Stop Paying Rent Forever
A Guide To Owning Your First Home

With recent fluctuation in the housing market, the industry has shifted from a sellers market to a buyers market. Where in recent years, a property would fly off the market within days of its listing, buyers were writing up offers on the spot. Now, however, the length of days on market has drastically increased, as the demand has shifted the prices have leveled out after an all-time high in 2005. The interest rates are still within the realm of all time lows, a variety of flexible financing programs are available, as well as an array of assistance programs that can help a multitude of people become proud homeowners.

These factors combine to make an economic atmosphere that simply couldn’t be better for you!

The process of purchasing a home can be very intimidating. Buying your first home is a landmark event in your life and therefore deserves a good deal of preparation. If you have always been a renter, you probably aren’t as familiar with the process of obtaining a home mortgage, nor are you aware of specifically what to expect as you being to search for your first home. Being informed is the key to a smooth and successful home purchase without any curve balls coming your way. The information included in this report will help save you valuable time, money and stress. An INFORMED buyer is a HAPPY buyer!

Why Should You Stop Paying Rent?

A home is an investment. If you have always been a renter, think about that check you write every month, that is money that is gone forever! That’s tens of thousands of dollars that you will never see again. Its time for you to start making money off your money! When you own a home, you can deduct the cost of your mortgage loan interest from you federal income taxes, and usually from your state taxes as well. This saves you a great deal because the interest you pay will make up most of your monthly payment for most of the years of your mortgage. Additionally, you can also deduct the property taxes you pay as a homeowner! As you make improvements to the home, whether it is new lighting fixtures or window treatments? That’s an investment that will increase the value of your home, instead of increasing the value of your landlords’ home. You’ll enjoy the pride of achieving the American dream, turning a house into your home.

What If You’ve Had Bad Credit?

Don’t despair if the credit report is not stellar. Sure there are incidents that can’t be taken off the report but with knowing the background of your financial history, there are steps you can take to build your credit score. Your first step will be to be sure all your bills are paid on time (late payments that are 30 days late or more have a negative effect on your credit rating). It’s in your best interest to contact a mortgage professional. He or she will access and study your credit report and will help you develop a plan of action to improve your score. They may, for example, advise you to reduce the number of credit cards you carry, pay any outstanding tax liens, and reduce your credit limits on your existing accounts. The corrections you make on your credit will allow you to qualify for a better interest rate! Your mortgage professional will help you address problems showing up on the credit report.

How Much Money Do You Have To Come Up With To Buy A Home?

The amount of cash you will need is dependant on each situation, and is heavily influenced by the cost of the house and type of financing you will get. There are three areas you must have enough money to cover – earnest money, down payment, and closings costs. You make an earnest money deposit at the time you submit you offer to the seller, if is consider proof to the seller that you are seriously about wanting to house. The earnest money deposit for a first time home buyer is generally around $1,000. The down payment is the second deposit you make to the seller. This is the percentage of the cost of the home that you will pay out of pocket (not financed through your mortgage). Your earnest money deposit is added to your second deposit which cumulatively becomes your down payment. The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase, which is why many first-time homebuyers turn to programs such as FHA loans which require only 3% down. Again, your mortgage professional will be able to help you pick the program that is right for you! The closing costs are the costs associate with processing the paperwork, title transfer, attorney’s fee, etc in order to buy a home. Closing costs are due at Settlement (time of closing) and generally range between 2 percent to 6 percent of the sale price. As your lenders processes the terms of your mortgage, he or she must provide you with a “Good Faith Estimate” which will breakdown all costs so that you may know what to expect due at closing.

How Do You Know If You Can Get A Loan?

There are a variety of mortgage calculators you can access yourself on the internet to see how much mortgage you could pay. For more accurate information, your best option is to contact a mortgage professional. They can initially pre-qualify you for a loan amount. They will help you evaluate your loan potential. This is a free service mortgage professionals provide before you start looking for a home. You are under no obligation, this is simply for you benefit.

In addition to the Mortgage payment, what other costs will I incur? If you have always been a “renter” you may be used to your utilities being covered in your monthly rental payment, so paying your utilities may be new to you. Often the seller can give you estimates on how much the utilities normally cost. You’ll also have property taxes, normally these taxes are rolled into your mortgage payment, so check with your mortgage professional to confirm.

What Do You Need To Apply For A Mortgage?

Being prepared with you visit your lender will save you a great deal of time and headaches. Bring with you:

1. Social security numbers for both your and your spouse (if both of you are applying for the loan)
2. Copies of your checking and savings account statements for the past 6 months
3. Evidence of any other assets like bonds or stocks
4. A recent paycheck stub detailing your earnings
5. A list of all credit card accounts and the approximate monthly amounts owed on each
6. A list of account numbers and balances due on outstanding loans
7. Your last 2 years’ income tax statements
8. Contact name of someone who can verify your employment.

When You Find The Home You Want, How Much Should You Offer?

This is when your real estate broker can help you the most. Your Realtor will do a comparative analysis of similar homes in the neighborhood which are currently on the market, under contract, and those that have closed in the recent past. They will give usually give you a small range in which they see the home selling for. Remember, this figure is a recommendation; the amount you offer is always up to you. You need to take into consideration how much the mortgage will be, make sure you can really afford what you are offering. How much you really want the home may also affect the price you offer.

What If Your Offer Isn’t Accepted?

Well, Offers are very often rejected which doesn’t mean “game over.” They often are! But don’t let that stop you. You may receive a “counter-offer” from the seller. Now you begin negotiating. Your broker will help you. There are several terms in the contract that you can adjust in addition to the price to make your offer more appealing. Often your Realtor might learn the seller has a specific date they are looking to close on or maybe they would like to see a slightly higher down payment. You may have to offer more money, but you may ask the seller to cover some or all of your closing costs or to make repairs that wouldn’t normally be expected. Often, negotiations go back and forth several times before a deal is made.

So What Will Happen At Closing?

The closing will usually take place at either your attorney’s office, the seller’s attorney’s office, or in some cases the real estate brokers office. The closing agent will have a large stack of papers for you and the seller to sign, he or she will give you an overview of each paper, and you may want to take the time to read each one or consult with your agent about what it is that you’re signing. Be sure you have review your “good faith estimate” and have the appropriate amount of funds at closing. After that, the keys are yours and “welcome home”.

If you would like more details on the contents of this report, don’t hesitate to contact me at 860-877-HOME or 203-789-1111, I am here for all of your real estate needs. I’d be happy to set up a FREE consultation with you to help you achieve the dream of home ownership.