TIPS For HOME BUYERS
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
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
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 email@example.com.