Purchasing a home is a great investment. When you are renting, your monthly payment merely helps the landlord pay off his/her mortgage. When you buy your own home, the benefits include:
For those with less-than-ideal-credit and/or minimal down payment, an FHA loan is generally the way to go. This type of loan allows for:
Using a real estate broker is a great idea. Finding somebody who knows the ins-and-outs of your particular area will take the pressure off your shoulders and allow for a more pleasant home-buying experience. A respectable Realtor® will be well-acquainted with the neighborhood and will be able to provide information about the quality of schools, safety of the neighborhood, distance to freeways, etc. Your real estate broker can also help you decide how to best structure your purchase offers. They may also be able to get the inside scoop as to why the sellers are moving and how motivated they are to accept an offer. Lastly, the seller pays the fee for your agent (not you), so find the absolute best professional for your needs is a no brainer.
The amount of money you will need 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 the following three costs:
Earnest Money Deposit (EMD) AKA “Good Faith Deposit” – The initial deposit you make at the time your purchase offer is submitted. While not cashed until/unless the offer is accepted, it lets the sellers know that you are serious about purchasing their home.
Down payment – Down payment is based on a percentage of the purchase price. Depending on your specific type of loan, down payments of 3.5% – 20% are generally required.
Closing costs – Closing costs include all other necessary fees during the escrow process such as appraisal, title, underwriting and all other associated costs/fees.
A reputable mortgage originator will be able to quickly go over your financial situation and give you an estimate of what your price range might be. Once you have all your basic questions answers, they can collect the necessary paperwork to get your pre-qualification in order. This pre-qualification process will put in you great shape when you begin making purchase offers as the sellers will know that you are pre-qualified to buy their house.
The best way to find a lender is through a referral source. When your friends, family or real estate agent recommend a certain mortgage professional, that is generally a good place to start. After speaking to the referred company/loan originator, you’ll have a base line for which to compare any other companies you may speak to during the home-buying process.
Besides your PITI payment (principle, interest, taxes and insurance) you’ll have your monthly utilities and any homeowner’s association dues and/or Mello Roos as applicable.
Following is a list of all of the basic paperwork you’ll need to start:
There are many types of mortgages to choose from and your mortgage professional will be able to guide you towards the best option(s). While choosing a loan may seem like a daunting task, once your goals and finances are in line, the choice will be simple. For a brief overview of loan types, please see our Loan Options page.
Your real estate agent will be your biggest asset when making an offer. However, there are several things you will want to consider: