buying your home

Buying a home is one of life’s most exhilarating & adventurous experiences – and one of the most challenging, too.  Preparation is the key to enjoying and understanding the whole process.  Gather up as much information as possible:  loan qualification amount, practical tips, and research neighborhood stats.  Then you can use my tools to find a home, find a REALTOR, and find a neighborhood.  From the initial planning stage to selecting the home that’s perfect for you, the Buying section of our Guide will assist you:

 

1) Planning Out the Purchase

When buying a home, it is best to square up the preliminary planning needed for a home purchase.

  • Take a look at your finances and credit history, and determine (on your own) how much home you think you can afford.  Straighten out any errors or disputed items now, rather than during the loan approval timeframe. 

  • Obtain financing from an approved lender.  This means you need to get pre-qualified or better yet, pre-approved.  Also, research what loan option works best for you.

  • Narrow down your criteria for the type of home you are looking for.  Write down a wish list which categorizes features, such as “Essential, Nice if Included, Undesired – Don’t want.”  Remember, that in the end, every home purchase is a compromise…every home has it’s pros and cons.

  • Start a savings plan (if you don’t already have one) for the down payment and closing costs of home purchase.

  • Find a Realtor you are comfortable with.  One who listens to your wants/needs and will appropriate enough time to work with you.  Give criteria of wants/needs to Realtor.

  • Start looking for your home.  Become an educated buyer.  Research neighborhoods.  Visit Open Houses because it will give you an idea of the market and evaluate real estate agents along the way.      

  • If you are relocating, subscribe to the local newspaper and read the local news and classified ads to get a feeling for the different neighborhoods.

  • Make an offer on a home, possibly a counteroffer, and close on the deal.

 

2.)  Mortgage

Finding the right mortgage is just as important as finding the right house.  You must find one that allows you an affordable monthly payment.  There are many options available such as loans that are 100% of purchase price or Adjustable Rate Mortgages that offer a lower interest rate for the first few years.  The challenge is finding one that fits you.  You’ll need to understand:

  • Components of a mortgage loan

  • Fixed-rate mortgages

  • Adjustable rate mortgages

  • Balloon loans

  • Government sponsored Loan programs

  • 100% Financed Loans

  • Basic Factors of a Mortgage Loan

A mortgage is an instrument that pledges your home as the lender’s security for repayment of the loan.  The lender (bank) agrees to hold the title or deed to your property (or in some states, to hold a lien on your title or deed) until you pay back the mortgage loan plus interest.  The following are the basic factors of a mortgage loan:

  • Mortgage Amount and Term: The mortgage amount is the amount of money you borrow from a lender to pay for your house.  The term is the number of years over which you have to pay back the amount you borrow.  Typically, the length of your mortgage repayment period will affect your monthly mortgage payment.  Most popular among mortgage terms is the 30 year loan.  If you can afford higher payments and would like to pay off the loan in a shorter time, you can choose a 15 or 20 year loan. 

  • Amortization is the payment of the loan through periodic installments of principal and interest.  During the first few years, most of your payments will be used toward the interest you owe.  During the final years of your loan, your payments will be applied to the remaining principal. 

Adjustable Rate Mortgage (ARM)
A mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the change in monthly payment amount, however, is usually subject to a cap.


Balloon Payment (Balloon Mortgage)
A mortgage that typically offers low rates for an initial period of time (usually 5, 7, or 10) years; after that time period elapses, the balance is due or is refinanced by the borrower (also called balloon mortgage).


Fixed-Rate Loan (Fixed-Rate Mortgage)
A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.


Closing Costs (Settlement Costs)
Customary costs above and beyond the sale price of the property that must be paid to cover the transfer of ownership at closing; these costs generally vary by geographic location and are typically detailed to the borrower after submission of a loan application.


Debt-to-Income Ratio
A comparison of gross income to housing and non-housing expenses; with the U.S. Federal Housing Administration, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income.


Discount Point
Normally paid at closing and generally calculated to be equivalent to 1% of the total loan amount, discount points are paid to reduce the interest rate on a loan.

Down Payment
The portion of a home's purchase price that is paid in cash and is not part of the mortgage loan.

Government Loans & Programs
The Federal Housing Administration (FHA), the U.S. Dept. of Veterans Affairs (VA) and the Rural Housing Services (RHS) are three agencies that offer government-insured loans.  To obtain these loans, you apply through a lender that is approved to handle them.  All of these agencies require certain criteria to be met. 

  • FHA Loans – FHA offers 15 & 30 year fixed loans as well as 1 Year Adjustable Rate Mortgages.  The down payment is 3% to 5% of the FHA appraisal value or the purchase price.  FHA has a maximum loan limit that varies depending on average cost of housing in a given county.  FHA is a little more lenient with borrowers FICO credit scores and have higher qualifying income ratios.

  • VA Loans- VA loans are for qualified veterans who are looking to buy a house with no down payment.  The maximum loan amount is $203,000.  The qualification guidelines for VA loans are a little more flexible than FHA or conventional loans.  To be eligible, please contact your nearest regional VA office.

  • RHS Loans- The Rural Housing Service, a branch of the U.S. Department of Agriculture, offers low-interest rate homeownership loans with no down payment guidelines to low and moderate low income borrowers who live in rural areas or small towns.

  • CHFA- Colorado Housing and Finance Authority offers 30 year loan programs to first time and non-first time home buyers.  The program also offers 2nd mortgages to cover down payment and closing costs.  A home buyer educational class is required.