or more.

I could mention a lot more things, but these comments should help you a lot. Now's an excellent time to buy a home and based on credible predictions neither Mortgage Interest Rates nor Home Prices will be this Low again for a long-long time. Our non-profit will be offering a Home Buyer Educational Seminar on May 16th in Douglasville. If you want to attend, please email an RSVP to randylon@comcast.net.

GOOD LUCK!
       

 


     

  
 

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