First Time Home Buyers Consultation

Posted by Kevin Thomas on August 11, 2021

First Time Home Buyers Consultation

Buyers Consultation:

Eight Frequently Asked Questions for First Time Home Buyers

Down Payment are you Eligible?

    1. Is my credit where it needs to be?

  • When it comes to lending, credit scores can play a role in one’s direction to homeownership. There are apps like “Credit Karma” that can provide you with a snapshot of your score using: TransUnion and Equifax.
  • Using one of my partnered lenders, we are able to determine the best approach or plan to spruce up your score over the desired time to ensure the best interest rate. The higher the score the lower the rate.

 

    2. Do I have sufficient savings?

  • Typically, one’s cash reserves should be two months of your mortgage payment. What this means is if your principal, interest, taxes, and insurance (PITI) comes to $1,500 you will want to ensure you have $3,000 as the reserve amount.

 

    3. Is the property free to use without restrictions?

  • One way to determine if a property is free to use at will depends on the covenants, conditions, and restrictions (CCRs). These are rules created privately regarding the use and improvement of real property.
  • The covenants are a language within a conveyance or other contract demonstrating an agreement to do or refrain from doing a particular act.

 

    4. What is my escrow cost and do I need to put an escrow             amount down?

  • Typically, escrow percentages are either between 1% to no more than 5%. Depending on the type of loan acquired can determine the minimum amount one will need to place in escrow.
  • For example, a Conventional loan requires 5% of the home's sales price to be placed in escrow.

Here are a few pros for having an escrow account:

  • Your property taxes and insurance are paid without you having to keep track of them.
  • You’ll receive advance notice of any increases in your premiums or taxes that you can dispute.
  • You avoid having to budget for large, lump-sum payments for your property taxes and insurance.
  • Nonetheless, in most cases, VA loans do not require an escrow account in addition to not having a down payment.

 

    5. How much house can I afford?

  • In determining how much home one can afford, what is reviewed is household income, monthly debts (for example, car loan and student loans payments), and the amount of available savings for the down payment.
  • As mentioned, a good rule of thumb is to have three months’ worth of payments to cover monthly debts and housing payments in reserve.
  • In today’s technology, there are mortgage calculators that provide a general rule of thumb of how much home would be available.

 

    6. Which type of mortgage should I choose?

  • VA Loans – For most VA loans, a down payment is not always a requirement, but is easier to obtain than a conventional loan.
  • FHA Loans: A 20% down payment would be required to avoid mortgage insurance (PMI).
  • Conventional Loan: Have competitive interest rates.
    • Out of the three options, conventional loans are typically the lowest.
    • Nonetheless, they have the most flexibility to use on all types of properties.

 

  • FHA Loans: If a first-time homebuyer with less than the typical credit score may not have had time to save for a down payment or to pay down their debt an FHA would be a good choice.

 

    7. Am I ready to own a home?

  • Is my Financial House in Order (Credit Card Debt, Auto or Student Loans, and Personal Loans?
  • Saved enough for a down payment – depending on the loan type
  • Can I Really Afford: The rent payment Versus the mortgage payment!

 

    8. What happens during the closing process?

  • Once mutual acceptance occurs (when all terms have been agreed between buyer and seller) your REALTOR will enter into the escrow/closing process.
  • The closing process typically lasts between 30-60 days. During this time, home inspections and appraisals are completed and various other legalities are handled, too.
  • Closing Day is moving day. However, “Closing, Signing, and Possession” are three different events in WA state.