Home Buyer’s Info
From your “Real Rocking Realtor”
Whether you’re a first-time home buyer or an experienced one, this guide will educate you on what to expect every step of the way!
1. Find a Realtor (buyer's agent's work for you for free. Buyer's agent's get paid buy the seller)
2. Find a lender (your Realtor can help if necessary)
3. Get pre-approved
4. Shop for a house
5. Put in an offer on a house
6. After offer is accepted, Securing the house with your deposit is crucial. The deposit will be cashed and credited back to you at closing.
7. Inspections are scheduled (not mandatory but extremely advised)
8. After inspections, we do an inspection response for the seller to repair deficiencies. The seller has 72 hours to decide what they are going to do.
After receiving seller’s decision, the buyer has 72 hours to accept the seller’s decision and move forward to the act of sale or reject and get out of the contract. (We can also still negotiate at this point)
9. Buyer order’s the appraisal for the house from their lender.
10. If the house appraises the next step is the closing after all your finances are approved in your lenders underwriting department.
11. The lender and the title company communicate and figure out a good day for the closing.
12. Close on your home and live happily ever after! ;-)
Follow these Do’s and Don’ts for a smoother mortgage approval process.
DO continue making your mortgage or rent payments
Remember, you’re trying to buy a home – one of the first places an underwriter looks for responsible patterns is at your current rent and/or loan history. Even if you plan on closing in the middle of the month, or if you’ve already given notice, continue paying that rent until you’ve signed your final loan documents. It’s always better to be safe than sorry.
DO stay current on all accounts
Much like the first item, the same goes for your other types of accounts (student loans, credit cards, etc.). Nothing can derail a loan approval faster than a late payment coming in the middle of the loan process.
DO keep your bank account balance in the positive at all times
Underwriters hate “financial mismanagement” when you take your bank account into the negative. This could lead to additional explanations and give the underwriter a negative perception of your financial situation.
DO save as much money as possible during the loan process
Underwriters LOVE that little extra rainy day money in the bank. It’s not required but it never hurts. J
DO stay in touch with your Real Estate Agent while searching for a home
It’s important to make sure you’re keeping your agent up to date with any tweaks or changes in your search criteria. Also, a real estate agent that you keep in touch with, will give you some preferential treatment. Ever heard of the squeaky wheel getting oiled? J
DO notify me if you are thinking about changing jobs
It’s not a deal killer, but we need to make sure everything still works with the new employment and income.
DON’T deposit cash in the bank
Don’t deposit and large sums of cash into your bank accounts, mortgage underwriters are very strict on the funds that enter your bank account, everyone has a small savings of cash but you don’t want to put that in the bank because it is not traceable funds, the underwriter will basically not allow that money to be used for the loan in any way.
DON’T pay for your earnest money deposit with cash or money order
Same as above…often times the underwriter can’t source this money and thus we can’t use it towards the loan transaction. Make sure to pay for the earnest money deposit with a personal check or a wire transaction with no cash deposits into the bank account right beforehand.
DON’T make a major purchase (car, boat, big-screen TV, etc…)
This one gets my clients in trouble more than any other item. A simple tip: wait until the loan is closed before buying that new car, boat, or TV.
DON’T buy any furniture
This is similar to the previous, but deserves its own category as it gets many borrowers in trouble (especially first-time home buyers). Remember, you’ll have plenty of time to decorate your new home (or spend on your line of credit) AFTER the loan closes.
DON’T open a new credit card
Opening a new credit card dings your credit by adding an additional inquiry to your score, and it may change the mix of credit types within your report (i.e. credit cards, student loans, etc.) Both of these can have a negative impact on your score, and could result in a denial if things are already tight.
DON’T close any credit card accounts
The reverse of the previous item is also true. Closing accounts can have a negative impact on your score (for one – it decreases your capacity which accounts for 30% of your score).
DON’T open a new cell phone account
Cell phone companies pull your credit when you open a new account. If you’re on the border credit-wise, that inquiry could drop your score enough to impact your rate or cause a denial.
DON’T look at buying a manufactured home
The underwriter won’t approve this home type
DON’T consolidate your debt onto 1 or 2 cards
We’ve already established that additional credit inquiries will hurt your score, but consolidating your credit will also diminish your capacity (the amount of credit you have available), resulting in another hit to your credit.
DON’T pay off collections
Sometimes an underwriter will require you to pay of a collection prior to closing your loan; other times they will not. The best rule of thumb is to only pay off collections if absolutely necessary to ensure a loan approval. Otherwise, needlessly paying off collections could have a negative impact on your score. Give me a call prior to paying off any accounts.
DON’T take out a new loan
This goes for car loans, student loans, additional credit cards, lines of credit, and any other type of loan. Taking out a new loan can have a negative impact on your credit, but also looks bad to underwriters.
If you're about to embark on the home-buying process, you want to know how to buy a house the quick and smart way. The process typically takes two to three months, but in a seller's market with low inventory and strong buyer demand, it could take six months to a year—or longer. But what if you could cut that time in half, without having to make any sacrifices? You’d do it, right?
Of course you would.
Well, you’re in luck! Take a look at our recommendations for buying a home the smart way.
1. Let the government lend a hand
If you’re in the process of saving for a down payment, you might be able to scrape together the remainder of the money by qualifying for one of the more than 2,200 down payment assistance programs offered nationwide. These programs provide home buyers with low-interest loans, grants, and tax credits.
If you haven’t heard of down payment assistance before, you’re not alone. Many people don't know about these programs or assume their loans are more difficult to get than they actually are.
You’ll have to meet certain eligibility requirements in terms of income, occupation, or credit, but buyers who use down payment assistance programs save an average of $17,766 between upfront savings and lower monthly mortgage payments over the life of the loan. Visit Down Payment Resource, which offers information on programs, to find a program you could be eligible for.
2. Stay on top of new listings
Find homes for sale on
You can see what houses are currently for sale in your area using realtor.com®. To fully stay on top of brand-new listings in your preferred area, however, ask your real estate agent to set up an automated email through the local multiple listing service so that you’ll get pinged every time a new listing pops up that fits your needs.
Tracking new listings in real time can give you an edge over other buyers, because you’ll be in position to schedule showings right away and potentially make an offer before another buyer even steps foot inside the house.
3. Consider buying a foreclosure
Many home buyers overlook foreclosed and bank-owned properties often because they fear the condition of the home. That’s a valid concern, because foreclosed homes are frequently sold as is—which means the bank is not going to fix any problems (even if you uncover them during a home inspection). However, buying a home that’s in foreclosure has a couple of big advantages.
It’s often worth the investment, given that foreclosed homes sell for an average 15% below the home's actual value—and foreclosed homes often sell for less than asking price. Also, because there is less competition among home buyers in this sector of the market, you’re less likely to go up against other bids when submitting an offer on a home that’s in foreclosure.
To begin your search you can browse listings of foreclosures on realtor.com, which might also be marked as “bank owned” or “real estate owned.”
4.Certifythat your finances are in order
Closing times are getting longer: On average, it now takes 50 days to reach closing, up from 40 days in 2015, according to a recent report by Ellie Mae, a company that provides mortgage solutions to consumers.
To close faster, your best move is to get pre-approved for a home loan before submitting an offer on a property. A mortgage pre-approval entails a lender running a credit check and verifying your income and assets, followed by an underwriter doing a preliminary review of your financial portfolio. If everything checks out, the lender will issue you a written commitment for financing up to a certain loan amount that’s good for up to 90 to 120 days.
Meanwhile, getting pre-qualified simply means you’ve discussed your finances with a lender and received a verbal commitment for the loan. Consequently, a pre-qualification can cause a home seller to dismiss your offer outright. And even if you somehow manage to sign a sales contract with only a pre-qualification, it’s probably going to take your lender longer to get the loan approved than if you had pre-approval.
Daniel Bortz is a Realtor in Maryland, Virginia, and Washington, DC, who has written for Money magazine, Entrepreneur magazine, CNNMoney, and more.
Home ownership rates are the lowest they have been in the last 50 years. Yet a large portion of Americans are still renting properties, instead of enjoying a home of their own. Consumer reports believe this is an issue because of a buyer's lack of trust in their ability to purchase. It is still a long standing notion that a buyer needs 20% towards the cost of the home in order to move forward, but this isn't true. With countless down payment assistant programs, and closing cost roll-ins, a home owner could move in with as little as a few hundred to a couple thousand dollars. Which is a huge difference in the time it takes to save up to make the move.
With interest rates at an all time low, home ownership in today's market is a great investment. The money saved over a mortgage's lifespan can result in tens of thousands of dollars, if not hundreds. That's more money in your pocket today. Don't wait to buy when interest rates soar again. With low interest rates, that means your monthly mortgage payments are at a significantly lower cost, as well. With such a heated housing marketing, rental prices are soaring, and statistics are constantly showing that home ownership can be equivalent to your rental rate each month, if not less. Why get stuck in a small 2 bedroom apartment, if you can move into a home a pay a monthly rate that is the same, and get a 3 bedroom house with a great backyard?
There is also a fear that a home can keep you "stuck" or "rooted" to one place, without an easy transition out if you decide to move. Although the future of the housing market isn't easily predictable from location to location, you can always discuss with your agent about buying a home in an area that has a strong turn-over rate when a home hits the market. The equity build up when it comes time to selling is going to be far more beneficial, than if you put money into a rental and decided to move. The money from selling the property can be used to purchase a new home. With renting, there would be no additional funds to transition into a new place.
Now imagine if you were renting a home for $2000/month. If your landlord is renting to make a profit, think how much less you'd be paying on a monthly basis towards your mortgage, if the home was yours. Then you wouldn't be paying a landlord to profit off of you, you'd be paying a reasonable rate, and get to call the property your own. Discuss with your agent and lender the steps you need to take towards home ownership, you might be happily surprised about the type of home you can afford to move into.
Finally ready to make the transition into home ownership? That's awesome, and in this exciting time you can be turning to friends and family for an insight into the process. However, there seems to be a circulation of misinformation spreading around, so we're here to clear up a few myths.
1. THE FIRST STEP IS SEARCHING FOR A HOME
You know the saying, "Don't put the cart before the horse," well that's important to remember when it comes to buying a home. You don't want to start looking for a house until you have gotten to sit down with a lender and discuss what the bank will qualify you for. If you fall in love with a house that's $250,000 and come to find out you're only qualified for $200,000 you can get your hopes crushed and waste a lot of time. Don't start the process on the wrong foot and make sure the numbers line up.
2. YOU DON'T NEED A REAL ESTATE AGENT
For starts, when buying a home, 99% of the time the buyer's agent gets paid by the sellers. That random 1% can be for odd circumstances. So you're getting to use the services of a real estate agent for free. Having a real estate agent on your side means you'll get to see homes that aren't as readily available on public searches, you avoid outdated listings and scammers (there are lots of them), and you have protection when it comes to navigating the legalities of contracts and buying a home. Why wouldn't you want an awesome negotiator working to ensure you get the best from the transaction? For FREE!
3. YOU CAN'T BUY A HOME WITH BAD CREDIT
Fortunately for some, this is a myth. Lenders and banks come by the hundreds of thousands and all though there are a few loan options, a lot of lenders can work with credit scores down to the low to mid 500's. Get in touch with an agent to help you connect with the right lender who can help you potentially approved. There is a lot of factors that go into approvals, but your credit doesn't have to be a sore thumb during the process. However, you will be doing yourself a favor if you connect with a credit repair specialist to at least get those numbers in the 600's. A better score will lower you interest rate.
4. YOUR DOWN PAYMENT HAS TO BE 20%
Think you have to sell an arm and a leg to buy a home? Not at all! An FHA loan only requires 3.5% while a conventional only requires 5%. There are a lot of programs that can potentially help you with down payment assistance or be 0% down mortgage. USDA and VA loans are the most popular 0% down programs. If you qualify, this can take a big chunk off the amount of cash you have to bring to the closing table.
5. DOWN PAYMENTS ARE THE ONLY UPFRONT COST
This is one of the biggest misconceptions. There is a lot of cost that goes into buying a home, and that includes upfront costs. One of the mandatory ones are a termite and appraisal. If you are getting a mortgage, the home will have to appraise and get a letter stating there are no termites in the home. Termite can range between $25-$75 dollars. An appraisal can range from $300-$700 dollars. Aside from your down payment, you then have to pay for closing costs. And NO, they are not the same thing. Closing costs can range anywhere between 3-6% of the purchase price. In certain markets, this can be negotiated for sellers to cover by rolling into the offer price, but whether that decision is smart to do or not when it comes to landing your dream home will need to be discussed with your agent.
Now that you have some knowledge to get the process started, get in touch with an agent who will help you get through the process as smoothly as possible.
Want to know more about a home loan? Here's some GREAT info from our partnered lender Cendera funding.
"This is not an intention to lend"
• Government insured mortgage
• Loan limits: 1 unit: $275,665, 2 units: $352,950, 3 units: $426,625, 4 units: $530,150
• 3.5% minimum down payment
• Seller can pay up to 6% of sales price towards closing/pre-paids for Borrower
• Appraisers could call for repairs for certain defects-(Rotten wood, peeling paint, missing fixtures, etc.)
• Do NOT have to be a first time buyer. Can own other property-(if another FHA loan it must be quite a distance from subject property- exception would be family increase, etc.)
• Minimum credit score: 600-(must have rental payment history, 3 mos. Reserves 600-619 score)
• Upfront mortgage insurance 1.75% financed back into the loan .85% monthly MI factor.
• Government insured mortgage-(loans up to $424,100)
• -0- down payment required
• Borrower must be active, reservist or Veteran from any branch of service with Honorable discharge
• Can use multiple times and on multiple properties with certain circumstances
• Seller can pay up to 6% of sales price towards closing costs/pre-paids for Borrower
• Can own other properties
• Only people allowed on title and loan are Veteran OR Veteran and a spouse. No other co-borrowers.
• Minimum credit score: 620
• VA funding fee for first time use is 2.2% and can go up to 3.3% depending on branch of service and how many times it’s been used. NO monthly mortgage insurance.
• Fannie Mae/Freddie Mac—Conforming loans up to $424,100 above that is JUMBO-(20% down)
• 5% down payment required-(owner occupied), 10%-(2nd home), 15%-(Investment property)
• Seller can pay up to 3% of sales price towards purchasers closing costs/pre-paids on owner occupied and 2% of sales price on 2nd home or investment property
• Appraisers are the least strict on this financing type and rarely call for repairs unless hazardous
• Minimum credit score: 620
• No up front mortgage insurance. Monthly PMI varies on loan to value and borrower credit profile. Estimated factor is .78% per month for 95% loans, .52% per month for 90-95% LTV, .25% per month for 80-90% .
• Government insured/guaranteed
• -0- down payment required
• Income limits apply-(1-4 family max household income: $74,500)
• Seller can pay up to 6% of the sales price towards purchasers closing costs/pre-paids
• Borrower can finance in closing/pre-paids up to the appraised value.
• Targeted areas-(all of St. Tammany now eligible)
• Minimum credit score 620—AND—at least one Borrower on loan must have at least 1 open trade lines of credit OVER 12 mos. old on credit report. Non-traditional credit can be used to make up a total of 3 trade lines of credit.
• New disclosure as of 12-1: Borrower must sign they plan on owner occupying the property for 30 years.
• Appraisers are MOST strict on these loan types. Home must be in very good condition.
• Cannot own any other homes at the time of closing –(can close back to back with the sale of a previous home)
• Up front mortgage insurance is 1% and monthly is .35% PMI factor.
Questions? Call or email Andrea! Cell: 985-788-8238 or EMAIL: Andrea@Cenderafunding.com