1.  How much house can I afford?

The amount of a loan for which you qualify is based on two different calculations. Using what are known as qualification ratios, lenders evaluate your income and long-term debts to determine a "safe" amount for your mortgage payments. A fairly standard ratio is 28/33. Certain mortgage plans sometimes use more liberal ratios-for example, the Fair Housing Authority currently uses 29/41.

Here's how it works: With a 28/33 ratio, you are allowed to spend up to 28% of your gross monthly income for mortgage payments.

The lender will then run a different calculation. This one is your loan payment and debt payments combined, which may not exceed 33% of your gross monthly income. 

To calculate exactly how much you may borrow, you also need an estimate of interest rates. For example: Suppose you had $1,000 a month for mortgage payment; at 7% that would let you borrow about $160,000 on a 30-year loan. At 6% the loan amount would be nearly $175,000. If your rate were 8%, the loan amount would be a bit less than $150,000.

As part of this calculation, you also need to estimate and include the property taxes, homeowner's insurance, and homeowner association fees (if applicable) you might need to pay, which are considered part of your monthly expense.

2.  Why do I need to check my credit prior to purchasing a house?

Even if you're sure you have excellent credit, it's wise to double-check at the outset. Straightening out any errors or disputed items now will avoid troublesome holdups down the road when you're waiting for mortgage approval. 

You may see disputed items, in addition to errors caused by a faulty social security number, a name similar to yours, or a court ordered judgment you paid off that hasn't been cleared from the public records. If such items appear, write a letter to the appropriate credit bureau. Credit bureaus are required to help you straighten things out in a reasonable time (usually 30 days).

3.  How much do I need to put down for a down payment?

This depends on many factors. For purchases, we have loan programs that allow financing from 95%, 97%, to even 100% of the home value. Of course, loans with a loan-to-value ratio (LTV) of greater than 80% will likely require private mortgage insurance (PMI) by the lender. For refinance loans, we have several "no out of pocket" loans available. For exact amounts, please contact us. 

4.  How do I find an agent to work with?

You need to find someone with whom you are comfortable and that you can trust to assist you through the process of buying or selling a home. The best way to do this is by interviewing several agents prior to reaching a decision. Key traits we have always looked for are experience, honesty, integrity, and knowledge.  

5.  What does "multiple listing" mean?

Most real estate agencies cooperate with other real estate agencies in showing and selling their listings. When someone decides to sell their property, they find an agent to work for them. That person is responsible for the marketing and sale process. When the home is listed, it is entered into the multiple listing system (MLS) database and your house is then available to all agents and automatically listed on any sites that subscribe to the MLS.

 

6.  What is a buyer's agent?

A real estate agent who is working on the buyer's behalf. The buyer agent is responsible for representing buyer and should only have that client's interest in mind. A seller's agent is responsible for the seller's interests.  

7.  As a first-time homebuyer, what should I do first? Find a mortgage lender or find a house?

It is usually best to first shop for a mortgage and obtain pre-approval for an amount that is affordable to you. Then you can negotiate a purchase agreement with the seller for an amount that you know you can afford. Having the preliminary approval of your lender will give you an advantage in negotiating with the seller, especially in a tight market.  

8.  Why do I need a home inspection?

A home inspection is critical because you can't always see everything that is wrong with a house. Would you purchase a used car without having a mechanic inspect it first?

Even a good seller may not be aware of issues that are developing with a house.

Inspections should cover (but are not limited to): an overall building inspection (covering structure, electrical, plumbing, and HVAC systems), septic systems, wells, radon, pest, lead, and water quality, and mold.

If you have any concerns, you should discuss them with the inspector prior to the inspection so that they will know to concentrate on them.  

9.  Why do I need title insurance?

Title insurance is always required by a bank or other commercial lender in a real estate transaction to protect their investment. In a private mortgage transaction, such insurance is advisable but not required. Title insurance will protect the mortgage holder against contractors' liens, boundary disputes, and various other liens that may have been placed on the property.  

10.  What is the difference between an inspection and an appraisal?

A home inspection is usually not required but an appraisal is.

A home inspection is used to discover any issues that may be wrong with the home or property allowing you to make an informed decision. The home inspection will help protect YOUR investment. An appraisal is used to ensure that the price being paid for the house is less than or equal to its actual property value. The appraisal helps the mortgage lender ensure that there will be sufficient value on the home/property to cover its investment should you default on the mortgage. It also helps you ensure you are not overpaying for the house/property.  

11.  How long does it take from when I make an offer until the house is mine (closing)?

After you have made an offer on a home a number of steps have to be completed. Your lender will need to receive and verify your documentantion, they will need the appraisal, title information and any other requirements that your loan requires.

You will also need to complete any other contingencies that you may have listed in your offer like the results of a home inspection, survey or sale of your other home.

Once all these conditions are met you will be cleared to close. A typical closing takes 30 to 60 days however, they can be completed in as little as 12 days if all conditions are completed quickly.