An FHA loan is a loan insured by the Federal Housing Administration (this means that if you default, the FHA will repay the note to the bank). Because the loan is insured, the lender typically offers a low down payment required (3.5%, for example) and low closing costs. Anyone can apply for an FHA loan and an FHA loan is easier to qualify for than a conventional loan. Instead of PMI on your FHA loan, you will have MIP (mortgage insurance premium), which stays with the life of the loan. That means that unlike a conventional loan where you can remove the PMI, on an FHA loan, you cannot remove the insurance without refinancing the entire loan (which you have to qualify for in order to do).
In a perfect world, I would love to get a 15 year fixed rate mortgage using a conventional loan where I put down 20% (avoiding PMI altogether) in a great neighborhood close to the city (but not too close) with a white picket fence, red door, and black shutters with a boatload of money in the bank to go with it. But here I am, writing about the process and not buying any homes – I’m just trying to pay off my student loans.
To find someone, interview several buyers' agents—this means they exclusively represent you, and not the seller, as well—until you identify someone who understands your needs and makes you feel comfortable. As a final step, check your state's real estate licensing board's website to ensure they're registered, and don't have any complaints or suspensions logged against them.
Williams got his start working in entertainment reporting in 1993, as an associate editor at "BOP," a teen entertainment magazine, and freelancing for publications, including Entertainment Weekly. He later moved to Ohio and worked for several years as a part-time features reporter at The Cincinnati Post and continued freelancing. His articles have been featured in outlets such as Life magazine, Ladies’ Home Journal, Cincinnati Magazine and Ohio Magazine.
Your agent may generally know which home you are going to choose, due to experience and intuition. However, make sure that you don't feel your agent is trying to steer you toward any specific property, and choose the home without interference from the agent because it's your choice as the buyer alone to make. Keep in mind, however, that real estate agents are required to point out defects and should help buyers feel confident that the home selected meets the buyer's stated search parameters.
Moving and other expenses: Moving expenses can vary from hundreds to thousands of dollars depending on how much you’re moving and how far away your new home is from your current place. To help with budgeting, you can call moving companies in your area for quotes ahead of time. If you plan to make updates to your home—like repainting, installing blinds, or buying new furniture—you’ll need cash for that too!
Having bad credit is not an uncommon problem for Americans, and it should not discourage you from the home buying process. Saving up for a larger down payment of 20 percent or more will be required with anyone with a credit score below 580, to help demonstrate that you will be able to manage a mortgage. Those with a credit score above 580 can qualify for a Federal Housing Administration (FHA) loan, with a down payment requirement of 3.5 percent. Home buyers can also consider taking out a private loan, but should be prepared to pay high fees and interest rates. Finally, taking out a conventional loan is still possible if you are able to demonstrate financial stability, and that you will be able to manage mortgage payments.
Contingency clauses also offer a form of protection. "A mortgage financing contingency clause protects you if, say, you lose your job and the loan falls through or the appraisal price comes in over the purchase price. Should one of these events occur, the buyer gets back the money he used to secure the property. Without the clause, he can lose that money and still be obligated to buy the house," explains Justin Lopatin, a mortgage planner with American Street Mortgage Co., to MSN.
Despite the District of Columbia having the fifth-highest cost of living out of the 100 largest metro areas in the U.S., the nation's capital is the 25th best affordable place to live. The District’s median blended annual household income – the median total income for households (rather than individuals) that rent or own a home in the area – is more than $95,000. This makes the blended annual cost of living – factoring in mortgage payments, rent, utilities and taxes – of slightly more than $25,000 comparatively affordable.
You'll want to know in advance that you likely qualify for a home loan, and that's where a credit check can prove invaluable when you buy a house. Your credit check will track your financial health using data from the three primary credit reporting agencies -- Equifax, TransUnion and Experian. Your credit score from each agency can range anywhere from 350 to 800. The higher the credit score, the more likely you'll be granted a home loan, and the more likely you'll pay a lower interest rate when securing a home mortgage (that's because a high credit score will be viewed by a mortgage lender as a lower-risk loan proposition). In your run-up to your credit check, avoid taking out any loans or credit -- that will raise your credit risk level in the eyes of lenders -- and make sure you pay down any debt owed, and ensure you've got a good track record of paying your bills on time.
A preapproval is based on our preliminary review of information provided and limited credit information only and is not a commitment to lend. We will be able to offer a loan commitment upon verification of application information, satisfying all underwriting requirements and conditions, and property acceptability and eligibility, including appraisal and title report. Preapprovals are subject to change or cancellation if a requested loan no longer meets applicable regulatory requirements. Preapprovals are not available on all products. See a home mortgage consultant for details.
Many home shoppers use a lender who was recommended by a friend, family member or real estate agent, and they don’t bother shopping around. But that doesn’t guarantee you’ll get the best rate, or even get a lender who is experienced with loans for your particular situation. The CFPB recommends talking to at least three lenders to get the best loan for you.
This is also a prime time to decide whether you'll hire a real estate agent, if you haven't already. While you're under no obligation to do so, there are several potential benefits to working with one. First of all, an agent can provide access to more home options than you'll likely find yourself, as well as set up viewing appointments. Since home-buying can be an emotional process, an agent can also act as a mediator between you and the seller.
Seller wants to sell his house and Buyer wants to buy Seller’s house. Buyer isn’t a millionaire, so Buyer needs to get help from the Lender (bank) to finance this big purchase. Lender agrees to give Buyer a loan under certain conditions (these terms are always advantageous to the Lender so the Buyer must read carefully). Seller and Buyer go through negotiations until they reach the most important substantive terms of their agreement (usually this is the price and a few other things). After Seller and Buyer have an agreement in writing, the closing process begins. The Seller and Buyer need to do their own due diligence to make sure that this deal is a good idea for each of them. Additionally, the Lender has to make sure the property is valued as it should be and that the Buyer will most likely keep its promise to pay the mortgage. After all parties involved – the Seller, Buyer, and the Lender – do their due diligence, they can begin to sign papers and transfer the property. However, if there are any hiccups with any of the parties, the deal may be called off. Otherwise, at closing, title to the property is transferred and the deal is complete.
FHA loan: Depending on property location and other, personal factors, you could qualify for a home loan from the Federal Housing Administration. In most cases, you'd be expected to make a down payment of approximately 3.5% (with a 1.75% insurance premium, and at a 4.25% interest rate). A down payment on our $300,000 model: $10,500. Together with closing costs and a buffer, savings required would be $26,916-$28,416. Notice, however, that you're paying a great deal more than in the non-FHA model when it come to the higher mortgage-insurance premiums -- some $43,485 over 103 months. Still, the FHA plan may be more manageable for some, as the initial down payment is smaller and insurance payments are spread out.
Take as much time as you need to find the right home. Then work with your real estate agent to negotiate a fair offer based on the value of comparable homes in the same neighborhood. Once you and the seller have reached agreement on a price, the house will go into escrow, which is the period of time it takes to complete all of the remaining steps in the home buying process.