GET A GOOD HOME LOAN TO BUY A HOME
Affordable Payment (P+I+T+I = principle,interest,taxes,insurance)
Your payment should be within the limits of your income to buy a home. If it is at all possible, base the payment on one income. It’s best to keep it at about 30% of income, before taxes, but you can go higher as you decrease other bills such as no car note, purchasing a home with low utilities, having a short commute and low gas usage, carefully budgeting groceries. The 30% is about what lenders look at also to buy a home.
Research articles about predatory lending and avoid it, if at all possible. It is called predatory because the requirements to qualify are low and the risks are high.
COST OF A LOAN TO BUY A HOME
Many people don’t know that loans cost money. This is covered in the escrow and closing cost fees and is extra from the down payment. There are 50 states and several cities within each state. Every state and the city within the states have their own closing cost schedule. Here is an example showing one city, within one state. The city is Los Angeles and the state is California, on a $200,000 loan.
LOS ANGELES CLOSING COST–LOAN AMOUNT $200,000, TO BUY A HOME
Origination fees charged by lenders $1,030
Third-party fees $1,196
Loan amount $200,000
ITEMIZED ORIGINATION FEES CHARGED BY THE LENDER
Origination points $586
Commitment fee $370
Document preparation $58
Broker, originator or lender $920
Tax service $76
ITEMIZED THIRD PARTY FEES
Attorney, closing or settlement $639
Credit report $25
Flood certification $11
Borrower’s share of state and local transfer taxes and fees $0
Mortgage tax $0
If you have sellers that are badly in need of a sell, sometimes they will agree to pay your sellers cost. Sometimes you can bundle the sellers cost in your loan.
THE AVERAGE COST OF HOMES
Some places in the country average home prices are $50,000 and Some $1 million. It depends on where you live. In places where there are several high-income jobs and a shortage of home inventory such as San Jose, California the cost of the average home is almost $1 million dollars. In contrast, the cost of the average home in Houston, Texas is less than $200,000.
WHAT TO LOOK FOR WHEN YOU SHOP FOR A HOME
Many general inspectors do quick inspections and leave major work for you to discover after you buy. You can get inspections from actual tradespeople for a reasonable fee. The trades would include electricians, plumbers, air conditioning, roofing, and carpenters. They would be more likely to find major problems than a general inspector.
When you do find, problems wrong you have two options 1. Ask the sellers to fix them, or 2. Ask them to lower the price so you can fix them with extra money from the loan.
This is difficult, but try to get copies of the electrical, gas, water, and other utility costs. Some homes have high utility cost and some have low cost. The larger the home, the more the utility maintenance cost are. Some high maintenance comes with old or malfunctioning equipment.
DISCLOSURE FROM SELLERS
Some states have strict disclosure laws and others don’t. Request that your seller discloses all potential problems with the home, neighbors, or the neighborhood.
Make your home sell contingent on everything you ask for, otherwise, the deal is off. This will motivate the sellers, real estate agent, and lender to be honest and do everything in a timely manner. It also gives you an out if something is found to be wrong during the process and you can get your deposit back.
Get a copy of the taxes paid for the year. Also, the real estate agent or lender can usually tell you what the home taxes are for your home.
ESCROW ACCOUNT TAXES AND INSURANCE
If you don’t want to have to pay a tax bill bi-yearly or worse yet yearly, you can request an escrow account, where you pay your taxes and insurance monthly with your payment. This is much easier than the lump sum, for most homeowners.
Your down payment is in addition to your escrow and closing cost. Most lenders want a down payment of 10% to get a good interest rate to buy a home. There are some no-down loans, but generally, your interest rate and payment are more. I prefer the down payment loan, and lower interest rate – it is less risky for the homeowner.
MOST REQUESTED INFORMATION
You will be asked for proof you can purchase a home or secure a loan. You will be asked for 1. proof of income from a job or business, 2. proof of income from income taxes provided by you and the Internal Revenue Service, 3. credit reports that show credit score and credit history. 4. proof of source of downpayment 5. proof of rent history or payment history of current loan.
LOAN BALANCE LIMITS COMMUNITY AND JOBS, TO BUY A HOME
Start with and affordable home. Don’t let a real estate agent or a lender talk you into getting more home than you know you can afford. Sometimes they don’t consider your existing bills or obligations you know you will have in the future, like the need for a better car or a kid going to college.
Look for a good neighborhood. There is no such thing as perfect people or a perfect neighborhood. But, you can search schools, crime and jobs nearby. The searches are not always accurate, but they will give you an idea.
Get your finances in order with my FREE Personal Finances Matter Guide.
Join WomenVestors Chat Stop on my private facebook group.
Do you need help? Sign up for a one on one consultation with me, find out if I can help you with your Personal Finance decisions.