Answer: You'll love the feeling of having something
that's all yours - a home where your own personal style will tell
the world who you are. A thriving vegetable garden in the backyard,
a tiled entryway, a yellow kitchen...when you own, you can do it
all your way! But there's more to owning a home than personal satisfaction.
You can deduct the cost of your mortgage loan interest from your
federal income taxes, and usually from your state taxes, too. And
interest will compose nearly all of your monthly payment , for over
half the number of years you'll be paying your mortgage. This adds
up to hefty savings at the end of each year. And you're also allowed
to deduct the property taxes you pay as a homeowner. If you rent,
you write your monthly check and it's gone forever. Another financial
plus in owning a home is the possibility its value will go up through
Answer: You may be a good candidate for one of
the federal mortgage programs that are available. A good place for
you to start is by contacting one of the HUD-funded housing counseling
agencies. They can help you sort through your options. In addition,
contact your local government to see if there are any local homeownership
programs that might work for you. Look in the blue pages of your
phone directory for your local office of housing and community development
or, if you can't find it, contact your mayor's office or your county
Answer: Although you won't have the benefit of
two incomes on which to qualify for a loan, there's no reason that
you can't become a homeowner. Become familiar with the process, pick
a good real estate broker, and think about getting pre-qualified
for a loan. You might want to contact one of the HUD-funded housing
counseling agencies in your area to talk through your options. And
you also might want to think about buying a HUD home - they can be
very good deals. Also, contact your local government to see if there
are any local homebuying programs that could help you. Look in the
blue pages of your phone directory for your local office of housing
and community development or, if you can't find it, contact your
mayor's office or your county executive's office.
Answer: Using a real estate broker is a very good
idea. All the details involved in home buying, particularly the financial
ones, can be mind-boggling. A good real estate professional can guide
you through the entire process and make the experience much easier.
A real estate broker will be well-acquainted with all the important
things you'll want to know about a neighborhood you may be considering...the
quality of schools, the number of children in the area, the safety
of the neighborhood, traffic volume, and more. He or she will help
you figure the price range you can afford and search the classified
ads and multiple listing services for homes you'll want to see. With
immediate access to homes as soon as they're put on the market, the
broker can save you hours of wasted driving-around time. When it's
time to make an offer on a home, the broker can point out ways to
structure your deal to save you money. He or she will explain the
advantages and disadvantages of different types of mortgages, guide
you through the paperwork, and be there to hold your hand and answer
last-minute questions when you sign the final papers at closing.
And you don't have to pay the broker anything! The payment comes
from the home seller - not from the buyer.
Answer: Well, that depends on a number of factors,
including the cost of the house and the type of mortgage you get.
In general, you need to come up with enough money to cover three
costs: earnest money - the deposit you make on the home when you
submit your offer, to prove to the seller that you are serious about
wanting to buy the house; the down payment, a percentage of the cost
of the home that you must pay when you go to settlement; and closing
costs, the costs associated with processing the paperwork to buy
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 more money you can put into your down payment,
the lower your mortgage payments will be. Some types of loans require
10-20% of the purchase price. That's why many first-time homebuyers
turn to HUD's FHA for help. FHA loans require only 3% down - and
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 your loan, your lender will give you an estimate of the
closing costs, so you won't be caught by surprise.
Answer: Use our simple mortgage calculators to
see how much mortgage you could pay - that's a good start. If the
amount you can afford is significantly less than the cost of homes
that interest you, then you might want to wait awhile longer. But
before you give up, why don't you contact a real estate broker or
a HUD-funded housing counseling agency? They will help you evaluate
your loan potential. A broker will know what kinds of mortgages the
lenders are offering and can help you choose a lender with a program
that might be right for you. Another good idea is to get pre-qualified
for a loan. That means you go to a lender and apply for a mortgage
before you actually start looking for a home. Then you'll know exactly
how much you can afford to spend, and it will speed the process once
you do find the home of your dreams.
Answer: You can finance a home with a loan from
a bank, a savings and loan, a credit union, a private mortgage company,
or various state government lenders. Shopping for a loan is like
shopping for any other large purchase: you can save money if you
take some time to look around for the best prices. Different lenders
can offer quite different interest rates and loan fees; and as you
know, a lower interest rate can make a big difference in how much
home you can afford. Talk with several lenders before you decide.
Most lenders need 3-6 weeks for the whole loan approval process.
Your real estate broker will be familiar with lenders in the area
and what they're offering. Or you can look in your local newspaper's
real estate section - most papers list interest rates being offered
by local lenders. You can find FHA-approved lenders in the Yellow
Pages of your phone book. HUD does not make loans directly - you
must use a HUD-approved lender if you're interested in an FHA loan.
Answer: Well, of course you'll have your monthly
utilities. If your utilities have been covered in your rent, this
may be new for you. Your real estate broker will be able to help
you get information from the seller on how much utilities normally
cost. In addition, you might have homeowner association or condo
association dues. You'll definitely have property taxes, and you
also may have city or county taxes. Taxes normally are rolled into
your mortgage payment. Again, your broker will be able to help you
anticipate these costs.
Answer: Most loans have 4 parts: principal: the
repayment of the amount you actually borrowed; interest: payment
to the lender for the money you've borrowed; homeowners insurance:
a monthly amount to insure the property against loss from fire, smoke,
theft, and other hazards required by most lenders; and 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.
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 your 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; and 8) the
name and address of someone who can verify your employment. Depending
on your lender, you may be asked for other information.
Answer: You're right - there are many types of
mortgages, and the more you know about them before you start, the
better. Most people use a fixed-rate mortgage. In a fixed rate mortgage,
your interest rate stays the same for the term of the mortgage, which
normally is 30 years. The advantage of a fixed-rate mortgage is that
you always know exactly how much your mortgage payment will be, and
you can plan for it. Another kind of mortgage is an Adjustable Rate
Mortgage (ARM). With this kind of mortgage, your interest rate and
monthly payments usually start lower than a fixed rate mortgage.
But your rate and payment can change either up or down, as often
as once or twice a year. The adjustment is tied to a financial index,
such as the U.S. Treasury Securities index. The advantage of an ARM
is that you may be able to afford a more expensive home because your
initial interest rate will be lower. There are several government
mortgage programs that might interest you, too. Most people have
heard of FHA mortgages. FHA doesn't actually make loans. Instead,
it insures loans so that if buyers default for some reason, the lenders
will get their money. This encourages lenders to give mortgages to
people who might not otherwise qualify for a loan. Talk to your real
estate broker about the various kinds of loans, before you begin
shopping for a mortgage.
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 awhile, 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.
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 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