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Frequently
Asked Questions (FAQs)
- Why
should I buy, instead of rent?
- I've
had bad credit, and I don't have much
for a down-payment. Can I become a homebuyer?
- How
much money will I have to come up with
to buy a home?
- In
addition to the mortgage payment, what
other costs do I need to consider?
- What
do I need to take with me when I apply
for a mortgage?
- So
what will happen at closing?
Why
should I buy, instead of rent?
Answer: You'll love the
feeling of having something that's all yours
- a home where your own personal style will
tell the world who you are. A thriving vegetable
garden in the backyard, a tiled entryway,
a yellow kitchen...when you own, you can
do it all your way! But there's more to owning
a home than personal satisfaction. If you
rent, you write your monthly check and it's
gone forever. When you own your home, it
is as if you are putting money into a savings
account each month. During the years, your
home’s value should increase, and you will
build equity that is money you take with
you if you sell the house in the future.
In addition, you can deduct the interest
you pay on your mortgage from your income
taxes, which can be a real savings.
I've
had bad credit, and I don't have much for a
down-payment. Can I become a homebuyer?
Answer: You may be a good
candidate for one of the federal mortgage
programs that are available. A good place
for you to start is by contacting one of
the HUD-funded housing counseling agencies.
They can help you sort through your options.
In addition, contact your local government
to see if there are any local homeownership
programs that might work for you. Look in
the blue pages of your phone directory for
your local office of housing and community
development or, if you can't find it, contact
your mayor's office or your county executive's
office.
How
much money will I have to come up with to buy
a home?
Answer: Well, that depends
on a number of factors, including the cost
of the house and the type of mortgage you
get. In general, you need to come up with
enough money to cover three costs: earnest
money - the deposit you make on the home
when you submit your offer, to prove to the
seller that you are serious about wanting
to buy the house; the down payment, a percentage
of the cost of the home that you must pay
when you go to settlement; and closing costs,
the costs associated with processing the
paperwork to buy a house.
When you make an offer on a home, your real
estate broker will put your earnest money
into an escrow account. If the offer is accepted,
your earnest money will be applied to the
down payment or closing costs. If your offer
is not accepted, your money will be returned
to you. The amount of your earnest money
varies. If you buy a HUD home, for example,
your deposit generally will range from $500
- $2,000.
The more money you can put into your down
payment, the lower your mortgage payments
will be. Some types of loans require 10-20%
of the purchase price. That's why many first-time
homebuyers turn to special financing options
that can require as little as 3 % down, or
in some cases don’t even require a down payment.
Closing costs - which you will pay at settlement
- average 3-4% of the price of your home.
These costs cover various fees your lender
charges and other processing expenses. When
you apply for your loan, your lender will
give you an estimate of the closing costs,
so you won't be caught by surprise. If you
buy a HUD home, HUD may pay many of your
closing costs.
In
addition to the mortgage payment, what other
costs do I need to consider?
Answer: Well, of course
you'll have your monthly utilities. If your
utilities have been covered in your rent,
this may be new for you. Your real estate
broker will be able to help you get information
from the seller on how much utilities normally
cost. In addition, you might have homeowner
association dues. You'll
definitely have property taxes, and you also
may have city or county taxes. You will also
have home owner's insurance to pay for each
year. Taxes and insurance normally are rolled
into your mortgage payment.
Again,
your broker will be able to help you anticipate
these costs.
What
do I need to take with me when I apply for
a mortgage?
Answer: Good question!
If you have everything with you when you
visit your lender, you'll save a good deal
of time. You should have: 1) social security
numbers for both your and your spouse, if
both of you are applying for the loan; 2)
copies of your checking and savings account
statements for the past 2 months; 3) evidence
of any other assets like bonds or stocks;
4) 30 days of recent paycheck stubs detailing
your earnings; 5) a list of all credit card
accounts and the approximate monthly amounts
owed on each; 6) a list of account numbers
and balances due on outstanding loans, such
as car loans; 7) copies of your last 2 years'
income tax statements; and 8) the name and
address of someone who can verify your employment.
Depending on your lender, you may be asked
for other information.
So
what will happen at closing?
Answer: Basically, you'll
sit at a table with your broker, the broker
for the seller, probably the seller, and
a closing agent. The closing agent will have
a stack of papers for you and the seller
to sign. While he or she will give you a
basic explanation of each paper, you may
want to take the time to read each one and/or
consult with your agent to make sure you
know exactly what you're signing. After all,
this is a large amount of money you're committing
to pay for a lot of years! Before you go
to closing, your lender is required to give
you a booklet explaining the closing costs,
a "good faith estimate" of how
much cash you'll have to supply at closing,
and a list of documents you'll need at closing.
If you don't get those items, be sure to
call your lender BEFORE you go to closing.
Be sure to read our booklet on settlement
costs . It will help you understand your
rights in the process. Don't hesitate to
ask questions.
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