Not pre-qualifying for a loan. Smart home buyers
pre-qualify for a home loan with a mortgage lender. Unfortunately, too many buyers make
the mistake of failing to know how large a mortgage they can obtain. They sometimes spend
hours searching for homes out of their price range, or settling for less house than they
need or can afford.
Under estimating your ability to qualify for a loan.
Lenders have dozens of financing plans. There are many different ways to qualify. As an
Experienced Realtor, Penny M. Romito, can help you find the best terms and answer your
financial questions. With the help of creative lenders, Penny can turn an otherwise
unqualified buyer into a qualified buyer.
Buying a house with a major incurable defect. The worst
incurable defect being, "LOCATION, LOCATION, LOCATION!" Buying a home is the
single biggest purchase (investment) that most people make. So the neighborhood you select
should bring you enjoyment and satisfaction for many years to come.
Picky, Picky or Being too fussy. There is rarely
"the absolutely perfect home." So, be prepared to compromise on the less
essential features. Most home buyers just want to turn the key in the door of their new
home and move in. This can be a very expensive decision. The reason is that "perfect
homes" sell for top dollar. As a result, it may be a long time before you build any
equity in such a home from appreciation in market value, since the seller took most of the
profit.
Offering the right price not too high or too low. Of
course one answer to this problem is to compare the home to other similar homes sold
recently in the area. But a house deal is more than simply a dollar figure written down on
paper. Sellers also care about terms and conditions - weather the transaction is
contingent on the sale of the buyer's home; who will bear the closing costs; and when the
transaction close.
Buyer can spend more time
looking for a home and less time worrying about financing. A head start in processing can
help eliminate surprises and speed up closing.
BUYING POWER
Realtor and buyer can
confidently establish a price range of homes to consider.
NEGOTIATING POWER
Buyer and seller can
negotiate with confidence that the buyer is already conditionally approved. A pre-approved
purchaser is like an all-cash transaction to the seller.
With inventory diminishing daily and multiple offers being extremely common, it is of
great importance that you position yourself to have the "Best Chance" to get
your offer accepted. You enhance your chance of getting the home of your choice by doing
the following:
Get pre-approved for the purchase: This takes very
little time and is of great value. At this time identify the price range for which you
qualify and with fits your lifestyle.
Submit a strong competitive offer: Submit the offer as
if there will be multiple offers.
Include substantial earnest money deposit: Acceptance
of an offer is sometimes determined by the amount of the deposit. A larger amount may
signify a bigger commitment to the seller.
Minimize or eliminate contingencies: The fewer
contingencies, the stronger the offer.
Make a buyer profile available: Time on the job,
flexibility, reason for purchasing seller's home, etc.
Be prepared to preview a new property quickly: Homes
sell sometimes in hours. Be prepared to make decisions quickly and be accessible to change
the terms instantly.
Provide comparables on property: I will substantiate
your offer on the property with a competitive market analysis.
Be aware of new listings: I will always check for new
MLS listings and any exclusive listing through Excalibur Properties.
Buyer and Agent to have instant communication access:
Let us maintain instant access to each other via office phone, voice mail, fax, cellular
phone or E-mail.
Two year history of employment and verification of all income sources.
If self-employed, copies of past two years Federal Income Tax Returns.
Information about your checking, savings and credit card accounts.
Name, account number and outstanding balance of each of your debts.
Application deposits. Approximate amount: $400.
Information about any assets.
Information regarding any other assets that will be used as funds to close.
If FHA - Copy of Social Security card and photo ID.
If VA - Certificate of Eligibility or DD214.
If Employee Relocation Client - include relocation information and copy
of offer,
promissory note and copy of check on bridge loan if you have or will obtain one.
Questions to ask when interviewing a
Lender:
Are both fixed-rate and adjustable mortgage loans available?
Do you offer FHA, VA and Conventional?
Any 1st time home buyer loans with special features?
What is the interest rate? Can I buy down the rate? How much will it take
to buy the
loan down?
How long can I "lock-in" the financing and do they have a letter stating the
terms?
Is a float down lock available? (If interest rates drop during your lock.)
What fees are associated with the type of loan your are obtaining, including Lender
related fees in conjunction with your loan?
Can the Lender offer second mortgage money?
Do you offer 15 and 30 year mortgages?
Will Private Mortgage Insurance (PMI) be required on your loan?
Will you have to pay any "points" for your loan? Usually lenders charge points
for the cost of giving you a mortgage loan, each point is 1% of the loan amount.
Is the loan serviced locally or is the servicing sold?
Is there a pre-payment penalty clause? This involves extra charges for paying off the
loan before maturity. About 80% of all loans in the United States are paid off early. This
is done when you sell the property before the term of your mortgage.
What is the "grace" period? How late can a monthly payment be made before a
late charge is assessed? What will happen if a payment is missed?
If you sell your house, will the new buyer (if he/she qualifies) be able to assume your
mortgage at the same interest rate?
Ask for a written "good faith estimate statement".
When planning your home purchase there are items to consider, please be prepared to
discuss these as we engage in our counseling sessions. I will educate you to the present
market and all inventory of interest to you. In addition, I will represent you, maintain
confidentiality of your information including anonymity if you so desire, as well as
provide instant information about new listing.
This form can be printed, faxed, saved or E-mailed.
Community or Location What is most
important to you?
Interior: Updated Kitchen Formal
Kitchen Formal Dining Breakfast Room Breakfast Bar Den/Family Room Fireplace # Bedrooms # Baths # Garage Master
Suite/with bath Walk-in Closets Guest Room Library Powder Room MIL (Mother-in-law quarters or guest) Basement Hardwood floors Wall to Wall Carpet Vinyl
Tile Oven/Range Microwave Oven Dishwasher Garbage
Disposal Trash Compactor Forced Air Heat (Gas) Forced Air Heat (Electric) Hot Water Heater Gas Hot Water Heater Electric Ceiling Fans Air Conditioning Mini Blinds
Washer/ Dryer Connections
Inside House Soak tub/Spa Skylights Energy Pkg. Double Pane Windows
Exterior: Trees
Landscaped Pool Spa/Hot
Tub Patio Deck Shed Additional
Parking Additional Garage #Acres Barn
Loafing Shed Fencing Dog Run
Present Home: What do you like most about your present home?
What do you dislike in your present home?
Life Style What recreational activities do you most enjoy?
Amenities What special features do you desire?
Sources of Down payment, Closing Costs and pre-paids: Must you sell before purchasing? Bridge loan or equity loan. Savings
Stocks & Bonds Life Insurance Gift Funds Company profit sharing/Savings Plan IRA
Monthly payment you are comfortable with? (Current rule of thumb is that the monthly payment and other debts
should not be more than 36-38 % of gross monthly income.)
Receiving Agency Disclosure1st Meeting with agent
5 min.
Buyer's Agency Agreement1st
Meeting
15 min.
Pre-Qualifying with Lender1st Meeting if not before
20 min.
Pre-Qualifying on type of property1st Meeting
20 min.
Searching MLS for comparable property 1st Meeting
20 to 30 min.
Making appointment on selected property 1st meeting 10 to 15 min.
Looking at property 1st
meetings
1 to 5 hours
Choosing the property meeting your price &
terms 1 to 5 hours
Do a comparable Market Analysis on selected property 30
to40 min.
Writing Offer
30 min. to 1 Hr.
Presentation to Seller When Offer is
Written
20 to30 min.
Acceptance or Counter Offer from
Seller
5 Hr. to 3 days
Time for you to Accept Counter Offer or
Counter
2 days
Acceptance by
Seller
1 day
Loan time and Inspection Time Begins
Loan Application with Lender Within
5 days
of acceptance of Contract
Inspections Structural Within
10 days
of acceptance of Contract
Inspections Pest Within
10 days
of acceptance of Contract
Lender processing Loan information during this time.
( 30 days
)
Verifications: Bank, Employer,
Credit Report, and other documentation.
Appraisal
1 to 3 weeks
Approval Within
30 - 45 days after application
Final Walk Through Within
1 day
after Approval of 1 day before Closing Date.
Signing of documents Within
48 Hours after Approval or by Closing Date
Keys to your new Home Within
48 Hours
of Signing
Approximate total time to Qualify, Find and Close on your property could be as little as
5 days without financing or Owner financing or as long as 45 to 60 + Days depending on the
type of property you are going to purchase.
As in all business transactions some of the steps may be longer or shorter depending on
your particular situation. Also items like Pest and Structural Inspections and work orders
may run the time line longer. This is just to give you an idea as to what type of timing
it will take for you, so you can make plans on the marketing of your home if you have
another to sell or give notice to the property owner where you now reside. All things vary
with different situations.
The interest rate stays the same throughout the term of the loan - usually 15 or 30
years - so the principal interest portion of your payment remains the same. Payments are
stable but initial rates tend to be higher than adjustable rate loans and often cannot be
assumed by a subsequent buyer.
Adjustable-Rate Mortgage (ARM)
The interest rate is linked to a financial index, such as a Treasury security or a cost
of funds -so your monthly payments can vary up or down over the life of the loan - usually
25 to 30 years. Interest rates can change monthly, annually, or every 3 or 5 years. Some
Arm's have a cap on the interest rate increase, to protect the borrower. Other terms
relating to adjustable-rate mortgages: Adjustable period: the length of
time between interest rate changes. Example: one year ARM-interest changes annually.
Cap:
The limit on how much an interest rate or monthly payment can change at each adjustment or
over the life of the loan. Conversion clauses: A provision in some loans
that enables you to change an ARM to a fixed rate loan, usually after the first adjustment
period. This may require additional fees. Index: A measure of interest
rate changes used to determine changes in the loan's interest rate over the term of the
loan. Margin: The number of percentage points a lender adds to the index
rate to calculate the ARM's interest rate at each adjustment.
VA Loan
The VA does not lend money, it guarantees a portion of the loan so that lenders who
originate the loan feel comfortable with their risk. Qualified veterans can obtain loans
up to 4 times the amount of their entitlement. Full entitlement at this time equals to
$203,000 with no down payment. VA-guaranteed loans can be combined with second mortgages
and are assumable upon qualifying by any future buyer.
FHA Loan
FHA does not lend money or make a loan; rather, it insures loans. The down payment can
be as low as 2.25%. Discount points may be paid by either buyer or seller. FHA charges a
2.25% up front Mortgage Insurance Premium (or as little as 2% for the first time home
buyer) that can be financed in the mortgage amount or paid in cash (no premium is required
for condominiums). The borrower must also pay an annual Mortgage Insurance Premium or .5%
which is collected monthly.
Seller Assisted Second Mortgage
The seller of the house lends the buyer enough to make up the difference between the
purchase price and the down payment plus first-mortgage balance (a commercial lender may
also make this kind of loan). The terms including the interest rate, are based on
buyer/seller agreement. It is often short-term (5 to 15 year) loan; sometimes
"interest only" payments until the term date when the balance is due in full. A
buyer can then refinance the home.
Assumable Mortgage
Buyer "takes over" or assumes the mortgage obligation of the seller (with
concurrence of the lender). The interest rate doesn't change and is sometimes lower that
current rates. Often the loan fees are less as well.
Agent - A person acting on behalf of another, called the principal.
Appraisal - An expert opinion or estimate of the value of real estate
as of a given date.
Amortization - The systematic payment of your loan over the agreed
time. (Mortgage)
Assessed Value - The valuation placed upon property by a public tax
assessor as the bases for taxes.
Bill of Sale - An instrument which transfers title to personal property
(chattels); a "Deed" transfers real property.
Buyers Agent - A Licensed Real Estate Broker (as agent) who is working
solely for the Buyer (the principal) in the purchase of a property. There is a signed
agreement which sets out terms and conditions for the services rendered by the licensed
real estate broker ( as agent) including how the service will be paid.
CC&R's - Covenants, conditions and restrictions - A document that
controls the use, requirements and restrictions of a property.
Certificate of Title - A document signed by a title examiner or
attorney stating that the seller has a good marketable and insurable title.
Closing Statement (Settlement) - The computation of financial
adjustments between buyer and seller as of the day of closing a sale to determine the net
amount of money which buyer must pay to seller to complete purchase of the real estate and
seller's net proceeds. Also, "settlement sheet," or "HUD-1".
Commission - Payment to a real estate broker for services performed.
Condominium - A form of real estate ownership where the owner receives
title to a particular unit and has a proportionate interest in certain common areas. The
unit itself is generally a separately owned space whose interior surfaces (walls, floors,
and ceilings) serve as its boundaries.
Contingency - A condition that must be satisfied before a contract is
binding. For instance, a sales agreement may be contingent upon the buyer obtaining
financing. Also if the buyer must sell his property before qualifying for a new loan.
Deed - A formal written instrument by which title to real property is
transferred from one owner to another. Also, "conveyance".
Deed of Trust - A security instrument whereby real property is given as
security for a debt. A Note is given for a loan, the Deed of Trust is recorded securing
the note, giving all the terms and conditions. The Deed of Trust consists of 3 Parties;
The Borrower, the Trustee (third party who acts in behalf of the parties), and the
Beneficiary (the Lender).
Due-On-Sale Clause - A clause that requires full payment of the loan
when the secured property changes ownership do to the terms of the Deed of Trust. Also
known as the Acceleration Clause.
Earnest Money - Evidence of good faith which is given at time of
written offer. Once offer is accepted the earnest money is than deposited on behalf of the
purchaser in an escrow account. The escrow account is usually with the Title or Escrow
Company named within the contract.
Equity - The interest or value which owner has in real estate over and
above the debts against it. (Sales Price - Mortgage Balance = Equity
Escrow - A procedure in which a third part acts as a non disinterest
person for both the buyer and the seller, carrying out both parties' instructions as per
the contract and assumes the responsibility for handling all the paperwork, recording and
distribution of funds.
Federal National Mortgage Association (FNMA) - Popularly known as
Fannie Mae. A privately owned corporation created by Congress to support the secondary
mortgage market. It purchases and sells residential mortgages insured by FHA (Federal
Housing Authority), guaranteed by the VA (Veterans Administration) or Conventional.
Fee Simple - An estate in which the owner has unrestricted power to
dispose of the property as he wishes, including leaving it by will or inheritance. It is
the greatest interest a person can have in real estate.
Fixture - An item that because of the means of attachment, intent or
conformity to the property now passes with the property when sold. EX.: A mirror that has
been attached to the wall with molly bolts. Bookshelves that have been placed around a
fireplace and permanently attached.
Graduated Payment Mortgage - A residential mortgage with monthly
payments that start at a lower interest rate and increase at a predetermined rate.
Hazard Insurance - Protects against damages caused to property by fire,
windstorms and other common hazards. Most policies also include Contents, theft and
liability as well.
Home Inspection Report - A qualified inspector's report on a property's
overall condition. The report usually includes an evaluation of both the structure and
mechanical systems.
Home Warranty Plan - protection against failure of mechanical systems
within in the property. Usually includes plumbing, electrical, heating systems and
installed appliances.
Joint Tenancy - An equal undivided ownership of property by two or more
persons. Upon the death of any owner, the survivors take the decedent's interest in the
property.
Lien - A legal hold or claim on pro0perty as security for a debt or
charge.
Listing Contract - Between a home owner (as the principal) and a
licensed real estate broker (as agent) by which the broker is employed to market the real
estate within a given time for which service the owner agrees to pay a commission. Also,
"Listing Agreement".
Loan Commitment - A written promise to make a loan for a specified
amount on specified terms.
Loan-To-Value Ratio - The percentage relationship to the value of the
property to the amount of loan (mortgage).
Market Value - The highest price at which a buyer, is ready, willing
and able to buy, (would pay) and the lowest price a seller is ready, willing and able to
sell (will take).
Mortgage - A lien or claim against real property given by the buyer to
the lender as security for money borrowed.
Mortgage Life Insurance - A type of term life insurance often bought by
mortgagors. The coverage decreases as the mortgage balance declines. If the borrower dies
while the policy is in force, the debt is automatically covered by insurance proceeds.
Mortgage Note - A written agreement to repay a loan. The agreement that
states amount of loan, interest rate, length of payment, amount of monthly payments, late
fees and any prepayment penalties. It is secured by the Deed of Trust or Mortgage.
Origination Fee - A fee or charge for work involved in evaluating,
preparing, and submitting a proposed mortgage loan. The fee is limited to 1 percent of FHA
and VA loans.
PITI - Principal, Interest, Taxes and Insurance (Normally what you
total payment consists.)
PUD - Planned Unit Development A community which has been developed
with planned usage of the property for residential and commercial.
Point - An amount equal to 1% of your loan amount. Points are charged
by the lender for the investor to increase the yield on the investment to keep real estate
market as competitive as other types of investments.
Prepayment Penalty - Many banks call it Prepayment Privilege : A fee
charged to pay off your loan prior to the original date. FHA and VA do not allow this
charge.
Principal - this word has several meanings: a) to denote the most
important b) a capital sum lent on interest c) one who appoints an agent to act on their
behalf d) either party of a contract.
Private Mortgage Insurance (PMI) - Insurance written by a private
company protecting the lender against loss if the borrower defaults on the loan
(mortgage).
Prorate - The accounting of the taxes, insurance, interest and
homeowner dues/fees to the day of closing between the seller and buyer. EX: Taxes or owed
by the seller from the 1st of the year to the day of closing that amount is credited to
the buyer so when taxes come due there will appropriate funds.
Purchase Agreement - A written document in which the purchaser agrees
to buy and the Seller agrees to sell under the stated terms and conditions.
Realtor - A real estate broker or associate active in a local real
estate board affiliated with the National Association of Realtors.
Regulation Z - The set of rules governing consumer lending issued by
the Federal Reserve Board of Governors in accordance with the Consumer Protection act.
Survey - A map or plat made by a licensed surveyor showing the results
of measuring the land with its elevations, improvements, boundaries, and its relationship
to surrounding tracts of land. A survey is often required by the lender to assure a
building is actually sited on the land according to its legal description.
Tenancy in Common - A type of joint ownership of property by two or
more persons with not right of survivorship.
Title Insurance - Protects Home Owners and Lenders against loss of
their interest in property dues to legal defects in title.
Title Search or Examination - A check of the title records, generally
at the local court house, to make sure the seller has legal right to sell the property and
there are no liens, overdue special assessments or other claims that would jeopardize the
Buyers interest into the property.
Transfer tax - State tax, local tax (where applicable) and tax stamps
(in some areas) required by law when title passes from one owner to another.
Advantages of Home Ownership
Avoiding
Common Buying Mistakes
Pre-Approval Benefits
Maximizing
Your Offer
Financing And You
Checklist
What you Want in a Home
Typical Steps and Timing
Types
of Financing
Real Estate Terms
