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- Why
should I buy, instead of rent?
 | Answer:
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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I've
heard of HUD homes. What are HUD homes, and are they
a good deal?
| Answer:
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.
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I've
had bad credit, and I don't have much for a down-payment.
Can I become a homebuyer?
| Answer:
You may be a good candidate for one of the
federal mortgage programs that are available.
A good place for you to start is by contacting
one of the HUD-funded housing counseling agencies.
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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I'm
a single mother. How would I go about buying a home?
| Answer:
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-qualified 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 homebuying 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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Should
I use a real estate broker? How do I find one?
| Answer:
Using a real estate broker is a very good idea.
All the details involved in home buying, particularly
the financial ones, can be mind-boggling. A good
real estate professional can guide you through
the entire 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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How
much money will I have to come up with to buy a home?
| Answer:
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.
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% down - 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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How
do I know if I can get a loan?
| Answer:
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 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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How
do I find a lender?
| Answer:
You can finance a home with a loan from 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. 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. You can find FHA-approved
lenders in the Yellow Pages of your phone book.
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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In
addition to the mortgage payment, what other costs
do I need to consider?
| Answer:
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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So
what will my mortgage cover?
| Answer:
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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What
do I need to take with me when I apply for a mortgage?
| Answer:
Good question! If you have everything with
you when you visit your lender, you'll save a
good deal of time. You should have: 1) social
security numbers for both your and your spouse,
if both of you are applying for the loan; 2) copies
of your checking and savings account statements
for the past 6 months; 3) evidence of any other
assets like bonds or stocks; 4) a recent paycheck
stub detailing your earnings; 5) a list of all
credit card accounts and the approximate monthly
amounts owed on each; 6) a list of account numbers
and balances due on outstanding loans, such as
car loans; 7) copies of your last 2 years' income
tax statements; and 8) the name and address of
someone who can verify your employment. Depending
on your lender, you may be asked for other information.
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I
know there are lots of types of mortgages - how do
I know which one is best for me?
| Answer:
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. There are several government mortgage programs
that might interest you, too. 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 real estate broker about
the various kinds of loans, before you begin shopping
for a mortgage.
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When
I find the home I want, how much should I offer?
| Answer:
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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What
if my offer is rejected?
| Answer:
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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So
what will happen at closing?
| Answer:
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. |
Information provided by HUD http://www.hud.gov/buying/comq.cfm
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