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Five Basic Areas to Know for First Time Home Buyers
Are you buying a home for the first time? Unsure of the overall process? It is important to understand many aspects of the process. The terms alone can be a foreign language. There are basically five areas that need to be looked at. To avoid making bad judgments and losing money, get to know the process.
Today home loan programs are more responsible with FHA being the most popular with a minimal 3.5% down. A family member can gift you the required down payment. It is preferred to have between 10-20% down. If you can muster 20% down you may avoid mortgage insurance.
The Pre-Qualification process is simple. It involves three parts. Your credit, income and assets will be reviewed for determining your ability to pay back the loan. It will also determine how much house you can afford to include the taxes, insurance and possible mortgage insurance. Your payment should be no more than 25% of your combined before tax income. Spending 26-50% of income is possible to qualify, however be careful to not exceed your budget with other expenses. Your credit score should be upwards of 620, 700 or more for the most favorable rates. Be sure to have enough in the bank for required down, closing costs, and perhaps two months of payments.
You will want to know your costs of doing your home loan. The Good Faith Estimate is the disclosure for this. It will detail all the loan particulars such as interest rate, monthly payment etc. It mostly gives you the detail of fees from the lender, title and escrow, and your taxes and insurance prepaid amounts. Keep in mind initially it is an estimate just as the title implies. You should get this disclosure before you leave a lender or shortly after a phone application. It is wise to keep this form to keep everyone generally accountable. Expect reasonable differences however as factors change along the way.
Your home loan professional and real estate agent will navigate you through the steps to buying a home. After pre-qualification, you now know how much house you can afford to include principal, interest, taxes and insurance (PITI). Negotiating the sales price with possibly having the seller pay 3-6% in closing costs is where a good Realtor will bring tremendous value to the table. Once your offer is accepted, and the sales contract is executed, the clock start ticking for several contingincies. A home inspection is recommended. Your appraisal, preliminary title report, formal loan approval and underwriter conditions are all in the process. You can count on bumps along the way. Additional supporting documents, verification may be asked for. Be patient. The more responsive you are to requests, the smoother the process will be.
Once conditions are met in underwriting, it is time to order your loan documents. Loan documents consist of the note, the deed of trust, and all disclosures required by law. After signing your documents in title or with a mobile notary, it typically takes 24-48 hrs to fund the loan. After funding and recording with the county, the home loan process is complete and the house is yours to move into!
To sum it up, good communication and experienced professionals will help make the overall transaction smoother. Choose carefully in the beginning who you want to work with. Cathy Acosta of Mission Hills Mortgage Bankers says, I love first time home buyers as I am a teacher at heart and can empathize with their inexperience. It is important to not assume buyers know or understand the loan process fully. Seek people you trust and are recommended. Learn as much as you can and most importantly take the initiative.
Before you select any lender, you owe it to yourself to check with a seasoned loan professional to be sure you are treated fairly. Prequalification is the first step. Visit home loans Redding for current loan programs and resources to make your transaction a success. Easily apply online for a home loan or call for current rates. Its FREE with No Obligation to analyze your loan scenario.
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