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| Two Articles for First-Time Home Buyers: 1. How to buy a house or condo in the local area 2. Some mortgage info. In order to make a home or condo purchase in Stamford, a buyer needs to be aware that your buying agent will be making an offer on your behalf for the home by faxing to the listing agent a couple of items: a. A COPY of your Binder Check (1% of the total purchase price) b. An application form c. A copy of your mortgage banker or broker's Pre-Qualification/Pre-Approval Letter d. A copy of the Connecticut Multiple Listing for the home When you have concluded the negotiations for the property, and both parties have accepted the offer, your Binder Check will be cashed. Meanwhile, two things are happening: You continue your "mortgage shopping," and you select an attorney. Now it's time to get the property inspected, by a professional, then appraised by your mortgage company. Usually the selling attorney prepares the sales contract, and any contingencies, and sends it to your attorney for review. Once you, the buyer sign the sales contract, the selling attorney will ask for and cash your Downpayment Check. The check can be for 5%, 10%, 20% or more - - whatever amount you play to "put down" on the house, which immediately becomes "equity" you own in the property. The rest of the money is paid by the bank or mortgage company. At the Closing, in one of the attorney's offices, lots of paperwork is reviewed and signed, the money is paid, and the keys are handed over to the buyer. Some First-Time Home Help Advice for first time home buyers: 1. First you need to ask yourself what your Comfort Zone" is for monthly mortgage payment, but you ALSO need to consider the tax benefits of a mortgage. For example, there is the deduction of the property tax AND the interest on the mortgage. People who rent, do not receive these benefits from the government. This should play a heavy role in your zone. Also, try to give any honest answer to this question: "If you are in the 25% tax bracket (under $80,000), for example, if you have a mortgage payment of $1,000/mo, can you guess what the tax deduction might be?" (It's about $100 a month in that tax bracket. So you could actually afford $1,200/mo. monthly payments - - this enables you to buy a better property than you might think.) 2. These deductions become a bonus of sorts from the government - - The American Dream to own a home - - this is tax break that the government gives you. This is the ONLY country, that I know of, that does this. It's very important. 3. So, the government helps you. But only if you take that plunge and buy and condo or house. 4. Prior to your purchase, over a long period of time, you need to "prepare yourself financially." Pay your bills on time. Everybody has credit and should make sure that your credit score is as high as it can be. You must have at least 4 lines of credit - - and don't bring any to the maximum (called "maxing out" a card). Try to keep your balances to about half of your cards' limits, or apply for additional cards. 5. Your credit score is being calculated by machines. By fixed criteria. Beat them. Make your monthly payments on time; don't charge to the limit each time; and, as noted, have at least four credit cards. 6. Establish your credit for at least two years - - active lines (credit cards, auto loans, etc.). This "establishes some credit." 7. Prepare mentally before you - - your max. purchase power - - much easier to decide. Talk first to your mortgage broker - - so you don't get side-tracked. Will get discouraged. 8. Mortgage buy, as an expert, can be of big help. 9. There is a fear factor about the amount of new debt. This is definitely the largest, most expensive decision you will every make. Men and women approach this definitely. The woman might be more into choosing the property, and he may be more into the money side. Ken can help both of you. 10. The cart before the horse - - If you are choosing property before you're qualified to buy it. Then you may be let down. 11. Fixed rate vs. Adjustable rate: a. Examine your psych: If you're very conservative - - not a gambler - - fixed rate may be best, but there is no 100% guarantee which is best. An expert in finance can help. Don't decide BEFORE you've talked to an expert before hearing what'[s available. b. ARM: Depending on your situation - - don't throw away A PROGRAM before talking to an expert. 12. Competitive industry: You're not married to your broker. Like comparing a car. Get a 2nd opinion - - try not to fall into the trap of talking to just one. It's a lot of money over many years. Do some homework by talking to another mortgage expert or two. (That's 2-3 only; you don't want 20 credit reports run the same month!) 13. Look at the services you receive from your banker or broker: - Their availability; their knowledge; it's not just rates (it's a factor), who are you dealing with. Here at William Raveis Real Estate, we believe in the concept of one-stop-shop and keep things simple -- everyone has competitive rates, BUT we also off legal, insurance, real estate, financial, title, this bundling of experts if free to you... folks who are experts in the area. So, when mortgage shopping, it's not just who has the best rates. 14. Calls you receive at your home from mortgage guys - - if you give good service, it's like a doctor; call me and ask what their tricks are. A better rate might only be for one month. It may be taking out equity in the home in future years. Call me for advice. 15. If called by a mortgage sales guy, first ask: Is there any negative amortization! Then, can you give that to me in writing. Then, they know you know something about mortgages. 16. Some program may illegal in Connecticut - - the amount you owe can actually INCREASE - - your payments will be added to, not subtracted from, your principle! 17. The difference in a new mortgage rate has to be at least 2% in order to cover the closing costs. 18. Ask if there can be pre-payment penalties. 19. Most Adjustable rate mortgages have these penalties; no fixed-rate mortgages have them! 20. Involve you real estate professional as well. 21. Get your agent to prepare average sales prices in that neighborhood, competitive market analyses, and other services. Why overpay. 22. The communication between you and your mortgage banker is also very important. 23. This can be a life-long relationship - - and a two way street. 24. By the way, there is no right or wrong time to obtain financing - - time of month or year. 25. It doesn't really matter, but rates that are available change every day. 26. Mortgage insurance: PMI: If you are planning to put less than 20% down (your downpayment), you are subject to Private Mortage Insurance. Avoid this by taking two first and second mortgages. PMI is NOT tax deductible. Interest on a second mortgage IS deductible. If these rates are very high, pay PMI. And, you don't want to use all of your cash on the downpayment. Consider 8% of the purchase price as additional expenses along with your purchase. Mortgage companies are getting more tolerant of that rule of thumb that your monthly mortgage payment should be more than 26% of your gross household income. They now consider the whole person, your income history and other factors. They want you to be comfortable paying off your mortgage. 27. Refinancing: If economically feasible, consider doing this later on. But to take money out (borrow against your home's equity, that is something else. Be careful! 28. Another good idea: Get a home equity line of credit at the same time when you obtain your mortgage. 29. It's a very fluid industry - - it changes with the economy. The better the economy, the worse the guidelines. NO set rules applies all the time; things change constantly. Your mortgage professional must always keep up with these changes, which can come quickly. 30. Time is a consideration - - rates are just like the stock market - - they can change hourly. They are a by-product of the market. Today's vs. next week's. Like today's newspaper: it's old news. Today the situation has changed. * Rates are regional vs. Calif. * Compare apples to apples. * ARMS - - have pluses and minuses. 31. In two to three years, your property may appreciate greatly; you only make this money when you sell, of course. So, buy property while the interest rates are lowest (they are still at historical lows). When rates go up, you lose on both ends (buying and when obtaining a mortgage). |
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