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Mortgage News Matters

Costs to Consider When Purchasing a Home.

Buying a home is likely to be the largest purchase you make in your lifetime. Along with the price tag, there are other costs to also consider. Costs will vary from buyer to buyer due to a few different factors including the type and length of the loan you receive, as well as location and demand. It is important to familiarize yourself with these financial obligations prior to beginning your home search. To help with understanding more about what comes along with the purchase of your home, here is a list of costs you will need to consider.

Down payment:

The down payment is a set price you pay upfront when you purchase a home. Through a conventional loan, a down payment is required and will be determined based on the property type and the price of the home. The amount you put down on a home will affect your interest payment as well. The larger the down payment, the lower your interest rate. However, some loans such as a VA loan or USDA don’t always require a down payment.

Closing Costs:

To finalize your mortgage loan and receive the keys to the property, you will have to submit all closing costs. These costs are each directly related to your mortgage and include the following.

  • Application fee
  • Appraisal fee
  • Credit check fee
  • Underwriting fee
  • Title insurance
  • Title search fee

Property Taxes:

Your property taxes are calculated by your local government where your property is located, and you are required to pay them as long as you own the home. These taxes are based on the value of your home or property and if over time the value is assessed to a higher value, your taxes will increase.

Homeowners and Mortgage Insurance:

Home insurance protects your property against the cost of potential damage from unforeseen circumstances. Homeowners insurance will vary as there are many options available, so it is best to shop around before deciding which one to go with. Mortgage insurance reduces the lender’s risk if you can’t make your mortgage payment.

HOA Fees:

If you are purchasing a home overseen by a homeowners association then you will be required to pay a monthly fee to the community. These fees are in place to keep shared spaces within the neighborhood maintained such as a gym, pool, or landscaping. They also protect other people’s property values by restricting a single homeowner from making a change to their home.

Maintenance Fees:

No matter where you choose to live, you will always have to keep up with regular maintenance and home repairs. Keeping extra funds on the side or setting up an emergency fund for replacing items will help you be better prepared when things break. Planning out a budget and knowing what costs to expect as you begin your home buying journey will eliminate any surprises that you may not have been prepared for.

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Mortgage News Matters

Is My Credit Good Enough to Buy a Home?

Is My Credit Good Enough to Buy a Home?

Achieving a high credit score should always be something to aim for. When it comes to buying a home, the higher your score is, the easier it will be to attain a loan since it shows the likelihood of you paying back your debt to the mortgage lender. Potential homebuyers should strive for a credit score of at least 760 in order to attain the best rates. However, it is still possible to purchase a home with a slightly lower score, although you will likely face higher rates. If your credit falls on the lower end of the spectrum here are a few ways to improve your score.

  • Review your credit report: once per year you are entitled to a free copy of your credit report. By obtaining your report you can check to see if there are any errors that have impacted your score.
  • Pay down maxed credit cards first: This will help alleviate your credit utilization rate by paying down the cards who have or almost reached their credit limit
  • Become an authorized user: Being added as an authorized user on a friend’s or family member’s credit card will help you to build credit with the help of someone else.
  • Don’t apply for new credit lines: This can hurt your credit score significantly especially if you were recently denied opening a new account.

Depending on which type of home loan you are applying for, the minimum credit score can vary with some being as low as 500. When purchasing a home, find out how much you can get pre-qualified for based on your current credit score.

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Mortgage News Matters

Tips on Navigating a Short Sale for Buyers

Are you a buyer considering purchasing your next home through a short sale? Consider our 5 helpful tips for buyers navigating a short sale.

  1. Get an inspection. Even though the property in a short sale is sold “as-is” it is important to get an inspection before going to the closing table. This will help you determine how much work you can expect to put into the home, as well as its real value. In some cases, proving that the home is in much worse condition than it seems, can persuade the lender to accept a lower price.

  2. Make a realistic offer. It is important to do your homework before putting in an offer. Though buyers can expect to get a deal when purchasing a home through a short sale, they will still need to be willing to make a reasonable offer. If the offer comes in too low, it is likely the lender will move on to another buyer.

  3. Provide a large down payment. Lenders are looking to liquidate short sale properties as soon as possible to make back their money invested. By offering more cash up front in the form of a down payment, buyers are more likely to get their offer accepted.

  4. Offer to pay for the seller’s closing costs. Though it is typical for the lender to pay commission and other seller fees, by offering to pay these costs the buyer can gain a competitive advantage to others also placing an offer.

  5. Hire a real estate professional. Short sales are a more complex process than that of a typical home sale. Hiring a knowledgeable real estate professional with experience in such complicated transactions can give buyers a leg-up and help them better navigate the process.

For more helpful tips on how to navigate a short sale, contact a VanDyk Loan Originator today!

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Mortgage News Matters

Process for Buyers Purchasing a Short Sale

Because a lender is much more involved in the purchase of a short sale, it is important to recognize that the process is not as simple as the typical home buying process between a seller and a buyer.

To help, we’ve broken it down into 6 unique steps that buyers must take when purchasing a short sale.

Step 1: Get approval for financing.

Like with a typical home purchase, the buyer must first get approved by the lender to take out a mortgage loan. This is especially important during the process of a short sale, as the lender will need to be sure that the new buyer is financially sound enough to make their mortgage payments – to avoid a future similar situation.

Step 2: Work with a real estate agent to find a home.

If you are committed to purchasing a short sale, it is important to find a real estate agent who can help you navigate the process. If you choose to find a home without the help of a real estate professional, you may want to focus your energy on looking at homes that are listed as ‘pre-foreclosure properties’ or searching through public records.

Step 3: Research, research, and research some more.

Before making an offer, it is vital to research said home and gain as much insight into the property’s history, as well as its current market value. Since, with a short sale, the seller owes more than the home’s actual value, you will want to find exactly how much the seller owes the lender.

You will also need to find out if there are any claims on the property by an outside person or entity, like a lien. The best way to be sure of this is to hire a title company to run a title search on the home.

This is another perk to hiring a real estate agent to help you, as they have exclusive access to important tools that can help you find this information.

Step 4: Make an offer.

Though many buyers look to short sales as a way to purchase a home for an especially good deal, it is important to keep in mind that the lender is still trying to make back the money on their initial investment. This is why it is important to get a realistic understanding of how much the home is worth before putting in an offer. You can do this by looking at what other homes in the area have sold or are currently priced at. Your offer will still have to be close to the market value if you want a chance that it is accepted.

Step 5: Get a home inspection.

Because of the nature of a short sale, they are sold “as-is.” This means buyers are not able to negotiate for a lower price if they discover problems with the property. Even with this, it is always a good idea to get a home inspection before purchasing a property, to get an understanding of any defects or issues with the home. If repairs are needed, this knowledge will help prepare the buyer.

Step 6: Close on the property.  

For a short sale to close the seller must provide documentation of the following:

  • Hardship letter, explaining that the seller is in financial distress and unable to make their mortgage payments
  • Proof of income and assets, which shows 2 years’ worth of bank statements and tax documents as proof that the seller is not financially equipped enough to pay back their debt.
  • Up-to-date list of liens, showing proof that there are no other individuals who can make a claim on the property.
  • Comparative market analysis, which shows the lender a list of comparable properties currently for sale and have sold within the last 6 months.

Though they are not necessarily an ideal situation for sellers to find themselves in, short sales can be beneficial to buyers and sellers alike.

To learn more about the process of purchasing a short sale, contact a VanDyk Loan Originator today!