• Lender fees include charges for loan processing, underwriting, preparation and establishing an escrow account.
• Third-party fees include charges for homeowner's insurance, title search, and other inspections such as home inspection & termites.
• Government fees include deed recording and state & local mortgage taxes.
• Escrow and interest fees include homeowner's insurance, loan interest, real estate taxes, and occasionally private mortgage insurance.
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2.Q -
What is a good credit score? How do I find out my credit score? How to improve my credit score?
In today's increasingly automated society, it should come as no surprise that when you apply for a mortgage, your ability to pay can be reduced to a single number. All the years you've been paying your mortgage, car payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.
All three of the major credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. The best known is called the FICO score, based on a model developed by Fair Isaac and Company (hence the name) and used by Experian. Equifax's model is called BEACON, while TransUnion uses EMPIRICA. While each of the models considers a range of data available in your credit report, the primary factors are:
• Credit History How long have you had credit? • Payment History Do you pay your bills on time? • Credit Card Balances How much do you owe on how many accounts? • Credit Inquiries How many times have you had your credit checked?
Each of these, and other items, are assigned a value and a weight. The results are added up and distilled into a single number. FICO scores range from 300 to 800, with higher being better. Typical home buyers likely find their scores falling between 600 and 800.
FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.
What can you do about your FICO score? Unfortunately, not much. Since the score is based on a lifetime of credit history, it is difficult to make a significant change in the number with quick fixes. The most important thing is to know your FICO score and to ensure that your credit history is correct. Conveniently, Fair Isaac has created a web site www.myFICO.com that let's you do just that. For a reasonable fee, you can quickly get your FICO score from all three reporting agencies, along with your credit report. Also available is some helpful information and tools that help you analyze what actions might have the greatest impact on your FICO score. Each of the credit services offers similar services on their web sites: www.equifax.com, www.experian.com, and www.transunion.com.
Armed with this information, you will be a more informed consumer and better positioned to obtain the most favorable mortgage available to you.
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3.Q -
What do I need to know about writing an offer?
It is standard practice to make a purchase offer contingent upon obtaining a mortgage. Because of this contingency, the seller will want the details of your financing plan included in the offer.
Down Payment: In the purchase offer, we will include the down payment amount you will apply toward the purchase. This will give the seller further evidence of your qualifications to secure a mortgage.
Interest Rate: Within the purchase offer, we will provide a safeguard against any dramatic change in interest rates between when the offer is made and when the loan is closed. The offer will not only be contingent upon qualifying for a mortgage, it will also be contingent upon an interest rate within a certain range.
Seller Assistance: If the house you select is at the top-end of your budget range, we may want to include a request for seller assistance to pay a portion of the closing costs traditionally paid by the buyer or to help "buy-down" your interest rate. Other seller assistance may include having the seller "carry back" a second mortgage to cover your down payment or even 100% seller financing.
With any of these seller assistance options, you can expect to pay a higher purchase price than if you had handled the financing through a traditional mortgage lender.
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4.Q -
What do I need to know before I start looking for my new home?
Before You Start Looking For Your New Home:
• Check your credit rating. Straighten out any errors before its too late.
• Determine a comfortable monthly budget for your new purchase, including down payment and monthly payment.
• Find a loan program that meets your needs and get pre-qualified (preferably pre-approved).
• Choose a REALTOR® that you trust and who understands your needs.
• Determine what neighborhood best matches your needs.
• Identify important features you need your new home to have.
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5.Q -
Things to think about before applying for a mortgage loan?
Ten Key Factors When Applying for a Mortgage Loan:
Lenders consider many different factors when deciding whether or not to offer you a mortgage and at what rate. You can improve your standing by paying close attention to these factors and making sure you don't do anything to sully your credit.
1. Your credit report: Get copies of your credit report from all three major credit bureaus and review them carefully. It is estimated that more than 40 percent of credit reports contain errors. Don't let errors raise your rates or stop you from getting a mortgage. Have any discrepancies reviewed and corrected.
2. Outstanding credit: Before you apply, pay off all credit cards and outstanding bills paid or carry very low balances.
3. Credit card accounts: If you know you will be applying for a mortgage, don't apply for new cards or close current accounts. This may make lenders suspicious.
4. Your down payment: The more you can put down up front, the lower the loan, and the more likely you are to be approved. Of course, if you have excellent credit, you're likely to be approved regardless of how much money you put down. But if your credit is less than perfect, the amount of your down payment may mean the difference between rejection and approval.
5. Your income: You will need to show steady sources of income, so don't quit or change jobs right before applying for a mortgage.
6. Interest rates: Interest rates won’t determine whether or not you get a loan, but they will help determine how much you will have to pay each month. While the review process and paperwork can take a while for the lender to process, interest rates will continue to change. Therefore, if you think interest rates may rise, consider paying a "lock-in" fee to guarantee you'll get a favorable rate.
7. Available funds: In addition to a down payment, you will need to have funds available for closing costs and to pay for points (if necessary). Don’t make major purchases and risk depleting your available funds just prior to buying a home.
8. Your price range: Your lender isn't likely to issue a mortgage for a home you can't afford. Figure out your debt-to-income ratio to get an idea of how much you can afford to pay on a monthly basis.
9. Your lender: Every lender is different. Ask about how many mortgage applications they approve and disapprove. It's not a good sign if the lender denies 20 percent of the people who apply. Due diligence on your part is valuable. Learn about the history of the lending institution and about their reputation.
10. Honesty: If you lie, hide, or try to alter information to increase your chances of getting a loan, you risk being charged with fraud and may never find a lender who will work with you again. "Full disclosure" should be your mantra.
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6.Q -
What is an Escrow Holder?
To finalize the sale of the home a neutral, third party (the escrow holder, a.k.a. escrow agent) is engaged to assure the transaction will close properly and on time. The escrow holder insures that all terms and conditions of the seller's and buyer's agreement are met prior to the sale being finalized, including receiving funds and documents, completing required forms, and obtaining the release documents for any loans or liens that have been paid off with the transaction, assuring you clear title to your property before the purchase price is fully paid. The documentation the escrow holder may be collecting includes:
• Loan documents • Tax statements • Fire and other insurance policies • Title insurance policies • Terms of sale and any seller-assisted financing • Requests for payment for various services to be paid out of escrow funds
Upon completion of all instructions of the escrow, closing can take place. All outstanding payments and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the property is then transferred to the seller and appropriate title insurance is issued as outlined in the escrow instructions.
At the close of escrow, payment of funds shall be made in an acceptable for to the escrow. As your real estate agent, I'll inform you of the acceptable form.
The Escrow Holder Will:
• Prepare escrow instructions • Request title search • Comply with lender's requirements as specified in the escrow agreement • Receive funds from the buyer • Prorate insurance, tax, interest and other payments according to instructions • Record deeds and other documents as instructed • Request title insurance policy • Close escrow when all instructions of seller and buyer have been met • Disburse funds and finalize instructions The Escrow Holder Won't:
• Give advice - the escrow holder must maintain neutral, third-party status • Offer opinions about tax implications
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7.Q -
What makes Inspection Important?
Whether you are buying or selling a home, you should have a professional home inspection performed. A home inspection will look at the systems that make up the building such as:
• Structural elements, foundation, framing etc • Plumbing systems • Roofing • Electrical systems • Cosmetic condition, paint, siding etc
If you are buying a home, you need to know exactly what you are getting. A home inspection, performed by a professional home inspector, will reveal any hidden problems with the home so that they may be addressed BEFORE the deal is closed. You should require an inspection at the time you make a formal offer. Make sure the contract has an inspection contingency. Then, hire your own inspector and pay close attention to the inspection report. If you arent comfortable with what he finds, you should kill the deal.
Likewise, if you are selling a home, you want to know about such potential hidden problems before your house goes on the market. Almost all contracts include the condition that the contract is contingent upon completion of a satisfactory inspection. And most buyers are going to insist that the inspection be a professional home inspection, usually by an inspector they hire. If the buyers inspector finds a problem, it can cause the buyer to get cold feet and the deal can often fall through. At best, surprise problems uncovered by the buyers inspector will cause delays in closing, and usually you will have to pay for repairs at the last minute, or take a lower price on your home.
It's better to pay for your own inspection before putting your home on the market. Find out about any hidden problems and correct them in advance. Otherwise, you can count on the buyers inspector finding them, at the worst possible time.
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8.Q -
What is a Mortgage Escrow Account?
A Mortgage Escrow Account is established to pay on-going expenses while there is a loan on the house. These expenses include property taxes, home insurance, mortgage insurance, and other escrow items. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.
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9.Q -
What are the two standard contingencies found in a purchase offer?
A: The two standard contingencies found in a purchase offer are:
Financing Contingency: In this case, the home purchase is contingent upon whether or not a buyer can secure a loan from a lender.
Inspection Contingency: In this case, a buyer has the right to have the property to be inspected for any issues that may have not been disclosed by the seller. If significant issues arise, the purchase offer could be revoked.
In either contingency, the outcomes can vary. For example, if buyers back out of a sale for reasons other than those contained within the contract agreement, their deposit could be forfeited. Additionally, if the seller does not fulfill their responsibility (e.g., clear title, agreed upon repairs not made, substantial changes to the property effected before closing), there could be ramifications to the purchase as well.
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10.Q -
Gilles, what do I need to do before I think about purchasing a home?
A: Get Your Finances in Order Often when people are considering buying a home whether it be a first time investment or another home, they believe they can just purchase one like buying a new item for a kitchen. That is not usually the case. Here are some things you should do before you buy a home. ??Check with a lender to see what you qualify for. ??You should know facts such as: • Annual Income • Amount of Cash you have for a down payment* • Other Home Loans • Credit Card Balances • Other Loan Balances (Vehicles, etc.) • School Loans • Other factors affecting your income e.g. child support, tax payments, dividends, etc.
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11.Q -
Gilles, Do I need to be pre-qualified?
A: It is generally a good idea to get pre-qualified. Many sellers require a pre-qualification letter with your offer to purchase. So you should have that readily available when it comes time to make an offer. In general it will make your offer look stronger.
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12.Q -
Gilles, what is pre-qualification?
A: Prequalification is where you have spoken to a lender about a possible home loan. This is when you have spoken to a lender, usually over the phone. You will provide him with the information described above. They in return will give you an estimate of what they believe you would qualify for if all the information you have given them is accurate. ?IT DOES NOT MEAN YOU ARE QUALIFIED!!?People often think because they are pre-qualified they can get the loan when they find the home of their dreams. That is not true. At this point in the loan process they have not run a credit check, or verified any of the information you have provided. There may be things on your credit report that are inaccurate or that you have forgotten about that may inhibit the loan process, or affect the loan amount.
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13.Q -
If I find a home that is not listed by you can you still show it to me?
A: Yes I am able to show you ANY home, new or resale, no matter who the listing broker is.??If you see a home advertised in the newspaper, or if you drive by a home that interests you, please call me! If you visit an Open House or a New Home Community, please tell the seller's agent in the home that I am representing you. Remember, home information is always available to me, even if it is not a Rais Team Listing or Coldwell Banker Properties listing.
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14.Q -
Gilles when we find a house we like how do we buy it?
A: It is a many step process here is a brief overview of the process You will need an earnest money check to accompany the Offer to Purchase. This may be in the form of a personal check, or in some cases a certified check. A minimum of 1% of the sales price is deemed adequate in most cases. When your written Offer to Purchase is presented to the seller, They have three choices:
1. They can accept your offer
2. They can reject your offer
3. They can make a counteroffer.
Negotiations after the initial written offer are normally conducted verbally until an agreement is reached. When the seller accepts your offer, or you accept his counteroffer in writing, you have a binding contract for sale on that property. Your earnest money will be deposited in the listing broker's escrow account to be held until closing.
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15.Q -
Gilles, is it best to make a really low offer at first?
A: If your offer is too low you may take some unwanted risks. It is important to remember that if you make a low offer on a home and the offer is rejected or countered, another prospective buyer may submit an offer that may be accepted by the seller before you have the opportunity to submit another offer or accept the seller's counter to your offer. I have even heard of experiences where a buyer made a low offer to the seller, and the seller was insulted and refused to entertain any more offers from the client.
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16.Q -
Gilles, would it be in my best interest to work with several Realtors and not just one?
A: It is in YOUR best interest to work exclusively with me.
• I have access to every home that is in the Multiple Listing Service • I am self-employed, not on an expense account, and will be paid only when I find the right home for you. • Your loyalty is appreciated, and in return, you will receive the maximum in service from me and my team. • All of my time and professional advice, experience, sharp negotiation skills and assistance is FREE to you!
