Resources for the Buyer Client

Your Credit

Your credit can be the difference in getting the home that you want and it determines the interest lenders will offer. It is advisable to check your credit score every 3 to 6 months for accuracy.

 

THINGS not to DO!

Some tips on THINGS not to DO when you decide to purchase Real Estate:

Do not apply for any additional credit or financing!

Don't buy the new furniture for the home until you close on the property!

Lenders

Lenders will pull your credit score a few days prior to the actual closing, new credit Applications could prevent you from getting the loan, even after you have paid for Appraisal, credit report and inspections.

 

 

Owning your own home is an exciting and prudent investment, however, there are additional costs associated with home ownership, so don't burn through your additional cash after closing on decorating.

Some tips for after you sign for the house.

  • Keep a small account that you add to monthly, for the unexpected repairs or upkeep costs.
  • When they occur, you'll have some back cash for the repair.
  • Do not try ignoring it, or trying to repair it with bubblegum and scotch tape, or being forced to put it on a credit card.

 

Deferred, or neglected maintenance on your home, can cause additional damage and repairs in the future and lower the resale value of your home.

Shop lenders,

Shop lenders, if your shopping for rates and do this within a reasonable period of time, over a 30 day period the rule of thumb is this will not affect your credit rating, verify the lenders prior to having them pull your credit.

 

Lenders

Lenders will pull your credit score a few days prior to the actual closing, new credit Applications could prevent you from getting the loan, even after you have paid for Appraisal, credit report and inspections.

 

 

 


Mortgages are offered through a variety of independent investors and they set their rates based upon Credit Scores and Property Types.

Useful terms for Home Buyers

FHA

Loans are Fixed Rate, with approximately 3% down payment. FHA loans have fees that you the buyer will not be allowed to pay and the seller will have to cover. The credit scores for FHA are more flexible than conventional. However, FHA loans are appraised based upon FHA Guidelines and the Standard 203 B FHA loan will require the home be in average condition. FHA also has a fixer up loan for home buyers, for all the FHA loans go to http://www.hud.gov/buying/loans.cfm

FIX RATE

Conventional. Requires a higher credit score, there are still some 5% down Conventional, there is also a 100% available, which is 2 loans, 80% of loan amount as a 1st Lien, 2nd lien for the other 20%. Run your numbers, the payment will be higher, but unless you put down 20% on a Conventional loan, you will a Payment Mortgage Insurance premium that will be added to your payment.

BALLON NOTE

This is the favorite loan for investors, fixed rate for 5 -7 years, amortized over 20 or 30 years(i.e.: your payment is step up as if you had 20 or 30 years to pay), then it BLOWS up like a Balloon, at the end of 5 years the note is due in full, which Means you either start trying to refinance in the 4th year, or you lose the property, unless you have hit the lottery and can pay off the Note.

ARM

Adjustable rate mortgages, though they have gotten very bad press, there are ARM loans (FHA) has one, that starts at a lower rate, and goes up a set percentage every year and then sets as a fixed rate.( FHA Step ARM.) ARMS are not to use by buyer’s who are not able to adjust their mortgage payments higher as the rates go up. It can put you in the position of not being able to cover your mortgage, perhaps the market will not be favorable at that time for you to sell and you could lose your home. These are gambler mortgages, used by experienced Real Estate Investors and home buyers who have owned Real Estate before and plan on reselling within 2 to 3 years, and also have the ability to maintain the payments and refinance should the rates go down.

DEFERRED AM

This is also a Gambler Mortgage, you are deferring the actual interest you would be paying and it is being tacked onto the backside of your mortgage. The Interest rates are lower on these loans, however within the first year you owe more than you borrowed and this scenario only works if you know you can resell the property for considerably more than you paid for it. However, there is never any way of knowing what a Real Estate Market will do after your purchase your home, so under no circumstances would I advise a home buyer to use this loan.
The financing will determine the property price you will want to shop.
There are other types of loans and rates and fees and down payments. You should always investigate this prior to starting the Property search so you are educated on what type loan you and your family will be comfortable with, and how much Real Estate you can qualify for.