• Learn – as a first time homebuyer you must do your homework before you buy. Review the prices of similar homes in the neighborhood, which can be found on websites such as Zillow.com, PropertyShark.com, StreetEasy.com, HouseValues.com, Trulia.com and others. Keep in mind these numbers sometimes trail the market by several months. A real estate agent can provide the latest sales data.
• Fix your credit - Today's best mortgage rates require a credit score of more than 700. Learn how to lift your credit score before you apply for a mortgage. Not only will a low credit score cost you more in terms of the interest rate on your mortgage, it could also stop you from obtaining a mortgage.
Go to AnnualCreditReport.com, the only federal government sanctioned service for obtaining a truly free credit report from one or all three of the major credit bureaus. On AnnualCreditReport.com, select your state and hit the red "Request Report" button and follow the directions. The report is free, but you will have to pay a nominal fee to get your credit score.
• Bid low - In many of today's buyers' markets you can offer 10 to 15 percent below the list price because prices are based on contracts signed three to four months ago. List prices don't necessarily reflect the most current values, especially in markets still on the decline.
• Consider a 'Lucky 7' loan - Take advantage of the lower interest rates available with a 7/1 adjustable rate mortgage (ARM), when compared to a fixed-rate 30 year mortgage. The interest rate on a 7/1 ARM is fixed for seven years. In the eighth year the loan resets as an ARM. Just be sure you know what the margin, life cap and periodic caps will be beginning in the eighth year to avoid surprises. Use those seven years to reduce debit and increase your income in preparation for what is likely to be a much higher rate than your starting rate.
First time home buyers should consider 30/15 year mortgages which are fixed for 15 years, amortized over 30 years and due in full in 15 years.
These and other mortgage options come with lower starting rates as a hedge against interest rates rising in the near future.
• Get pre-approved - Go beyond pre-qualifying for a mortgage, which only tells you what you can likely borrow. Get a pre-approved mortgage and you'll know your home price shopping parameters. You'll also present yourself to the seller as a serious buyer. Financing in hand will also help level the playing field with all-cash buyers and investors and it will help you negotiate a better purchase price.
• Consider a newly built home - The new home sector has been harder hit than re-sales. Concessions and reduced prices are the norm. The latest U.S. Census Bureau data reveal that sales of new homes fell for the fourth consecutive month in February, to a seasonally adjusted annual level of 308,000 sales - a year-over-year decline of 13 percent and the lowest level ever. Just be sure to check out the reputation of the builder.
• Inspect everything - Get a home inspection for a new home, a resale home, a nearly new home or a very old home. Just because it's new doesn't mean it's defect free. Unseen problems can torpedo the value of your home.
• Read the title report - Make sure that any new additions or construction to an existing home are fully permitted and recorded with the local municipality.
• Check the appraisal - Likewise check the appraisal report for any oversights, missed features or other errors that could cause the property to be undervalued.
• Bargain - Don't be afraid to dicker. It's a buyers' market. Concessions are available from both new home builders and existing home sellers. Ask for help with the closing costs, repairs, even furnishings and other perks. Motivated sellers have much to offer.
• Don't hold back on on the help - If you look for the least expensive attorney, real estate agent, inspector, etc., you will get what you pay for. Ask family, friends, co-workers, realty professionals and others you trust for referrals and then carefully vet them.
Nothing is more exciting than being an Orlando first time home buyer. You can only picture how great it feels to forget about rent and landlords. You would by no means feel like you are throwing your hard-earned money out the window again. Even if you've just bought a new home for you for the first time, don't question yourself, you have made an investment that counts. Nowadays there is a great diversity of options for first time home buyers. This is a good thing as you want your first very own home to be a comfortable and endearing place and you can easily find what you are looking as there is so much to choose from.
The fastest and simplest way for the Orlando first time home buyers to find their own place is to search the Internet. No matter if you are planning to buy your first home or you are a skilled home buyer, you can count on cyberspace to give you some useful tips and pieces of advice. I recall how I felt when I was looking for the perfect place when I was a first time home buyer several years ago. I was lucky enough to have a knowledge wife who made the whole process of buying our first home a lot easier. We knew what we wanted right from the beginning - two story home with four bedrooms situated in a safe neighborhood.
We found a good real estate agent and it took us just a few days to find or perfect home. Our real estate agent helped us a lot by showing us many homes which matched our requirements and that is how we managed to find the one that was perfect for us. Of course when you are a first time home buyer you try to avoid being deceived. Even though you might not have played the game before, you can count on technology to guide you through the process. Just get online and have a look on a few websites for first time home buyers. They will provide you with useful information what to look for and what to avoid. Generally we want a home that suits our family but we often have a tight budget. One piece of advice I'd like to give you is to consider the location very well.
No matter what state you have chosen to live in, you are searching for a safe neighborhood for your family. This might increase the price for your home, but it will also increase your home's value as no first time home buyer wants to purchase a home in the bad part of a town. If you are a first time home buyer or you are simply interested in new home opportunities, then it is a good idea if you use the Internet. Don't forget that conducting online research saves time and efforts.
Nearly no one would refute that he/she does not dream of owning their own Orlando home, on the other hand the only thing that could be preventing a lot of individuals is how to get the right home mortgage loan quote. If you are one of those, who are enthusiastic on getting an Orlando mortgage, you should take into mind several necessary things for instance the basic difference between fixed as well as variable rate, the down payment amount, fees that are required to be paid at every step and interest rate that appears possible with your credit record. By keeping all these points in mind, it would turn out to be very easy for you to pay off the amount without any trouble.
There are on the whole two types of interest rates variable interest rates and fixed interest rates. Before going for any type of mortgage you should understand both these interest rates. In the case of variable rate, interest rates vary in line with the market condition and monthly mortgage payments rely on the interest rate fluctuations every month. However, with fixed rate, interest rates do not differ till all the payments are settled up. For individuals, who are not sure if they would stay on in the same home for more than a few years, the variable interest rates are considered as a good choice.
You must also keep in mind the down payment amount. You should be aware of that more the amount of down payment, lesser will be the monthly mortgage payments. The majority of lenders demand at least 5% of total cost of the home as down payment, on the other hand if you are financially capable; it is worthwhile to pay 20 to 30% as a down payment beforehand.
In adding up, it’s at all times better to be familiar with all the fees involved in a home mortgage loan. While requesting a home mortgage loan quote, you should request the lenders to provide the list for all the possible fees involved. You can as well request the lender to document the entire fees on a single paper with the intention that you can do a comparison to decide on the right lender. With the exception of these tips, it is important that lender has the transparent interest rates and terms given that this is a fundamental element of any home mortgage loan quote.
To add it all up, a home mortgage loan quote is a thing that makes it simple for you to find the best Orlando home mortgage loan deal. With the exception of taking into account the interest rates as well as all the other fees involved, you should work hard to carry out a negotiation with the lender given that this would as well save a substantial amount of money. Another point to consider is that you should do some research on mortgage loan quotes, its relatively easy nowadays with the help of internet there are several resources online. You use these by searching online for mortgage rates quotes.
There are a number of ways for borrowers to avoid or lessen the amount of Orlando mortgage insurance typically required when obtaining a mortgage. First let’s look at what mortgage insurance is, what it does and does not do.
Mortgage Insurance protects the Orlando mortgage lender against loss caused by a mortgagor's default. It may cover all or part of the loss and it may or may not relieve any liability on the borrowers part if a default on the mortgage occurs.
Private mortgage insurance was developed to help borrowers purchase a home without putting 20% down as was mandatory by banks and lenders many years ago. You may think of it as a "hired co-borrower".
Different types of loans refer to it in special ways, and some loans have different requirements for the amount of coverage needed, but it essentially serves the same purpose. It helps protect the lender. Not all loans require mortgage insurance and the premium varies due to different criteria.
Conventional MortgagesWhen the loan to value for an owner–occupied residence is more than 80% (or the borrower is putting less than 20% down) then Private Mortgage Insurance (or PMI), is typically required. The premium may be paid on an annual, monthly or single premium plan. (The most popular method of payment is the monthly method). The premiums are based on the amount and terms of the loan and may vary according to the loan-to-value, type of loan, term of loan and the amount of coverage required by the lender. The less the borrower puts down the higher the premium. PMI may be waived when the loan reaches 80% or less of the value of the property.
VA MortgagesA VA loan is guaranteed by the Veterans Administration (VA) and the lender is required to collect an up-front one-time fee at closing called the "Funding Fee". This amount is between .50% and 3.00% of the loan amount depending upon the status of the Veteran and if the Veteran has used his VA Benefits previously to purchase a home. There is no monthly premium and there is no refund of the Funding Fee when the loan–to-value is reduced below 80% or if the loan is paid off early.
FHA Mortgages Regardless of the amount of the down payment, FHA requires a one time upfront fee of 2.25% of the loan amount which, may be financed in with the loan. In addition to the upfront fee there is a yearly fee of .50% of the unpaid balance of the loan which is divided into 12 equal payments and paid monthly in the house payment. If the loan is paid in full within the first 7 years there may be a prorated refund of the upfront premium paid. The monthly mortgage insurance premium may not be waived regardless of the loan to value.
Now some good news. There are ways to reduce or even avoid paying mortgage insurance. Here are just a few examples.
Put 20% down on a Conventional loan. The down payment may be a gift from a relative or it may be borrowed against the borrowers own assets, such as loan against the borrowers 401k, auto, etc.
Have your lender or mortgage broker set up two loans. The "first" mortgage of 80% and a "second" for 10% or 15%.
Apply for an 80% mortgage and have the seller carry back a "second" mortgage.
Ask your lender about individual mortgage programs that do not require mortgage insurance. These programs typically have a higher interest rate but still the overall payment is less than with mortgage insurance.
Have the lender set up Lender Paid Mortgage Insurance. In this case you pay a higher interest rate and the lender pays your mortgage insurance for you. Since the mortgage insurance is "built-in" to the interest rate it may be tax deductible. The draw back to this is that since there is no "mortgage insurance" it can’t be dropped when the property value reaches 80% or less.
Anytime mortgage insurance is required on a home loan discuss with your lender or mortgage broker what other options and loan programs may be available to reduce or even avoid mortgage insurance.
1. Not checking your credit report and score
You've clicked through hundreds of online listings, compared floor plans and square footage, and are eager to jump-start your search. But before you, the first time home buyer, even think of setting foot in an open house, make sure you get a copy of your credit report. The cleaner your credit report and the higher your credit score, the more likely you are to be pre-approved for a mortgage at a low interest rate. According to Orlando Mortgage Central, most home buyers will need a credit score of about 720 to obtain the most favorable mortgage rates.
Review your credit report a few months before you begin your house hunt, and you'll have time to ensure the facts are correct and dispute mistakes before a mortgage lender checks your credit. You can access a free copy of your credit report at annualcreditreport.com once every 12 months.
2. Not getting pre-approved
After you've assessed your credit report, it's time to establish with a qualified lender how much you can afford. "First time home buyers need to take the time to get an approval from their lender before looking at homes," advises Ray Boss Jr., a six-year licensed Realtor with RE/MAX Realty Group in Maryland. "This includes getting a credit check and giving their lender a copy of W-2s, pay stubs, and bank and brokerage statements." Getting pre-approved can help you save time by looking for homes that you know you can afford instead of lusting after something out of your price range. And it will put you in a better position over another bidder with no pre-approval.
3. Not creating a long-term budget
If the housing crisis proved anything, it's that mortgages were given to people who clearly did not have the means to pay them back. To avoid making this mistake, home buyers should create a budget before even beginning their home search to determine just how much house they can really afford. A good rule of thumb is to devote no more than a third of your monthly household income to housing costs, which include mortgage principal, interest, taxes, and insurance. "A good number would be 30 percent," Zandi says. "If you are over 35 percent, you are really pushing the envelope." There are several work sheets available online to help you figure out how your income, debts, and expenses affect what you can afford each month for the next 15 or 30 years.
4. Forgetting about the hidden costs
You grossly underestimated what you can afford to pay each month. You factored in the purchase price of the home but didn't consider the cost of taxes, insurance, utilities, and fees. There are several hidden costs that first-time home buyers neglect to prepare for. They can be anything from the closing costs to appraisal fees, escrow fees, homeowner's insurance fees, property taxes, and even moving costs. Another factor is the cost of repairs and maintenance. "When you're renting and the furnace goes out, what do you do? You call the landlord," says Tom Vanderwell, mortgage officer for Fifth Third Bank in Michigan. "When you own a house, what do you do? You have to fix it yourself." You may find there are numerous "nickel and dime" things to account for that could add up to a significant chunk of money over time.
5. Not using professional help
Sure, it's possible to go out and buy a home without the aid of a professional real estate agent. But think about how much time and stress a good agent can save you. For starters, Realtors have access to all the homes on the market through the multiple listing service, or MLS, plus all the ones that are under contract and have been sold. A specialist has time to sift through all of these listings, says Boss, and make the appointments to show you the houses, create comparative market analyses to determine proper pricing, and meet with necessary inspectors. Real estate agents also can help buyers traverse a taxing, 70-page legal contract. "I would want someone who is going to look out for my interests first and foremost," says Boss. "Someone who knows the contracts, who has experience negotiating, and who can walk me through the entire process smoothly—step by step—and make sure I get the house that's right for me."
6. Picking your real estate agent and lender blindly
"One of the mistakes a lot of people make is finding a Realtor they aren't comfortable with," says Boss. Begin your search at the National Association of Exclusive Buyer Agents, a nonprofit that represents buyers. Or ask relatives, friends, neighbors, and coworkers for referrals.
First-time home buyers, Boss says, are generally more time-consuming than the average buyer and require more attention. A good real estate agent will be friendly and accommodating, show only homes that fit your parameters, and help you with strategies during the bidding process—but never pressure you into something you're not comfortable with. "It's important that the Realtor be experienced with first-time buyers, understand their wants and needs, and be able to connect with them well," says Boss.
Similarly, the buyers should feel at ease with and have complete confidence in their mortgage lender, and they should fully discuss and understand their financing options with that lender. "Don't apologize for asking questions," says Vanderwell, who stresses the importance of knowing what you're getting into. "There's a pretty substantial chunk of people who are in really rough straits right now and would not have been had they done their homework."
7. Thinking you'll get everything on your "wish list"
Another mistake people make is being too close-minded while searching for their home, says Boss. He suggests sitting down with your real estate broker before searching for a home and creating a need/want list. Some of the items you might want to include as "must haves" or deal breakers are the towns you'd want to live in, square footage, or accessibility to transportation. The second part of the list would be things you don't necessarily need but wish to have, such as a garage, new kitchen appliances, or an extra room for an office. "As you search for your home, you may realize there are certain parameters you really want or don't want," says Boss. "Understand that a certain amount of flexibility is essential." Your aim is to be able to afford everything you need—as well as some items you want—all while staying within a long-term budget.
8. Not keeping your feelings in check before hiring a home inspector
You've already chosen the perfect paint color to match your living room set. But hold on: Before you start picking out accent pillows for your sofa, you need to bring in a home inspector to check the safety of your potential new home. Inspectors will evaluate the structure, construction, and mechanical systems of the home and will give you the approximate price of repairs that may be needed. They will examine everything from the electrical system, water heater, and HVAC system to the foundation and floors.
Buyers should find and hire their own inspector—independent of the real estate broker—to ensure there isn't a conflict of interest. When you make your offer, make sure the seller is aware that your offer is contingent on the house passing inspection. You can also add a clause to the contract stating that the seller will pay up to a certain amount for any repairs required as a result of the inspection.
9. Not researching your neighborhood
You may be living in your dream home, but your neighborhood's a nightmare. Or you may have children or are planning to have children in the near future, but you didn't consider the quality of the school districts or parks in the vicinity. You should ask yourself a number of questions during your home search, such as "Are there good schools nearby?" and "Do I feel safe coming home at night?"
Boss suggests that if schools are an important factor, you should go check them out personally. Speak with the principals or the parents waiting on the steps outside to pick up their kids. To learn more about the community, open up the local newspaper, Boss says. You can find out about community events or even how good the local high school football team is. Today's buyers can gather all sorts of neighborhood information from real estate blogs and websites like Zillow and Trulia. (U.S. News has a partnership with Trulia.) "It is the responsibility of the buyer to check crime reports, school options, churches, and shopping," says Boss. "Remember, you can change your house, but you can't change the neighborhood."
10. Not considering the resale value of your home
You've just started the home-buying process. The prospect of selling a home hasn't even crossed your mind. Besides, you're thinking you might live in whatever home you buy forever. Yet life is full of surprises, whether it is a job transfer or having another child or taking care of an incapacitated relative.
When the time comes to put your house on the market, will your home be easy or difficult to sell? While you're on the hunt, it's a good idea to account
for preferences of the typical home buyer. Just because you love to landscape or enjoy a bright-pink backsplash doesn't mean a prospective buyer will. "How we make our plans initially has a big impact on our ability to adjust those plans and to deal with whatever comes our way," says Vanderwell.
Refinancing is something that most people have heard of but many of us don't stop to think about for ourselves. When you hear friends talk about Orlando mortgage refinance you most likely hear them talk about how much money they are saving and how much more affordable their home is for them. You don't have to simply sit back and hear about their good fortune; instead you can make it a reality for yourself, too.
Is Orlando Mortgage Refinancing Best For You?
Many people stop and wonder if Orlando mortgage refinancing is right for them or not. The fact of the matter is that this is something that will require you to look into it and weigh the pros and cons. Refinancing is the best thing that has happened to a lot of people but other people have found that they have lost money in the process. If the goal is to save money you will need to consider many different things.
The first thing you will need to consider when you are looking into Orlando refinance is how long you will continue to live in your Orlando home. If you only plan to live in your home for two or three more years you'll generally find that refinancing does not make sense. The problem is that Orlando mortgage refinancing costs money and it will take some time for the process to pay for itself in the way of savings.
The next thing you will need to think about is what the current interest rates are. Interest rates will dictate how affordable an Orlando refinance is for you and whether or not it makes sense to do it now or wait to do it in the future. Your goal is to lower your interest rate by at least two to three percent. When you do this you will see that your monthly payment can be reduced significantly on a monthly basis and the overall savings will be huge. Just lowering your interest rate by three percent can save you hundreds each month, depending on the size of your mortgage.
Orlando refinance isn't for everyone, but there are a lot of people who can benefit from this practice and you may be one of them. You need to look into the process carefully and see what it can do for you. How long will it take to pay off the cost of the refinance and will you be in the home long enough for the savings to pay for the refinance? How much can you lower your interest rate by? There is a lot to think about and if you aren't sure what questions you should be asking yourself you can always team up with a mortgage broker who can help you run the numbers so you can see where you stand.
It's not uncommon for an Orlando first time home buyer to say to me, "Gosh, just last week I called you about buying a home and now I'm in escrow! How did this happen so fast?"
The answer is it didn't. First-time home buyers start the search long before most even realizes it.
Here's what you can expect from your home shopping experience.
Benefits for an Orlando First Time Home Buyer
You should buy an Orlando home. That's what you've been hearing from friends and family, right? So, by now you have likely already weighed the benefits and decided that Orlando home ownership was the best decision for you. That's a major hurdle now passed. You are focused and certain. Good.
Defining Search Parameters for a First Time Home Buyer
Almost 80% of all home searches today begin on the Internet. With just a few clicks of the mouse, home buyers can search through hundreds of online listings, view virtual tours, and sort through dozens of photographs and aerial shots of neighborhoods and homes. You've probably defined your goals and have a pretty good idea of the type of home and neighborhood you want. By the time you reach your real estate agent's office, you are halfway to home ownership.
How Long Should It Take to Buy Your First Home?
In seller's markets, often I show only one home. After all, how many homes do one family need? A few buyers will look for years, but buyers who do that aren't motivated. A motivated buyer will find a home within two weeks. Most of my buyers find a home within two days. Good real estate agents will listen to your wants and needs and arrange to show only those homes that fit your particular parameters. Your agent should preview homes before showing them to you as well.
How Many Orlando Homes Will a First Time Home Buyer See?
Studies show that your memory dramatically improves after consumption of carbs and slows upon consuming sugar. So, lay off the soft drinks and have a hearty meal of carbs before venturing out to tour homes. The average number of homes that I show to a buyer in one day is seven. Any more than that and the brain is on overload. Therefore, don't expect to see 20 or 30 homes; although it's physically possible to do so, you probably will not remember specific details about any of them.
The "Red Shoes" Experience for a Home Buyer
Women will relate to this. Say, you need a new pair of red shoes. You go to the mall. At the first shoe store, you find a fabulous pair of red shoes. You try them on. They fit perfectly. They are glamorous. Priced right, too. Do you buy them? Of course not! You go to every other store in the mall trying on red shoes until you are ready to drop from exhaustion. Then you return to the first store and buy those red shoes. Do not shop for a home this way. When you find the perfect home, buy it.
How a First-Time Home Buyer Can Rate Inventory
· Bring a digital camera and begin each series of photos with a close-up of the house number to identify where each group of home photos start and end.
· Take copious notes of unusual features, colors and design elements.
· Pay attention to the home's surroundings. What is next door? Do 2-story homes tower over your single story?
· Do you like the location? Is it near a park or a power plant?
· Immediately after leaving, rate each home on a scale of 1 to 10, with 10 being the highest.
View Top Choices a Second Time Before Buying That First Home
After touring homes for a few days, you will probably instinctively know which one or two homes you would like to buy. Ask to see them again. You will see them with different eyes and notice elements that were overlooked the first go-around. At this point, your agent should call the listing agents to find out more about the sellers' motivation and to double-check that an offer hasn't come in, making sure these homes are still available to purchase.
Making the Selection to Buy a Home
I'll let you in on a little secret. I generally know which home a buyer is going to choose, and I suspect most other agents operate the same way. It's an intuition. But I make it a practice not to steer buyers, and I insist that buyers choose the home without interference from me. It's not my choice to make.Real estate agents are required, however, to point out defects and should help buyers feel confident that the home selected meets the buyer's search parameters.
If you are thinking about buying an Orlando home, but your credit rating is not where it should be, the experts recommend you put off the purchase and try to repair your credit first. Though credit repair can take some time, there are many things you can do to raise your score in just a few months. This can be enough to allow you to qualify for an Orlando mortgage with a lower interest rate and fewer fees.
If you just can't wait to buy that new Orlando home and can't be convinced otherwise, there are a few options available to secure an Orlando mortgage. One possibility is a subprime mortgage. These loans are made to borrowers who otherwise would not qualify for a traditional loan. Prior to the housing and financial meltdown of 2007 through 2009, these subprime loans were the most popular type of home loans. Millions of people purchased homes using this type of mortgage, which in turn led to many of the financial troubles we see today. Loans of this type are extremely risky to lenders and have become much rarer in today's climate. However, if you are persistent, there are still a few lenders offering these loans.
These loans are mostly made to low income families and to people who have a history of not paying bills on time, so it makes sense that delinquencies on these loans are much high than the norm. A large number of the loans issued from 2004 to 2007 have defaulted and the lenders are left with empty properties. To make up for these risks, lenders are forced to charge much higher interest rates, require higher down payments and charge higher closing fees. Lenders will usually also require mortgage insurance, which can add an additional burden. Though you may get the home that you otherwise would have had to wait for, it will cost you dearly.
Since many borrowers secure subprime loans as a short term solution to their financial problems, lenders usually charge steep penalties for prepayment of the loans. This can crush your plans to refinance later to a loan with a lower interest rate and such penalties are designed to do just that. Why should the lender take a risk with you only to lose your business when you become less of a risk?
If you have made your payments on the subprime loan for a good period of time, you should be able to qualify for a traditional loan with a much lower interest rate. You have proven your ability to control your finances and make payments and are now considered less risky. Even if you have to pay a prepayment penalty on your original loan, you will usually still come out better in the long run by refinancing. Shopping around can help you get the lowest rate possible and can save you thousands of dollars over the life of your mortgage.
Though subprime loans are not the preferred option, they do offer a solution to those who otherwise would not be able to buy a home. The most important thing is to understand exactly what the loan entails and the consequences of securing one. Buying a home can be an emotional time, but such emotional decisions have on place in finance and should be avoided.
Step 1: Spiff up your credit
Good credit can lower your Orlando mortgage interest rates, potentially saving you hundreds of dollar a month. Order a credit report (usually free online). You can dispute any mistakes, but the most important thing is to build up good credit from here out.
Lenders want first time home buyers who can pay bills on time and who don't owe too much to anybody else. Automated bill-paying services help. Stop applying for credit cards just for a free T-shirt or to shuffling your debt around. Consider closing some of your accounts, but that's tricky. Maxine Sweet, Vice President of public education at Experian, says lenders don’t want to you to owe near your limit, which can happen if you consolidate to one card. Your score can dip temporarily when you make any big change -- even for the better-- so work on your credit long before you seek a mortgage, she says.
Step 2: Start saving for a down payment and closing costs
First time home buyers traditionally had to put up a 20% down payment. Now it's more like 5-10%. Some don't put anything down. "There's nothing typical today," says Pat Vredevoogd Combs, president-elect of the National Association of Realtors.
You'll always get a better deal if you make a down payment. Until you've paid for 20% of your home, your lender will probably want you to buy insurance on your mortgage.
The buyer also has to come up with closing costs, about 1-2% of the price.
Step 3: Calculate how much house you can afford
Housing eats up more of everyone’s paycheck these days, but as a rule of thumb buyers spend 25-30% of their pre-tax pay on housing. That translates roughly to a mortgage of 3 to 4 times your salary. Consider your entire budget: How is your credit card bill, student loan or kid’s tuition? How much will your new palace cost to maintain? Will you get a big break on your taxes from the mortgage interest rate deduction?
Step 4: Shop for a mortgage
New loan offerings make it easier to buy a home, but harder to pick which mortgage is right for you. The standard 30-year fixed rate mortgage allows predictable payments. If you’re planning on moving quickly, consider an adjustable rate mortgage, which has low interest and payments for the first few years. Buyers have really low starting payments with interest-only loans, but they don't build up any equity in their homes. These new fangled mortgages are often sold to those who want to buy more house than they can afford.
Compare terms and rates from several sources. A pre-approved mortgage will let you pounce on the right house. Your lender usually calculates your monthly expenses, including principal, interest, taxes and insurance. You'll pay a monthly bill into an escrow account instead of getting clobbered by annual taxes.
Step 5: Shop for a home
Make a list of the features you want or don't want. A realtor can be a great help, so much so that some start planning here months or years before they're ready to buy.
The buyer pays the sale commission, which typically runs 5-7%, split between the seller's agent and buyer's agent. So -- especially first time buyers -- get the service basically for free. Some also shop from people who are selling their own homes, figuring the lack of a commission means a lower price.
Some agents specialize in buyers. To put customers at ease about potential conflicts of interest, some go as far as not working at firms that take any listings. Kathleen Chiras, a spokesman for the National Association of Exclusive Buyer Agents, says the potential for a double commission gives agents a reason to sell homes that are "not necessarily the best house for that person."
Step 6: Make an offer
How much did similar homes sell for nearby? How long has this house been on the market? (Weary sellers may be more flexible.) Your realtor can evaluate market conditions and help you make a reasonable offer.
Step 7: Sign a contract
You sign and pay a deposit that is held by a neutral third party. In some states, you’ll want a real estate lawyer to go over the deal. Typically buyers can back out if the home inspector finds big trouble or if they can't find financing or, in a new twist, Combs says, homeowner’s insurance.
Step 8: Take a Close Look at Your House
Make sure your contract is contingent on a home inspection for a detailed, objective evaluation of your home's infrastructure. After, negotiate with the seller over needed repairs. Be sure the title of the house is free of any liens. Your bank will appraise the house, too.
Step 9: Shop for homeowners insurance
Shop around, but your own car or life insurer will probably give you a good package deal. As always, a higher deductible saves you money.
Step 10: Sign papers
You'll meet at lawyer's office or title company, sign a big stack of papers and receive the keys to your new home.
1. Why should I become an Orlando first time homebuyer, instead of rent?
o Answer: A home is an investment. When you rent, you write your monthly check and that money is gone forever. But when you own your home, you can deduct the cost of your mortgage loan interest from your federal income taxes, and usually from your state taxes. This will save you a lot each year, because the interest you pay will make up most of your monthly payment for most of the years of your mortgage. You can also deduct the property taxes you pay as a homeowner. In addition, the value of your home may go up over the years. Finally, you'll enjoy having something that's all yours - a home where your own personal style will tell the world who you are.
2. What are "HUD homes," and are they a good deal?
o 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. Read all about buying a HUD home. Check our listings of HUD homes and homes being sold by other federal agencies.
3. Can I become an Orlando homebuyer even if I have I've had bad credit, and don't have much for a down-payment?
o Answer: You may be a good candidate for one of the federal mortgage programs. Start by contacting one of the HUD-funded housing counseling agencies that can help you sort through your options. Also, contact your local government to see if there are any local homebuying 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.
4. Are there special homeownership grants or programs for single parents?
o Answer: There is help available. Start by becoming familiar with the Orlando home buying process and pick a good real estate broker. Although as a single parent, you won't have the benefit of two incomes on which to qualify for a loan, consider getting pre-qualified, so that when you find a house you like in your price range you won't have the delay of trying to get qualified. Contact one of the HUD-funded housing counseling agencies in your area to talk through other options for help that might be available to you. Research buying a HUD home, as 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.
5. Should I use a real estate broker? How do I find one?
o 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. To find a broker who sells HUD homes, check your local yellow pages or the classified section of your local newspaper.
6. How much money will I have to come up with to buy a home?
o 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.
7. How do I know if I can get a loan?
o Answer: Use our simple mortgage calculators to see how much mortgage you could pay - that's a good start. 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.
8. How do I find a lender?
o 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.
9. In addition to the mortgage payment, what other costs do I need to consider?
o 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.
10. So what will my mortgage cover?
o 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.
11. What do I need to take with me when I apply for a mortgage?
o 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.
12. I know there are lots of types of mortgages - how do I know which one is best for me?
o 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,including the Veteran's Administration's programs and the Department of Agriculture's programs. 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.
13. When I find the home I want, how much should I offer?
o 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.
14. What if my offer is rejected?
o 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!
15. So what will happen at closing?
o 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.
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You can save a lot of money if you research your options and learn how to refinance. Refinancing your Orlando mortgage can help you to benefit from lower mortgage rates. You can have lower monthly payments, a shorter loan term, or switch to a different type of loan. You can also opt for ‘cash out’ refinancing, which will allow you to take money out of the equity you have in your home. Use an online mortgage calculator to decide about whether home refinancing is the right option for you. Talk to an Orlando mortgage broker to decide about which type of Orlando mortgage refinance is suitable for you, depending on how long you intend to stay in the home. If you are planning to move out of your home in a few years, you may not have enough time to recover the money you will have to spend on the prepayment penalty, closing costs, and fees. You may not be able to refinance if the value of your home is less than what you owe on your mortgage. If you don’t have much equity in your home, lenders may ask you to buy private mortgage insurance (PMI), which will make mortgage refinancing less attractive. Lending norms have become stricter and you will only be eligible for the lowest refinance rates if you have a high credit score. Mortgage rates have risen from their lowest levels and many homeowners have postponed their refinancing plans due to this. Shop around and compare offers from different types of mortgage lenders. You can contact commercial banks, credit unions, mortgage companies, savings banks, and savings and loan associations. Mortgage brokers will also give you a lot of useful information about the best deals being offered by different lenders. Ask a few reputable refinance Orlando mortgage lenders and brokers to give you quotes in writing for the same type of refinancing loan, with the same loan amount and term. This will make it easier for you to compare the offers. Ask the lenders to write down all the loan costs. Negotiate with the lenders for better terms based on quotes provided by others. Make sure that lenders don’t increase one cost when they reduce another. Check the background and reputation of the refinance mortgage brokers and lenders. Don’t let anyone rush you into signing papers you haven’t read or don’t understand. Remember, if you get an offer that seems to be too good to be true, it probably is. We can help you to get free; no-obligations home refinance quotes from pre-screened refinance lenders and brokers in your area with a few clicks. This is a free offer and there are no commitments involved at all. We will not give your contact information to anyone without your permission.
Orlando Mortgage Insurance- Ways to Avoid It
There are several ways for borrowers to avoid or reduce the amount of Orlando mortgage insurance usually required when obtaining a mortgage. To start let’s look at what mortgage insurance is, what it does and does not do.
Mortgage Insurance protects the Orlando mortgage lender against loss caused by a mortgagor's default. It may cover all or part of the loss and it may or may not relieve any liability on the borrower’s part if default on the mortgage occurs.
Private mortgage insurance was created to help borrowers purchase a home without putting 20% down as was required by banks and lenders many years ago. I like to think of it as a "hired co-borrower".
Different types of loans refer to it in different ways, and some loans have different requirements for the amount of coverage needed, but it essentially serves the same purpose. It helps protect the lender. Not all loans require mortgage insurance and the premium varies due to different criteria.
Conventional Mortgages When the loan to value for an owner–occupied residence is more than 80% (or the borrower is putting less than 20% down) then Private Mortgage Insurance (or PMI), is typically required. The premium may be paid on an annual, monthly or single premium plan. (The most popular method of payment is the monthly method). The premiums are based on the amount and terms of the loan and may vary according to the loan-to-value, type of loan, term of loan and the amount of coverage required by the lender. The less the borrower puts down the higher the premium. PMI may be waived when the loan reaches 80% or less of the value of the property.
Now the good news. There are ways to reduce or even avoid paying mortgage insurance. Here are just a few examples.
Ask your lender about special mortgage programs that do not require mortgage insurance. These programs typically have a higher interest rate but still the overall payment is less than with mortgage insurance.
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