Before You Buy!

THINGS TO KNOW WHEN YOU ARE READY TO BUY A HOME

You are not the first to be nervous when applying for a mortgage.

Ok, so we all know how we feel about going to the dentist, or when we are driving along minding our own business and we see those flashing blue and red lights in our rear-view mirror, Wow! Does the stress level hit a peak!

Getting a mortgage is probably one of the most important decisions you will make and with that decision comes a large amount of “stress.”

How you can "BE STRESS FREE” with some mortgage knowledge and get the best loan program and interest rate.

1-YOU DO NOT NEED A 20% DOWN PAYMENT

Down payments range from 0% to 20% or more.
FHA loans require a minimum 3.5% down payment and this down payment can be from a local government agency offering Down Payment Assistance programs or as a gift from a relative.
Conventional loans can range from 3% to 20% down payment. Any down payment that is 20% or greater will come with NO mortgage insurance.
Jumbo home loans require a minimum of 10% or more as a down payment.
USDA or Rural Housing loans can be obtained with 0% for down payment.

2-MORTGAGE INSURANCE

FHA LOANS

Any loan with 20% or less as a down payment will require some form of mortgage insurance.
FHA LOANS have two types of mortgage insurance.
For all FHA loan terms there is the UFMIP (Up Front Mortgage Insurance Premium) which is added to your loan amount and is financed over the term of your loan. The UFMIP rate is 1.75% of the loan amount.
The other type of FHA mortgage insurance is the MIP (Monthly/Mortgage Insurance Premium). This insurance premium is paid monthly, included in your overall monthly housing expense and remains for the term of your loan.
For a 30 year FHA loan, If your down payment is 4.99% or less of the loan amount the rate for this is 0.85% of the loan amount, for any down payment amount 5% or greater as a down payment the rate is 0.80% of the loan amount divided by 12 months. (loan terms less than 30 years, monthly rates are much lower).

CONVENTIONAL LOANS

For conventional loans with less than 20% down payment there is a monthly “PMI” (private mortgage insurance) payment. The rate for PMI on conventional loans will vary depending on location, credit scores, loan-to-value, number of borrowers and debt-to-income ratios.
Conventional loan down payments that are 20% or more will NOT have mortgage insurance premiums.

3-CREDIT REQUIREMENTS

One of the first things that will be required is your credit report with your credit scores.
FHA loans require minimum credit score of 580, in some cases can be as low as 500.
Conventional loans require minimum credit score of 640, in some cases can be as low as 620. Remember there are numerous programs available to “First Time Home Buyers" making home ownership very possible. You do not necessarily have to have “perfect” credit to be approved for a home loan.

4-Closing Costs-What Are They? And Who Pays Them?

Purchasing a property is not just about the down payment and loan amount. There are numerous other fees that will have to be paid to secure your loan. Fees such as, Title Services, Appraisal, Contract Processing fees, Government fees, Survey, Escrow Fees, Loan Origination fees, Realtor or Broker fees. Other fees might include Home Inspection fees, HOA transfer fees, discount points (if applicable to your loan) and any other fees that may be associated with your loan.
These can all add up to seem like a large number, but there are things you can negotiate on your behalf. One of these things is asking the seller to pay a percentage of your closing costs, you can ask for anywhere from 1% to 6% of the loan amount from the seller to help you pay your closing costs. For a large loan seller paid closing costs could in some cases eliminate a very large portion of your closing costs or put you in a position where you might receive money back.
Another alternative is using lender paid costs. Be aware that using lender paid costs requires you to agree to a higher interest rate. The higher the rate you want to agree to equals a higher amount paid to your closing costs. This is beneficial to many buyers that might not have assets enough to pay their closing costs.
Down Payment Assistance programs are just what they mean. Governmental agencies such as local cities or counties have programs like these available to First Time Home Buyers. The assistance received will help with your down payment and or closing costs. Most agencies will require that you make a minimum investment of your own money in order to receive the assistance.
Gifts of money from relatives are another way to help with your down payment and closing costs. These gifts must be documented by the donor and the recipient.

5-EMPLOYMENT

Your loan officer is your best source for the requirements for employment. Most lenders will require a 2-year history documented by the previous two years tax returns. There are exceptions and your loan officer should be able to explain as well as determine your eligibility.
You have probably heard DO NOT change jobs when applying for a home loan. This is very true but there are exceptions to this. If you are thinking about changing jobs or have recently changed jobs most lenders will accept this change IF the change has resulted in an increase in wages and or the change is within the same trade as your current employment.
Another change that could possibly be accepted is changing jobs after obtaining your degree from an educational institution and securing a job that is within the scope of the degree after graduation and has increased your wages. Here again your loan officer should be able to advise you on this, please verify with your loan officer prior to making any changes to your employment.

6-TAKE TEST DRIVE

This is definitely not a sign and drive decision. Call Nomar Mortgage and ask to be pre-approved for a home loan. The loan officer should be able to advise you on how much you can be approved to borrow, an estimate on the costs and what you might be able to do to borrower more or lower the monthly payments that would be suitable to your specific situation.

REMEMBER THE MORE YOU KNOW,

THE BETTER INFORMED YOU ARE,

THE LESS “STRESS” YOU WILL HAVE!

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