Answer to Question
1: You’ll love the
feeling of having something that’s all
yours - a home where your own personal
style will tell the world who you are.
A thriving vegetable garden in the
backyard, a tiled entryway, a yellow
kitchen...when you own, you can do it
all your way! But there’s more to
owning a home than personal
satisfaction. You can deduct the cost
of your mortgage loan interest from
your federal income taxes, and usually
from your state taxes, too. And
interest will compose nearly all of
your monthly payment, for over half
the number of years you’ll be paying
your mortgage. This adds up to hefty
savings at the end of each year. And
you’re also allowed to deduct the
property taxes you pay as a homeowner.
If you rent, you write your monthly
check and it’s gone forever. Another
financial plus in owning a home is the
possibility its value will go up
through the years.
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Answer to Question
2:
HUD homes can be a very good deal.
When someone with a HUD insured
mortgage can't meet the payments, the
lender forecloses on the home; HUD
pays the lender what is owed; and HUD
takes ownership of the home. Then we
sell it at market value as quickly as
possible. One might be right for you!
And check your listings of Hud Homes -
as well as homes being sold by other
federal agencies.
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Answer to Question
3:
You may be a good candidate for one of
the first time home buyer programs.
They can help you sort through your
options. In addition, contact your
local government to see if there are
any local homeownership programs that
might work for you. Look in the blue
pages of your phone directory for your
local office of housing and community
development or, if you can’t find it,
contact your mayor’s office or your
county executive’s office.
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Answer to Question
4: Although you
won’t have the benefit of two incomes
on which to qualify for a loan,
there’s no reason that you can’t
become a homeowner. Become familiar
with the process, pick a good real
estate broker, and think about getting
pre-approved for a loan. You might
want to contact one of the HUD-funded
housing counseling agencies in your
area to talk through your options. And
you also might want to think about
buying a HUD home - they can be very
good deals. Also, contact your local
government to see if there are any
local home-buying programs that could
help you. Look in the blue pages of
your phone directory for your local
office of housing and community
development or, if you can’t find it,
contact your mayor’s office or your
county executive’s office.
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Answer to Question
5: Using a real
estate broker is a very good idea. All
the details involved in home buying,
can be mind-boggling. A good real
estate professional can guide you
through the home buying process and
make the experience much easier. A
real estate broker will be
well-acquainted with all the important
things you’ll want to know about a
neighborhood you may be
considering...the quality of schools,
the number of children in the area,
the safety of the neighborhood,
traffic volume, and more. He or she
will help you figure the price range
you can afford and search the
classified ads and multiple listing
services for homes you’ll want to see.
With immediate access to homes as soon
as they’re put on the market, the
broker can save you hours of wasted
driving-around time. When it’s time to
make an offer on a home, the broker
can point out ways to structure your
deal to save you money. He or she will
explain the advantages and
disadvantages of different types of
mortgages, guide you through the
paperwork, and be there to hold your
hand and answer last-minute questions
when you sign the final papers at
closing. And you don’t have to pay the
broker anything! The payment comes
from the home seller - not from the
buyer.
By the way, if you want to buy a HUD
home, you will be required to use a
real estate broker to submit your bid.
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Answer to Question
6: Well, that
depends on a number of factors,
including the cost of the house and
the type of mortgage you get. In
general, you need to come up with
enough money to cover three costs:
earnest money - the deposit
you make on the home when you submit
your offer, to prove to the seller
that you are serious about wanting to
buy the house; 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. Consult
your mortgage professional for more
complete information on the financing
of your home.
When you make an offer on a home,
your real estate broker will put your
earnest money into an escrow account.
If the offer is accepted, your earnest
money will be applied to the down
payment or closing costs. If your
offer is not accepted, your money will
be returned to you. The amount of your
earnest money varies. If you buy a HUD
home, for example, your deposit
generally will range from $500 -
$2,000.
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 price.
That’s why many first-time homebuyers
turn to HUD’s FHA for help. FHA loans
require only 3% investment in the
property - and sometimes less.
Closing costs - which you will pay at
settlement - average 3-4% of the price
of your home. These costs cover
various fees your lender charges and
other processing expenses. When you
apply for your loan, your lender will
give you an estimate of the closing
costs, so you won’t be caught by
surprise. If you buy a HUD home, HUD
may pay many of your closing costs.
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Answer to Question
7: Use our simple
MORTGAGE
CALCULATORS
to see how
much mortgage you could pay - that’s a
good start. If the amount you can
afford is significantly less than the
cost of homes that interest you, then
you might want to wait awhile longer.
But before you give up, why don’t you
contact a mortgage lender, real estate
broker or a HUD-funded housing
counseling agency? They will help you
evaluate your loan potential. A broker
will know what kinds of mortgages the
lenders are offering and can help you
choose a lender with a program that
might be right for you. Another good
idea is to get pre-qualified for a
loan. 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.
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Answer to Question
8: You can finance a home with a loan from a
mortgage broker, a bank, a savings and loan, a credit union, a
private mortgage company, or various state government lenders.
Shopping for a loan is like shopping for any other large purchase:
you can save money if you take some time to look around for the best
prices. Different lenders can offer quite different interest rates
and loan fees; and as you know, a lower interest rate can make a big
difference in how much home you can afford. But, the lowest rate
isn’t always the best rate for you. Your situation is different from
everyone else’s at the water cooler. Talk with several lenders
before you decide. Most lenders need 3-6 weeks for the whole loan
approval process. Your real estate broker will be familiar with
lenders in the area and what they’re offering. Or you can look in
your local newspaper’s real estate section - most papers list
interest rates being offered by local lenders. HUD does not make
loans directly - you must use a HUD-approved lender if you’re
interested in an FHA loan.
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Answer to Question
9: Well, of course
you’ll have your monthly utilities. If
your utilities have been covered in
your rent, this may be new for you.
Your real estate broker 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
normally are rolled into your mortgage
payment. Again, your broker will be
able to help you anticipate these
costs.
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Answer to
Question 10: 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; homeowners
insurance: a monthly amount to insure
the property against loss from fire,
smoke, theft, and other hazards
required by most lenders; and property
taxes: the annual city/county taxes
assessed on your property, divided by
the number of mortgage payments you
make in a year. Most loans are for 30
years, although 15 year loans are
available, too. During the life of the
loan, you’ll pay far more in interest
than you will in principal - sometimes
two or three times more! Because of
the way loans are structured, in the
first years you’ll be paying mostly
interest in your monthly payments. In
the final years, you’ll be paying
mostly principal.
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Answer to
Question 11
Good
question! If you have everything with
you when you visit your lender, you’ll
save a good deal of time. You should
have:
A.
Social security
numbers for everyone applying for the
loan.
B. Copies of your
checking and savings account
statements for the past 3 months.
C.
Evidence of any other assets like
bonds or stocks.
D.
Most recent four paycheck stubs
detailing your earnings.
E.
A list of all credit card accounts and
the approximate monthly amounts owed
on each.
F.
A list of account numbers and balances
due on outstanding loans, such as car
loans. Including loans against your
401-K savings account.
G.
Copies of your last 2 years’ federal
income tax statements with W-2’s.
H.
Contact information for your place(s)
of employment for the past two years.
I.
Contact information for your place(s)
of residence for the past two years.
J.
Depending on your lender and loan
program chosen, you may be asked for
other information.
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Answer to
Question 12:
You’re right - there are many types of
mortgages, and the more you know about
them before you start, the better.
Most people use a fixed-rate mortgage.
In a fixed rate mortgage, your
interest rate stays the same for the
term of the mortgage, which normally
is 30 years. The advantage of a
fixed-rate mortgage is that you always
know exactly how much your mortgage
payment will be, and you can plan for
it. 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, as often
as once or twice a year. 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.
Most people have heard of FHA
mortgages. FHA doesn’t actually make
loans. Instead, it insures loans so
that if buyers default for some
reason, the lenders will get their
money. This encourages lenders to give
mortgages to people who might not
otherwise qualify for a loan. Talk to
your loan officer about the various
kinds of loans, before you begin
shopping for a mortgage.
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Answer to Question
13:
Again, your real estate broker can
help you here. But there are several
things you should consider: 1) is the
asking price in line with prices of
similar homes in the area? 2) Is the
home in good condition or will you
have to spend a substantial amount of
money making it the way you want it?
You probably want to get a
professional home inspection before
you make your offer. Your real estate
broker can help you arrange one. 3)
How long has the home been on the
market? If it’s been for sale for
awhile, the seller may be more eager
to accept a lower offer. 4) How much
mortgage will be required? Make sure
you really can afford whatever offer
you make. 5) How much do you really
want the home? The closer you are to
the asking price, the more likely your
offer will be accepted. In some cases,
you may even want to offer more than
the asking price, if you know you are
competing with others for the house.
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Answer to
Question 14:
They often are! But don’t let that
stop you. Now you begin negotiating.
Your broker will help you. 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 on a price go back
and forth several times before a deal
is made. Just remember - don’t get so
caught up in negotiations that you
lose sight of what you really want and
can afford!
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Answer to
Question 15: Basically,
you’ll sit at a table with your
broker, the broker for the seller,
probably the seller, and a closing
agent. The closing agent will have a
stack of papers for you and the seller
to sign. While he or she will give you
a basic explanation of each paper, you
may want to take the time to read each
one and/or consult with your agent to
make sure you know exactly what you’re
signing. After all, this is a large
amount of money you’re committing to
pay for a lot of years! Before you go
to closing, your lender is required to
give you a booklet explaining the
closing costs, a "good faith estimate"
of how much cash you’ll have to supply
at closing, and a list of documents
you’ll need at closing. If you don’t
get those items, be sure to call your
lender BEFORE you go to closing. Be
sure to read our booklet on settlement
costs. It will help you understand
your rights in the process. Don’t
hesitate to ask questions.
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