Knowing how to buy your first home or how to sell your home involves many details better left to real estate professionals. We’ve organized this page with some very useful information. As we guide you through your real estate transaction they will help you understand the steps, processes, expectations, and terminology associated with how to buy your first home or how to sell your home.
Getting Ready to Buy Your Home
Communicate this list to your realtor who will then set up a comprehensive search — including a personal portal into the Multiple Listing Service (MLS) — to assist you in finding your dream home.
Getting Prequalified for a Home Loan
1.) Conventional – A conventional loan is a mortgage that is not guaranteed or insured by any government agency. It is called a “conforming” mortgage because it conforms to guidelines established by Fannie Mae and Freddie Mac. These two government-sponsored enterprises (GSEs) buy mortgages from lenders and sell them to investors. Their purpose is to make mortgages more widely available. All conforming mortgages are also conventional mortgages. They generally require at least 5% down payment and will require private mortgage insurance if your down payment is less than 20%.
2.) FHA – An FHA loan is a mortgage insured by the Federal Housing Administration. A 3.0 to 3.5% down payment is generally required. Borrowers with FHA loans pay for mortgage insurance which protects the lender from a loss if the borrower defaults on the loan. FHA loans can offer attractive interest rates while having less stringent qualifications and credit score requirements. They are referred to as non-conforming loans.
3.) VA – a VA Loan is a home mortgage option available to United States Veterans, Service Members, and not remarried spouses. VA Loans are issued by qualified lenders and guaranteed by the U.S. Department of Veterans Affairs (VA). They generally do not require a down payment or mortgage insurance.
#2 Adjustable Rate Mortgage, or ARM. ARM Payments increase or decrease on a regular schedule with changes in interest rates increases are typically subject to limits. Variable rates may be best for buyers who plan to sell within 1-5 years.
#3 Balloon Mortgage: These offers very low rates for an Initial period of time usually 5, 7, or 10 years. When time has elapsed the balance is due or refinanced, though not automatically.
#4 Two-Step Mortgage- Interest rates adjusts only once and remains the same for the life of the loan.
ALSO: Many other types are available, including government-insured mortgages and VA loans for veterans. Talk to lenders and real estate professionals to assess your situation. Buying down the interest rate down can be beneficial. Talk to your Arizona mortgage loan officer to determine if this is an option for you.
If a borrower can’t repay an insured mortgage loan as agreed, the lender may foreclose on the property and file a claim with the mortgage insurer for some or most of the total losses. You generally need mortgage insurance only if you plan to make a down payment of less than 20% of the purchase price of the home. The FHA offers several loan programs that may meet your needs.
Remember that a lender must disclose the Annual Percentage Rate (APR) of a loan to you. The APR shows the cost of a mortgage loan by expressing it in terms of a yearly interest rate. It is generally higher than the mortgage interest rate because it also includes the cost of points, mortgage insurance and other fees included in the loan.
What About My Credit Score
The FHA is generally more flexible than conventional lenders in its qualifying guidelines. The FHA allows you to re-establish credit if: two years have passed since a bankruptcy has been discharged, all judgments have been paid, any outstanding tax liens have been satisfied (or appropriate arrangements have been made to establish a repayment plan with the IRS or state Department of Revenue), three years have passed since a foreclosure or a deed-in-lieu has been resolved. If you prefer to pay debts in cash or are too young to have established credit, there are other ways to prove your eligibility. Talk to your lender for details. NOTE: (NOTE: some factors mentioned here may change. Verify with your chosen lender)
Selecting Your Home
Does anything need to repaired or replaced? Will the seller repair or replace the items? Imagine the house in good weather and bad and in each season. Will you be happy with it year-round? Take your time and think carefully about each house you see. Keep the scorecard and notes for each one.
When you find places that you like, talk to people that live there. They know the most about the area and will be your future neighbors. More than anything, you want a neighborhood where you feel comfortable.
Once You Have a Home Under Contract
Generally, an inspector checks: the electrical system, plumbing and waste disposal, the water heater, insulation and ventilation, the heating and AC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Be sure to hire a home inspector that is qualified and experienced.
Closing on Your Home Purchase
The seller will give you the title to the house in the form of a signed deed. You’ll pay the lender’s agent all closing costs and, in turn, he or she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state Registry of Deeds and you will be a homeowner.
Additional Mortgage Information
By sending in extra money each month or making an extra payment at the end of the year you can accelerate the process of paying off the loan. When you send extra money be sure to indicate that the excess payment is to be applied to the principal and keep records. Remember that payment applied to loan principal is not tax-deductible.
Selling Your Home
Check here for Common Home Seller Questions.
We hope you now feel more confident knowing more about buying your first home. You’ve now increased your confidence with the steps, processes, expectations, and terminology associated with how to buy your first home.