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Frequently Asked Questions:

1. I’ve had bad credit, and I don’t have much for a
down payment. Can I become a homeowner?

Answer: You may be a good candidate for one of the federal mortgage programs available. Start by contacting a HUD housing counseling agency in your area. In addition, contact your local government to locate any local homeownership programs that might be available to you.

2. Should I use a real estate broker? How do I find one?

Answer: Using a real estate broker is a good idea. A real estate professional can guide you through all the details, including financial ones, of buying a home. A real estate broker will be well acquainted with all the important things you’ll want to know about a neighborhood. The agent will help you determine the price range you can afford and will search the classified ads and multiple listing services for homes in your price range. The broker also has immediate access to homes as soon as they’re put on the market, so your chances of locating what you want increase.

Once you want to make an offer, the broker can point out ways to structure your deal to save you money. The agent will explain the different types of mortgages, guide you through the paperwork, and answer last-minute questions when you sign the final papers.

You should be aware that unless you have specifically requested a Buyer’s Agent, the agent essentially represents the seller.

3.  How much money will I have to come up with
to buy a home?

Answer: The answer depends on a number of factors, such as the cost of the house and the type of mortgage you get. In general, there are three costs:

  • earnest money - the deposit you give the seller when you make the offer.
  • down payment - a percentage of the cost of the home that is paid when you settle.
  • closing costs - the costs associated with processing the needed paper work to buy a house.

When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies. If you buy a HUD home, for example, your deposit generally will range from $500 - $2,000.

The larger the down payment, the lower your mortgage payments. Some types of loans require 10-20% of the purchase price. Many first-time homebuyers turn to the Federal Housing Administration (FHA) for help. FHA loans require only 3% down — and sometimes less.

Closing costs, which you will pay at settlement, average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for a loan, your lender will give you an estimate of the closing costs. If you decide to buy a HUD home, HUD may pay many of your closing costs.

4.  So what will my mortgage payment cover?

Answer: Most mortgages consist of 4 parts:

  • principal: the repayment of the amount you actually borrowed
  • interest: payment to the lender for the money you’ve borrowed
  • homeowner's insurance: a monthly amount, required by most lenders to insure the property owner against loss from fire, smoke, theft, and other hazards
  • property taxes: the annual city/county taxes assessed on your property, divided by the number of mortgage payments you make in a year.

Most loans are for 30 years, although 15-year loans are available, too. During the life of the loan, you’ll pay far more in interest than you will in principal — sometimes two or three times more! Because of the way loans are structured, in the first years you’ll be paying mostly interest in your monthly payments. In the final years, you’ll be paying mostly principal.

5.  What do I need to take with me when I
apply for a mortgage?

Answer: Good question! If you have everything with you when you visit your lender, you’ll save a good deal of time. You should have:

  1. Social security numbers for both you and your spouse, if both of you are applying for the loan
  2. Copies of your checking and savings account statements for the past 6 months
  3. Evidence of any other assets like bonds or stocks
  4. A recent paycheck stub detailing your earnings
  5. A list of all credit card accounts and the approximate monthly amounts owed on each
  6. A list of account numbers and balances due on outstanding loans, such as car loans
  7. Copies of your last 2 years’ income tax statements
  8. The name and address of someone who can verify your employment.

Depending on your lender, you may be asked for other information.

6.  When I find the home I want, how much should I offer?

Answer: Again, your real estate broker can help you here. But there are several things you should consider:

  1. Is the asking price in line with prices of similar homes in the area?
  2. Is the home in good condition or will you have to spend a substantial amount of money making it the way you want it? You probably want to get a professional home inspection before you make your offer. Your real estate broker can help you arrange one.
  3. How long has the home been on the market? If it’s been for sale for a while, the seller may be more eager to accept a lower offer.
  4. How much mortgage will be required? Make sure you really can afford whatever offer you make.
  5. How much do you really want the home? The closer you are to the asking price, the more likely your offer will be accepted. In some cases, you may even want to offer more than the asking price, if you know you are competing with others for the house.

7.  What if my offer is rejected?

Answer: They often are! But don’t let that stop you. Now you begin negotiating. Your broker will help you. You may have to offer more money, but you may ask the seller to cover some or all of your closing costs or to make repairs that wouldn’t normally be expected. Often negotiations on a price will go back and forth several times before a deal is made. Just remember — don’t get so caught up in negotiations that you lose sight of what you really want and can afford!

8.  So what will happen at closing?

Answer: Basically, you’ll sit at a table with your broker, the broker for the seller, the seller, and a closing agent. The closing agent will have a stack of papers for you and the seller to sign. While he or she will give you a basic explanation of each paper, you may want to take the time to read each one and/or consult with your agent to make sure you know exactly what you’re signing. After all, this is a large amount of money you’re committing to pay for a lot of years! Before you go to closing, your lender is required to give you a booklet explaining the closing costs, a "good faith estimate" of how much cash you’ll have to supply at closing, and a list of documents you’ll need at closing. If you don’t get those items, be sure to call your lender BEFORE you go to closing. Be sure to read our booklet on settlement costs . It will help you understand your rights in the process. Don’t hesitate to ask questions.

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teacherdough.com
A Division of Signature Home Loans, LLC
9192 Red Branch Rd., Ste. 280, Columbia, MD 21045
410-715-4081 / Info@teacherdough.com

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