How to Buy Your First Home

1. How should I determine how much house I can afford?  There are some mathematical formulas you can use, but the best recommendation is to make an appointment with your Agent or Mortgage Loan Officer to pre-qualify.  They will discuss how much you qualify for and what programs you qualify for.
   
   
2. How do I determine if I am ready to purchase a home?   If you are paying as much for rent as you could be paying to own a home, then you may be ready to purchase a home.  With all of today’s program and financing options, more people are ready to buy than ever.  Speak to your Agent, Realtor or Mortgage Loan Officer to determine if you are ready to purchase a home.
   
   
3. What are the things I should consider when purchasing a home? (resale value)Amenities needed, number of bedrooms, location, schools, shopping.  Other considerations are age of home, surrounding environment, condition, and last but not least, price and holding costs.
   
   
4. What happens if the home doesn’t appraise for the market value?  If you are obtaining financing, the lender would more likely not provide you the loan.  You could renegotiate the deal with the seller or cancel the contract.
   
   
5. What is the mortgage application process? The process is usually to complete an application for a loan, supply documents to the lender (W-2s, bank statements, tax returns, and an itemization of your revolving expenses), and allow them to run your credit history.  Other information may be requested/needed as well.
   
   
6. How much money do I have to put down?  Everyone’s financial portfolio is different, so this can vary.  However, with the assistance of grant money and various other programs available, the range could be from no money down to as much as 20% of the purchase price.
   
   
7. Do I have to have money saved beyond my down payment? Yes.  Typically three months reserves are required for conforming loans.  The reserves can be in the form of liquid assets, certificates of deposits (CDs), savings account and/or retirement portfolios.
   
   
8. How long is the process form application time to closing? It depends.  Some loans can be closed in as little as a week to ten days.  However, normally, if down payment assistance is used, it can take 21 to 45 days to close a loan.
   
   
9. What are some of the fees associated for closing a loan? Closing costs are considered title insurance, homeowners insurance, recording fees, transfer tax, mortgage expenses, lender fees, title work fees, appraisals, credit reports, survey of property, points.  Closing costs vary depending upon the loan product and the fees that are customary in your area.
   
   
10. How do I know if I am getting a good interest rate?  Shop around by seeing what is advertised and then talk to a couple of lenders for comparisons.
    
    
11. What is the difference between APR and interest rate? The interest rate is the advertised rate the lender provides you.  The APR (Annual Percentage Rate) is the yearly percentage of the loan that included the interest rate plus the cost to secure the loan.  It is the true amount you are paying for the loan.
    
    
12. What organization is prepared or able to assist me with repairing my credit, if needed? Many organizations can provide this service.  Check with Mid Central Community Action, Chestnut Credit Counselors, and Family Credit Counselors.
    
    
13. What is an escrow account? It is an account held by a lender on your behalf to pay the taxes, insurance, and other periodic debts against the real estate.
    
    
14. Why do I need homeowners insurance?  How much?  What’s the difference between replacement cost and market value? Homeowners insurance protects the lender in case of a loss.  You will need at least as much as the loan amount in homeowners insurance.  Replacement cost is the cost to rebuild the home.  Market value is what the home is currently worth.
    
    
15. What services can I expect from a realtor? Realtors are the experts in knowing the value of houses in the area and will assist you from A-Z in counseling you through the home buying process. 
    
    
16. Will I need a house inspection?  What happens if there are problems with the house? You should always have the house you are interested in purchasing inspected by a licensed and certified home inspector, especially if it is an older home.  Unless the house is sold “as is” it is usually the Seller’s expense to have the repairs done.  If the repairs are too extensive, the contract should allow you to get out of the deal. 
    
    
17. What should I expect for household expenses once I purchase the house? Connection fees on utilities, upkeep and maintenance, real estate taxes, homeowners insurance, and of course the mortgage.
    
    
18. Are there organizations to assist with down payment costs? Yes, there are a few different down payment assistance programs.  They have maximum income requirements to meet.  Make sure you stop by each table to see what programs they offer.
    
    
19. What’s the best time of the year to purchase a home? Typically any time is the best time.  More houses are for sale in the late spring early summer.
    
    
20. Should you purchase an older home or a new home?  What’s the benefits and cost of each?  It depends on your needs, lifestyle, and desires. Older homes typically have an inherent higher maintenance cost just because of their age.  A newer home will have some costs involved such as landscaping and window coverings.
    
    
21. What are property taxes? These are taxes against the property that are based on its value.  They assist to pay for services of the general public such as schools and emergency services.
    
    
22. Can I deduct any of this for my taxes?  Yes, property taxes along with mortgage interest tax are tax deductible.  Make sure you seek the professional advice of a tax professional.