What should I know before
buying a home?
Here are some tips that could save you a lot of
time, money and trouble.
Plan ahead. Establish good credit and save as much
as you can for the down payment and closing costs.
Get pre-approved online before you start looking.
Not only do real estate agents prefer working with
pre-qualified buyers; you will have more
negotiating power and an edge over homebuyers who
are not pre-approved.
Know what you really want in a home. How long will
you live there? Is your family growing? What are
the schools like? How long is your commute?
Consider every angle before diving in.
Set a budget and stick to it.
Make a reasonable offer. To determine a fair value
on the home, ask your real estate agent for a
comparative market analysis listing all the sales
prices of other houses in the neighborhood.
Choose your loan (and your lender) carefully.
Consult with your lender before paying off debts.
You may qualify even with your existing debt,
especially if it frees up more cash for a down
Keep your day job. If there is a career move in
your future, make the move after your loan is
approved. Lenders tend to favor a stable
Do not shift money around. A lender needs to
verify all sources of funds. By leaving everything
where it is, the process is a lot easier on
Do not add to your debt. If you increase your debt
by financing a new car, boat, furniture or other
large purchase, it could prevent you from
Timing is everything. If you already own a home,
you may need to sell your current home to qualify
for a new one. If you are renting, simply time the
move to the end of the lease.
- How much house can I
afford to buy? Answer
- How do I know which
type of mortgage is best for me?
- What is the difference
between a fixed-rate loan and an adjustable-rate
- How is an index and
margin used in an ARM? Answer
- What types of loans are
- What does my mortgage
payment include? Answer
- How much money down
will I need to purchase a home?
- What kind of credit
score do I need to purchase a home?
Q. How much house can I afford to buy?
usually can purchase a home with a value of two to
three times your annual combined income. However,
the amount that you can borrow will also depend
upon your employment history, credit history,
current savings and debts, and the amount of down
payment you are willing to make. You may also be
able to take advantage of special loan programs
for first time buyers to purchase a home with a
higher value such as the SHIP program.
Q. How do I know which type of mortgage is best
A. Determining the loan type takes
into account many factors hence there is not
simple formula for determining the best loan type
for any specific individual. This choice depends
on many factors such as income, credit scores, job
stability, assets, the amount of time you plan to
stay in your home, etc.
Q. What is the difference between a fixed-rate
loan and an adjustable-rate loan?
A. With a
fixed-rate mortgage, the interest rate stays the
same during the life of the loan. With an
adjustable-rate mortgage (ARM), the interest
changes periodically, typically in relation to an
index. While the monthly payments that you make
with a fixed-rate mortgage are relatively stable,
payments on an ARM loan will likely change. There
are advantages and disadvantages to each type of
mortgage, and the best way to select a loan
product is by talking to a mortgage professional.
How is an index and margin used in an ARM?
A. An index is an economic indicator that lenders use
to set the interest rate for an ARM. Generally the
interest rate that you pay is a combination of the
index rate and a pre-specified margin. Three
commonly used indexes are the One-Year Treasury
Bill, the Cost of Funds of the 11th District
Federal Home Loan Bank (COFI), and the London
InterBank Offering Rate (LIBOR).
What types of loans are there?
and Government Loans
which may be conforming or
loans The Federal Housing Administration,
which is part of the U.S. Dept. of Housing and
Urban Development (HUD). FHA
VA loans which
are guaranteed by U.S. Dept. of Veterans Affairs.
What does my mortgage payment include?
mortgage payment for most homeowners include the
Principal (this is payment towards the
amount borrowed), Interest (this is payment
to the lender for giving the loan), and Taxes &
Insurance (Monthly payments are normally made
into a special escrow account for items like
hazard insurance and property taxes. This feature
is sometimes optional, in which case the fees will
be paid by you directly to the County Tax Assessor
and property insurance company).
How much money down will I need to purchase a home?
A. The amount of money depends on many
things such as loan type, loan program, credit
scores, etc. You will generally need to put
Earnest Money (The deposit that you put down
with a contract offer on a home). Down Payment
(Usually a percentage of the cost of the home.
This is due at closing. And Closing Costs
(These are costs associated with the closing such
as title insurance, doc stamps, mortgage stamps,
What kind of credit score do I need to purchase a home?
A. This will depend on many factors such
as the loan program, how much money you can put
down, job stability, etc. Generally the higher the
credit score the lower the interest rates, the
less money down needed, and the easier it is to
qualify for the loan.