Home Buying Guide

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Home Buying Guide Provided by Erin Rundall, Realtor Licensed to sell real estate in the State of Iowa. www.erinrundall.com

Transcript of Home Buying Guide

  • Specially prepared for:Clients Of Erin Rundall

  • Congratulations!

    Buyingahomeisoneofthebiggestinvestmentsandfinancialdecisionsyoucanmake.Whileitisa majorcommitmentand

    responsibility,itisalsoaveryexcitingtimeinyourlife.I'mproudthatIwillgettoplayapartinitandamexcitedaboutsoon

    havingtheprivilegeofhandingyouthekeystoyournewhome!

    .

    Withthatsaid,it'simportanttokeepinmindthathomebuyingisacomplicatedprocess.Iwillbe workinghardtomakesure

    thateverythingisasrewardingaspossible,guidingyouateverystepandmakingsurethatyourneedsanddesiresaremet.

    .

    Thisguidewasdesignedtoinformyouaboutallstepsofthehomebuyingprocesssothatyoucanfeelconfident,make

    informeddecisionsandactasaneducatedbuyer.Itwillalsohelpbothmeandyouunderstandthethingsthatyou'relooking for

    inahomesothatoursearchcanbemadeaseasyaspossible.

    .

    Pleasetakesometimetoreviewcarefullyalloftheinformationpresentedhere.Ifyouhaveanyquestionaboutthetopics

    discussed,Iwillbegladtogooverthemwithyouindetail.Sinceeveryrealestatetransactionisunique,youwillmostlikely

    havequestionsorconcernsnotpresentedhere.That'swhatI'mfor toassistyouateachstep,to answeryourquestions,andto

    helpyoufindthehomeyoudesire!

  • AnnualSalary MaximumHomeValue AnnualSalary MaximumHomeValue$50,000$60,000$70,000$80,000$90,000$100,000

    $125,000$150,000$175,000$200,000$225,000$250,000

    $110,000$120,000$130,000$140,000$150,000$160,000

    $275,000$300,000$325,000$350,000$375,000$400,000

    PreliminaryFinancingConcerns

    Mosthomebuyersfindthattheyneedtofinanceatleastpartoftheirhomepurchase.Therefore,the firststageinfindingtherighthomeistoreviewyourpersonalfinancialsituationandmakeaninformedestimateofyourtruepurchasingpower.Yourpurchasingpowerwilldependon:

    YourIncomeYourCreditRatingOtherMonthlyExpensesYourDownPaymentAvailableInterestRates

    HowMuchHomeCanYouBuy?Thenextfourstepsdiscussedwillhelpyoureviewhomefinancingandgetyoupreparedtospeakindetailwithalender.Amorethoroughoverviewofthefinancingprocessiscoveredlaterinthisguide.

    Step1:Makearoughestimateofhowmuchhomeyoucanaordbasedonyourincome.Hereareafewmethodsthatwillgiveyouanapproximatestartingpointforhowmuchhomeyoucanafford.Method1:Thepriceofyourhomeshouldn'tbeanymorethan2.5timesyourannualsalary.

  • AnnualSalary MaximumHousePaymentGrossMonthlyIncome$50,000$60,000$70,000$80,000$90,000$100,000$110,000$120,000$130,000$140,000$150,000$160,000

    $4,167$5,000$5,833$6,667$7,500$8,333$9,167$10,000$10,833$11,667$12,500$13,333

    $1,250$1,500$1,750$2,000$2,250$2,500$2,750$3,000$3,250$3,500$3,750$4,000

    HowDoesYourScoreRate?

    Great

    Exceptional

    Good

    Fair

    Low

    Above780

    740780

    690740

    620690

    Below620

    TheaveragecreditscoreintheUSis678.

    Method2:Ahousepaymentshouldbenomorethan25%ofyourgrossmonthlyincome(beforetaxesanddeductions)

    Keepinmindthattheseareguidelines.Therearemanyotherfactorsthatdeterminehowmuchhomeyoucanafford.

    Step2:Takeacloselookatyourcreditreport.YourCreditHistoryisoneoftheprincipalmeasuresusedbyalendertodetermineyourinterestrate.Thebetteryourcredit,thebetterlendingtermsyourbankorlendinginstitutionwillbeabletoofferyou.Ahigherinterestratetranslatesintoahighermonthlymortgagepayment,andsoyourcreditscorewilldirectlyaffecthowmuchmoneyyoucanborrowandatwhichhomesyoushouldbelooking..Youshouldbeawareofwhatinformationisonyourcreditreportbyobtainingandreviewingcopiesofyourcreditreportfromthethreemaincreditreportagencies.

    Equifaxwww.equifax.com1.888.766.0008

    TransUnionwww.transunion.com1.800.888.4213

    Experianwww.experian.com1.888.397.3742

    Rememberthatthereareseveralfactorsthataffectyourcreditreportincludingyourpaymenthistory,yourcurrentratioof debt

    toincomeandsignsofresponsibilityandstability.Andsincenotallcreditorsreporttoallthreeagencies,it'sbestto

    orderareportfromallthreeinstitutions.Yourgoalinorderingallthreecreditreportsistomakesurethatalloftheinformationstatedoneachreportisaccurateandcorrect..Ifthereareanydiscrepanciesonyourcreditreport,it'simportantthatyoucontacttheratingagenciesandhavethoserecordscorrected.Takingthetimetoverifyandcorrectyourcreditreportbeforeyouspeaktoalenderwillhelpeliminatehassleslateron.

  • Step3:GathertheDocuments/TakealookatyourAssetsandMonthlyExpensesYourlendinginstitutionwillaskyoutogiveacompleteprofileofyourfinancialsituation.Inadditiontoyourincome,yourexistingassetsanddebtswilldeterminehowmuchmoneythatyoucanborrow.Belowyou'llfindalistofdocumentsyoumayberequiredtoproduceregardingyourfinancialsituationwhenyouspeaktoalender.Itisagoodideatogatherthesethingsnowandhavethemonhand.Youwillneedtoprovidethisinformationforallprimaryandcoborrowers.

    SocialSecurityNumber W2Formsfromtheprevioustwoyears PayStubs(mostrecentmonths) EmploymentHistorySummary Bankstatementsforcheckingandsavingsaccounts(past3months)

    CreditorInformation.Thisincludesdebtslike:

    StudentLoans AutoLoans CreditCards ChildSupportPayments

    FederalTaxReturns(forthepast2years) CompleteRecordofAssets

    Stocks,bond,andinvestmentaccounts IRA/Retirementplan Lifeinsurancepolicies Automobilesowned Constructionloan Giftletters Documentationofotherincome

    Improvinganyoftheseareaswillhelpyouqualifyforbetterlendingterms,sokeepthatinmindbeforeyouspeakwithamortgageprofessional.Ifit'spossibletopayoffacarloanoracreditcardbalancebeforeyouseekfinancingforyournewhome,thepreferentialfinancingtermsthatyoucouldreceivemaysaveyouthousandsofdollarsoverthelifeofyourmortgage.

    Step4:TalktoaQualiedLenderAfterlookingatthisinformationforyourself,it'stimetospeaktoaqualifiedlender.Aprofessionaladvisorwillnotonlybeabletogiveyouinformationonthebestratesandtermsavailableinthecurrentmarket,butheor shecanalsoexplaintoyouwhatoptionsyouhavegivenyouruniquefinancialsituation.

    Talkingtoalenderatthistimewillhelpyougetamoreaccurateideaofwhatyoucanafford.Whenwebegintolookseriouslyathomesyou'llgobacktothelenderandshoparoundforthebestloanavailable.Ifyou'restilllookingforaqualifiedandexperiencedlendingprofessional,Iwillrecommendsomeforyoutospeakto..

  • SingleFamilyDetachedDuplexCondominium/TownhomeApartmentOther

    AirconditioningCarpetedfloorsHardwoodfloorsTiledfloorsWalkinclosetsOther

    Extensivecabinet/counterspaceHometheaterFireplaceBasement

    ElementaryschoolMiddleschoolHighschoolLocalparkRecreationcenter

    LargeyardSmallyardFencedyardGarageCarportOther

    Patio/DeckPoolOutdoorspaExtraparking

    Home Type

    LotFeatures

    InteriorFeatures

    CommunityFeatures

    Price Location Size Other

    Nowthatyou'vedetailedyouridealhomeit'stimetoputyourprioritiesinorder.Whatisthemostimportantthingforyou,

    whatareascanyoucompromise?Chancesarethattheperfecthomeforyouwon'tbeexactlywhatyouputdownonpaper.Rank

    thesefiveareasofyourhome'sfeatures/benefitsfrom15,1beingthemostimportant,5beingthe leastimportant:price,

    location,size,amenities&design,others/special.

    I'vemadeacommitmenttohelpyoufindahomethatsuitsyourwantsandneeds,sonowit'stimeforyoutoarticulateexactlywhatthosewantsandneedsare.Bysittingdownandconsideringthekindsofthingsyou'rereallylookingfor,youcansavealotoftimeandfrustrationbyavoidinghousesthataren'tforyou.

    Whatareyoulookingfor?

  • Apreapprovalletterfromalenderwillalsogiveyouanedgewhenmultipleoffershavebeenmadeonahouse.Preapprovedbuyersgenerallycloseescrowmorequickly,sincemostofthepaperworkhasalreadybeentakencareof.

    PreQualicationvs.PreApproval

    PreQualificationisonlyaloanagent'sopinionthatyou'llbeabletoobtainfinancing.Noverificationsaremade,soformalapprovalisnotissued..PreApprovalmeansyourloanapplicationhasbeentakenthrougharigorousprocedure.Preapprovalsavesyouthetimeoflookingathousesyoucan'tafford..Preapprovedbuyersareaheadinthehomebuyinggame.Ifyoumakeanofferonahomeandthenapplyforaloaninsteadoftheotherwayaround,youareatthemercyofthelenderwhonowknowsthatyoudon'thavetimetoshoparound.

    MortgageOverview

    Whenconsideringyourfinancingoptions,you'llwanttoreviewmanydifferentthingsabouttheloansofferedtoyou.Inthisnextsectionyou'llfindabasicoverviewof

    homeloanfeaturesandthethingsyoushouldconsiderasyoushopforalenderorloan.

    Whatkindoflenderareyouborrowingfrom?

    Homeloansareavailabletoconsumersfromthriftinstitutions commercialbanks,mortgagecompanies,creditunionsandmortgagebrokers..AMortgageBrokerisunlikeotherlendersinthatthebrokerdoesnotlendmoneytoyoudirectly.Abrokerwillhelpfindyoualenderandsecurethetermsofyourarrangement.

    MortgageBrokervs.TraditionalLender

    ABrokermayhaveaccesstoseverallendersandthereforecanofferyouawiderselectionofloanproductsandterms.Heorshecanhelpyoushopforthebestdealbasedonyourcircumstances.(ABrokerisnotobligatedtofindyouthebestdealpossible,sobesuretoaskquestions.).Fortheirwork,brokersarepaidafeeinadditiontothelender'soriginationfees.Brokerssettheirowncompensation,soyou'llneedtoaskanyoneyouspeaktohowtheirfeesaredetermined.

  • 1.Evenifyoudecidetoworkwithatraditionallender,askifabrokerisinvolved.Manynancialinstitutionsactasbothlendersandbrokers,soyoushouldaskifabrokerisinvolvedonanyloanyouareoered..2.Askyourmortgagebrokerhowtheirfeesareassessed.Sometimesthesefeesmaybenegotiable.

    Whatarethetermsoftheloan?

    Allthetermsofaloanmatter,notjusttheinterestrate.You'llwanttogetacompletepictureandbreakdownofwhatagivenoffermeanstoyouonamonthlybasisaswellashowmuchmoneyyou'llbespendingoverthelifeoftheloan..Ataminimum,youshouldrequestquoteswithafewdifferentscenariosandcomparethefinancialimpactofeachsituationbeforeyoudetermineyourbestcourseofaction.

    LoanType/RateTypesFixedRate(Traditional)Loan

    AdjustableRateLoans(ARMs)

    FederalHousingAdministration(FHA)Loans

    VeteransAdministration(VA)GuaranteedLoans

    Points

    Theseloansareusuallystructuredwithrepaymenttermsof15,20or30years.Thelenderwillagreetochargeafixedinteres