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How smart of a home buyer are you?

Buying a home can be overwhelming but with just a few pieces of information and the right team you can become a smart home buyer.  And if you are smart home buyer, you are very likely a much more attractive candidate to the seller and in today’s housing market that is extremely important.
Let’s start with who should be on your team?
The two most important members of your team are your realtor and your mortgage loan officer. Both will provide guidance and help you choose the right home, at the right price with a payment that fits your budget.
What are important actions to take before starting the home buying process?
Starting to save for the down payment should be the first step in the process. Following very closely with that action is making sure your credit score and report don’t have any blemishes.  Pay off any judgements and clean up any old accounts that might create a derogatory finding on your credit.
Do you need a 20% down payment to buy a home?
Down payments can be as little as 3% depending upon your loan program. If you have less than 20% for a down payment you will likely have to have private mortgage or PMI insurance which is an added cost.
What is better – prequalification or pre-approval?
A preapproval is better because this means you have submitted an application, a pre-qualification is just an estimate of what a lender thinks you can afford.  The pre-approval letter assures you and more importantly the seller that you can in fact get a mortgage and close the deal.
When buying a “For sale by owner home”, can you use a buyer’s agent?
Yes, you can still use a buyer’s agent, the homeowner might be willing to pay the agents fee of 2.5 to 3% or you might have to negotiate some arrangement with the seller and your agent.  Regardless, you definitely want to continue to use your agent to help you navigate the home buying process.
How much should you expect to pay for closing costs?
Besides the down payment, you should always budget between 3 – 6% of the purchase price to cover costs at settlement which can including loan origination fees, points to buy down the rate, insurance fees and your initial deposit into your escrow account.
Can adjustable rate mortgages can still be a good deal in a rising rate environment?
Yes for some people. A lower cost adjustable rate mortgage (ARM) loan can be a smart financial move.  As long as the initial fixed portion of the ARM term matches the length of time you expect to stay in your home, you will get the benefit of a lower mortgage payment and the comfort that you will sell the home before your mortgage rate adjusts.
How does owning a home change your tax situation?
For many, they will be able to take itemized deductions rather than the standard deduction. The itemized deductions could include mortgage interest, real estate taxes and perhaps closing costs and other costs in the first year of owning a home.  This likely is more than the standard deduction which will help reduce your tax liability.

Posted: 8/1/2016 with 0 comments

Categories: Education, Homeownership, Money Matters

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