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Frequently Asked Questions (FAQs)

  1. Why should I buy, instead of rent?
  2. I've had bad credit, and I don't have much for a down-payment. Can I become a homebuyer?
  3. How much money will I have to come up with to buy a home?
  4. In addition to the mortgage payment, what other costs do I need to consider?
  5. What do I need to take with me when I apply for a mortgage?
  6. 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 homeís 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.

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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.

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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 donít 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.

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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.

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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.

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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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