Common First-time Homebuyers Questions
Should I buy or rent?
A home is an investment. When you rent, you write your monthly check and that money is gone forever. When you own your home, you can deduct the cost of your mortgage loan interest from your federal income taxes, and usually from your state taxes. You can also deduct the property taxes you pay as a homeowner. In addition, the value of your home may go up over the years. Finally, you’ll enjoy having something that’s all yours.
Can I become a homebuyer with less than perfect credit, and not much for a down-payment?
You may be a good candidate for one of the federal mortgage programs. Start by contacting your Sail Mortgage loan consultant that can help you sort through your options, including FHA loans, Gifts, Co-Signers, etc.
How much money will I have to come up with to buy a home?
That depends on the cost of the house and the type of mortgage you select. You need to come up with enough money to cover three costs: hand money – the deposit you make on the home when you submit your offer; 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 a house.
How do I know if I can get a loan?
Call a Sail Mortgage Loan Consultant to see how much mortgage you could afford. 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.
In addition to the mortgage payment, what other costs do I need to consider?
You’ll have your monthly utilities. Your real estate agent 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 are normally rolled into your mortgage payment.
So what will my mortgage cover?
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; property taxes; the annual city/county taxes assessed on your property, divided by the number of mortgage payments in a year; and homeowners insurance: a monthly amount to insure the property against loss from fire, smoke, theft, and other hazards required by most lenders.
What do I need to take with me when I apply for a mortgage?
1. social security numbers for both your and your spouse; 2. checking and savings account statements for the past 6 months; 3. evidence of any other assets like bonds or stocks; 4. 2 recent paycheck stubs detailing your earnings; 5. a list of all credit card accounts and the amounts owed on each; 6. account numbers and balances due on outstanding loans, such as car loans; 7. last 2 years’ income tax statements; 8. the name and address of someone who can verify your employment.
Which mortgage is best for me?
Most people use a fixed-rate mortgage. In a fixed rate mortgage, your interest rate stays the same for the term of the mortgage. The advantage of a fixed-rate mortgage is that you always know the exact amount of your mortgage payment. 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, at the end of the fixed period of time, each year after that. 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.
What happens at closing?
You’ll sit at a table with your agent, the agent for the seller, probably the seller, and a closing agent. The closing agent will have papers for you and the seller to sign.