Down Payment – 10 Things to Know Before Buying a Home

For many Americans, coming up with a down payment for their first home can be a major roadblock—and quite often the reason for renting, rather than owning a home.

A down payment is the difference between the home’s purchase price and its mortgage amount. This percentage of the sale price must be paid up-front and can vary by lender, location, and loan program. A higher down payment generally translates into lower loan interest rate requirements.

Typically, a down payment comes from personal cash savings, but it can also be a gift that is not to be repaid, or a borrowed amount secured by assets.

While conventional loan down payments may be close to 20% of the sale price, government loans typically have lower down payment requirements. This allows potential homebuyers who normally cannot meet down-payment requirements an opportunity to qualify for a mortgage. Keep in mind that down payments that are less than 20% of the sale price typically require mortgage insurance payments.

10 things to know before buying a home

  • Before you start looking for a home, get pre-qualified for a loan. This will help you determine how much home you can afford and will give you an advantage over buyers who do not have their financing setup in advance.

 

  • If you have marginal or bad credit, consult your lender. You may be able to qualify for a loan depending on how long ago and what reason(s) caused the bad credit.

 

  • You will need a down payment. Down-payment requirements vary depending on the type of loan.

 

  • You will need funds for closing costs. Closing costs are charges for services related to the closing of your real estate transaction. They include, but are not limited to: Escrow fees, title policy issuance fees, mortgage insurance fees, fire, flood, and homeowners insurance, county recorder fees, and loan origination fees. Consult your lender for an actual estimate of these costs.

 

  • Some loans have “points” and some do not. A point is a loan origination fee equivalent to 1% of the loan amount. Together with the interest rate, they constitute the yield on your loan for the lender.

 

  • Mortgage rates can be fixed or adjustable. Which one is right for you depends on whether mortgage rates are at a high or a low point when you purchase, and on how long you plan to live in the home.

 

  • There are two main types of loan categories. Conventional mortgage loans are available with fixed or adjustable interest rates. Government loans include FHA fixed and adjustable rate mortgage loans, and VA fixed rate mortgage loans.

 

  • If you are a low-to-moderate-income homebuyer, there are special programs designed to help you. These loans are available through private lenders, as well as local and state housing agencies.

 

  • You may have to pay mortgage insurance. Mortgage insurance protects the lender from potential loss if you should default on your mortgage loan payment. Mortgage insurance is always required on FHA mortgage loans.

 

  • Many organizations offer home loan counseling to prospective homebuyers. They will cover home selection, REALTOR® services, lenders, loan programs, homeownership responsibilities, saving for a down-payment, and other important pieces of information.

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Nicole Emanuel Real Estate

Coldwell Banker

(408) 410-2060

nicole.emanuel@cbnorcal.com

www.realestatebynicole.com

7 Things You Should NOT do when Applying for a Home Loan

1) Don’t buy or lease an auto – Lenders look carefully at your debt-to-income ratio. A large payment such as a car lease or purchase can greatly impact those ratios and prevent you from qualifying for a home loan.

2) Don’t move assets from one bank account to another –  These transfers show up as new deposits and complicate the application process as you must then disclose and document the source of funds for each new account. The lender can verify each account as it currently exists. You can consolidate your accounts later if necessary.

3) Don’t change jobs – A new job may involve a probation period, which must be satisfied before income from the new job can be considered for qualifying purposes.

4) Don’t buy new furniture or major appliances with a credit card – If the new purchases increase the amount of debt you are responsible for on a monthly basis, there is a possibility this may disqualify you from getting the loan or even cut down the amount of available funds for closing costs.

5) Be aware of who runs your credit report – This will show as an inquiry on your lender’s credit report. Inquiries must be explained in writing.

6) Don’t attempt to consolidate bills before speaking with your lender – The loan officer can advise you if this needs to be done.

7) Don’t pack of ship information needed for the loan application – Important paperwork such as W-2 forms, divorce decrees and tax returns should not be sent with your household goods. Duplicate copies take weeks to obtain, and could stall the closing date on your transaction.

If you need help finding a reliable & reputable lender, give me a call! I have some fantastic lenders I can refer you to to qualify you for buying a new home.

Get Your Home in Shape for the New Year!

Ring in the new year right by getting your home in shape. Your home is your most valued possession so why not spruce it up for the year ahead!

Paint touch-up. Scuffs, dirt and even crayons can plague beautiful walls of a home. Simply mark those areas with blue painter’s tape and then walk around your home with a touch-up paintbrush.

Carpet cleaning. Carpets should be professionally cleaned at least twice per year. Now that you’ve enjoyed those festive holiday celebrations, have those muddy footprints, or worse yet, cranberry sauce stains, professionally treated.

Window washing. While the rainy season is still upon us, spring will be here soon. There is nothing worse on a beautiful home than dirty windows. So take the time to either hire a window washing service or if you’re a do it yourselfer, establish a weekend where you can dedicate yourself to the task at hand.

Fertilize your yard. Spring will be here before we know it. Many of our perennials require winter fertilizer to ensure they enjoy a robust bloom.

Donate old clothing. I once read that truly organized people throw away (or donate) one item for every one item that they bring into their home. Now is the perfect time to go through your closets and donate clothes and shoes that may no longer fit or are outdated. You can call the
Salvation Army at 1.800.95TRUCK to have them picked up at your doorstep.

Pantry and refrigerator cleaning. Do your salad dressings’ expiration dates say 2007? That’s a sign that it’s time to clean out your refrigerator and pantry. Be sure to check expiration dates on everything. You’ll be surprised to know that even pancake mix has a relatively short shelf life.

I work with an impressive list of professional home contractors, landscapers, painters and more. If you’d like a recommendation for any of the above services, please don’t hesitate to call me.