Home Buying Process SUMMARY

• Hire a REALTOR® early on it will save you time and he/she will bring a ton of expertise you do not possess

• Even if you want to do some ‘HOME SEARCH’ on your own, given that the internet vastly facilitates home searches nowadays

• Real estate professionals – REALTORs - have access to the MLSs (Multiple Listing Services) – where your home search will be more accurate and customized to your needs

• Financing your primary home purchase give you the benefit of Mortgage Interest Deduction [MID] until the very last payment you make on the mortgage for a primary residence

• Cash purchase has no interest and therefore no Mortgage Interest Deductions (MID) either

• Renters have no MID. Except if it is for business expenses. However, that has nothing to do with MID and all to do with ‘business expenses.’

• Credit application is required to attain a mortgage loan

• Most mortgage loan approval will require a credit score of 620 or higher

• Some lenders will work with VA loans with FICO Score as low as 500! GO VETS! 😊

• Proof of Funds – cash buyer must show proof of funds in a financial institution.

• Pre-qual letter – after you contact a mortgage loan officer and they have the opportunity to check your credit worthiness, they will issue a ‘pre-qual’ letter which will show the world that – within their conditions – you will be able to purchase a home

• Home Price – make sure you are looking for house that will be compatible with your ‘buying power’ …as set by your mortgage loan office in the “Pre-qual Letter.’

• Home comparable – ‘comps’ – similar properties which will justify the price that you are paying for the house. Best when they are no more than a half mile radius

• Credible Offer – make sure that you make an offer that will be credible. Which is to say justified by the ‘comps,’ you have an earnest money in there, you present proof of funds or a ‘pre-qual’ letter issued by a mortgage lender

• Earnest Money – should be 1% of the purchase price or higher; it belongs to you and it will be counted on your side of the HUD-1 (Official doc to close all real estate transaction in the whole USA) at closing …as long as you proceed timely and according with what was established in the contract

• Down Payment – is the upfront percentage of the home purchase price you need to have out or your pocket at closing table. It can vary from 3.5% to 20% (of purchase price).

  Mortgage loans with an amount financed over the 80% will carry a Mortgage Insurance (MI) fee:

• FHA calls their mortgage insurance Mortgage Insurance Premium (MIP)

• It will have to be carried for the life of the loan or till such time that you refinance the home (for a non-FHA loans)

• FHA loans are fully insured by the government to the lender

• There are some Convention with 5% down:

• Conventional mortgage call their mortgage insurance Private Mortgage insurance (PMI)

• Conventional mortgage program is completely private and has NO backing from the government

• Conventional 5% down loans, can be removed at the point the combined future payments plus the home increased value bring the loan balance to the 80% threshold

• Those who qualify for VA loans and USDA loan can buy a house with ZERO down… with NO MI!

• Closing costs – are expenses incurred to generate a real estate transaction. There are many items that enter the closing costs: loan origination fee, title insurance, lawyer/escrow company fees etc.

• There is no legal definition who pays for closing costs and it also can be paid for a split between all the parties …including the lenders

It also can be a combo (combination) of all of the above