Buyer’s information

As a buyer it’s very important to be informed about the home buying process before you jump into it, especially if it’s your first time buying a home. It can be a extremely time-consuming and costly if you’re not familiar with all aspects of the process, and you don’t have all the best updated information and resources available at your disposal. To help you understand what is going to be required of you I’ve answered some very important questions you should know.

What should I do if I don’t have a credit history?

If you never had a credit card or taken out a loan before you might not have a credit history. There are a couple of things you can do to start establishing a credit history. You may be able to use what is called a “nontraditional” credit history. That’s done by documenting your rent, telephone bills, or utility payments on time each month and use that as a history of credit. Another thing you can do is set up a secure credit card with a bank by opening an account and charging from that account. The bank will give you a credit card with a charging limit totaling the amount that you have deposited in a secured account. If you deposit $500 into the secured account you will only be able to charge under that amount and will not be able to charge again untill the account has enough money to secure what you are charging.

How do I get started?

Unless you are paying cash you can’t buy house without borrowing money, so you need to find out how much a bank is willing to loan you. Before you find out how much you can borrow you want to make sure that your credit history does not reflect any clerical mistakes, which can cost you a lot of money over time. You can get your FREE annual credit report from all three major credit agencies, Experian, exquifax and TransUnion by going to FREE ANNUAL CREDIT REPORT. If you find any simple mistakes you can correct those by writing to the reporting company, and pointing out the error and provide them with proof of the mistake. You can also protest by writing-in your own comments explaining the problem and have it attached to the credit report for future inquiries.

Now you are ready for your credit score. Contact any one of the three major credit agencies, TransUnion, Experian or Equifax to get your credit score or simply go to MY FICO to obtain your FICO score. Make copies of your FICO score report to hand-out to the mortgage brokers or bankers if or when they need to run a credit check on you.

Rule of thumb to follow below.

Excellent Credit- If you know that all three of your FICO credit scores is 760 or higher, your credit is excellent and there’s no need to try to improve your score.
Good Credit- If your FICO scores is between 700 and 759, then you have a choice: cleaning up you reports and get your score to about 760 that will get you a slightly higher interest rate.
Fair to Bad Credit- If your FICO scores are less than 700, or if you don’t know your scores but you have your credit reports and can see that they list negative items, then it’s time to start rebuilding your credit.

 

How do I find a lender?

You can either go to mortgage brokers who specialize in finding you the best rates from a variety of lenders out there or you can go to mortgage bankers who specialize in finding you the best program from within their banking institution. Lending institutions consist of banks, saving and loans, credit unions, Mortgage Companies, finance companies, investment group and various state government lenders.

A mortgage banker- is an agent that works for a direct lender that lends you its own money

A mortgage broker- is a middleman that charges a fee for finding you a loan from a wide variety of loan programs

I have bad credit can I buy a house?

Yes, lenders will check your credit record to see whether they’re willing to loan you money, and see what interest rate to charge you. Bad credit doesn’t mean that you can’t obtain a loan, but it does mean that you will pay a higher interest rate, and you may have to have a larger down payment than otherwise.

I don’t have much for a down-payment, can I become a homebuyer?

You can buy a home for as little as 3% down which comes out to about $6,000 for a $200,000 house. At 3% down your interest will be higher and you will need good credit in todays market. Whenever possible people put 20% down to eliminate the (PMI) Private Mortgage Insurance cost.

How much money will I have to come up with to buy a home?

That question depends on many factors. Generally a buyer will need money to cover:

Earnest Money- $500 to $2,000 (which goes towards the closing cost)
Down Payment - 3% to 20% (of purchase price)
Inspections- $200 to $600 (can be paid at closing or outside closing)
Closing Cost- 3% to 8% (of purchase price)

The earnest money deposit – (a.k.a Good Faith Deposit) the money you put up to show your intent to buy the property, when you make an offer. The earnest money eventually goes towards the closing cost at time of closing. During the negotiating and contingencies the earnest money stays in escrow. An accepted amount is anywhere from $500 to $2,000 on a home priced from $100,000 to $500,000

Down payment- is the difference that is not being financed. If you go for 80% financing you will need to come up with 20% towards down payment cost. The downpayment cost is usually anywhere from 3% to 20% of purchase price.

Closing Cost- (aka Settlement Cost), total costs associated with processing, paying the discount points and brokerage commision which usually totals to about 3% to 6% of the price of the home.

Fees associated with closing cost:

• Attorney’s Fee- (if you decide to use one)
• Brokerage Fee (5%-7% of selling price)
• General Home Inspection- $175 to $600
• Termite Inspection- $50 to $200
• Property Taxes (if purchase is after November)
• Property Insurance
• Loan Origination Fee- (covers lenders administrative cost)
• Survey Fee (if seller does not have a useable survey)
• First Premium of Mortgage Insurance
• Title Insurance (negotiate between you and the seller)
• Loan Discount Points (charge by lender 1 point = 1% of money borrowed)
• Any documentation preparation fees

When I find the home I want, how much should I offer?

The first thing you should do is find out the actual market value of the property before you make an offer. Your Realtor can help you evaluate the market conditions and find the current market value to give you a base price to work from. Compare the home to all others you have seen so far and offer what you feel is a reasonable price considering everything.

What steps need to be taken to secure a loan?

• Pay stubs for the past 2-3 months
• W-2 forms for the past 2 years
• Information on long-term debts
• Recent bank statements
• Tax returns for the past 2 years
• Proof of any other income

Which type of mortgage loan should I choose?

That’s something that you and your mortgage broker/banker will have to decide on. The majority of Americans uses fixed rate mortgages, which are excellent for long term loans.

What happens at the real estate closing?

The day prior to closing you should receive a copy of the HUD-1, review the statement for errors
The Hud-1 summarizes the closing and all the settlements are finalized on the statement
Make sure you have your driver’s license with you at closing
The deed to the house is transferred from the seller to the buyer
All mortgage papers are signed

Are other types of inspections required?

The standard FAR 9 contract used by most brokerage agencies in Florida have two inspection contingencies, a general home inspections and a terminate inspection, but you can add additional inspection contingency to the contract.
Other types of common home inspections:

• Mold Inspection
• Radon Inspection
• Asbestos Inspection
• Lead-base paint Inspection

In addition to the mortgage payment, what other costs do I need to consider?

Home Insurance and property taxes are incorporated into the mortgage payment when the home is financed in form of escrow.
Other costs are:

• Trash & Yard Pick-Up
• Water & Sewer
• Electricity
• Home Repairs
• Cable
• Association Fees
• Reserves for Replacements

Search the MLS I Featured Properties I Communities I About Sarasota I Relocate
Things-to-Do I Buyer’s Information I Seller’s Information I About Patou I Contact