Resources
First Time Homebuyer Guide
Starting The Process
How much house can I afford?
The total debt to income ratio should not exceed 45% for a conventional loan. Under certain circumstances, and if putting a down payment of at least 20%, one can get approved as high as 50%. Government loans can occasionally allow for higher debt ratios, but they also have their own specific requirements. It’s always best to discuss these requirements with a lender as there will be different limits for different situations.
How much do I need to save in order to purchase a home?
FHA and conventional loans both require a down payment to be brought to closing. This down payment is what we refer to as your equity in the home. On a FHA loan, a minimum of 3.5% is required at closing and conventional is around 5%. It is important to talk with a reputable lender as soon as possible to understand rates, options in loan products, down payment percentages, along with PMI and closing costs due upon closing. Equity or your down payment on your home and closing costs are separate items to budget for. Closing costs are able to be negotiated into your purchase contract, this is something to discuss with lender and your REALTOR®.
What is the minimum credit score needed to get pre-approved for a home loan?
We have seen FHA loans offered with as low as a 560 credit score (most lenders 580) and VA loans as low as a 550 credit score. Industry-wide, a 620 is the minimum requirement for a conventional loan.
What’s the difference between being pre-qualified and pre-approved for a mortgage?
Pre-qualification: An informal determination by a lender or mortgage broker stating how much mortgage you can afford. (Typically a lender can give this letter to you the same day)
Pre-approval: A very thorough and comprehensive review of credit, income and assets to ensure the applicant meets the minimum requirements needed for the loan program they’re applying.
It is important to talk with a reputable lender as soon as possible to understand rates, options in loan products, down payment percentages, along with PMI and closing costs due upon closing.
How does a REALTOR® get paid?
The compensation that REALTOR®s receive typically comes in the form of commission paid from the seller’s proceeds at closing. In other words, there is no commission cost to the buyer to use a REALTOR® in a traditional buyer/agent relationship.
Looking Into The Purchase Contract
What is Earnest Money? And what happens to my Earnest Money check?
Earnest money, “EM”, is used to show the buyer’s “good faith” or “good intention” to purchase the home. Earnest money is typically 1% of the offer price of the the contract when financing is involved. Clients are able to put higher percentages of earnest money on a contract.
Your EM check will be deposited immediately in the title company’s escrow account and held up to the closing day. On the closing disclosure, your EM will be shown as a credit toward the purchase of your home.
If for some reason you were to not close on the property, the EM would need to be discussed with your REALTOR. If your duties as a buyer were not completed according to the contract, your EM may be at risk. If you were not able to obtain financing during the financing contingency, the EM is released back to you as the buyer.
What appliances are typically included in the sale of a property?
The dishwasher, stove, oven, and above range microwave are included, but normally refrigerators, and washer and dryers are negotiable items. If you are interested in having the seller leave these items, we need to include a Non-Realty Addendum with the contract to specifically include these items.
What should be put in the residential home warranty section?
The residential home warranty section is optional. If the buyer requests the seller to pay for a home warranty they typically range from $350 for the annual base policy up to $650 for the annual premium policy. Prior to closing, a specific home warranty policy and company will need to be purchased by the title company and included on the closing disclosure. As a buyer, you are able to pick a more expensive policy if desired and pay the overage at closing.
