Home Buyer Needs

Tips From a Licensed Mortgage Loan Originator

KNOW WHAT YOU CAN AFFORD

Knowing what you can afford makes buying a home a whole lot easier. To help you get started, know these basics: • Your home price generally should be no more than 2.5 to 3 times your annual income. • Monthly debts usually should not be more than 36% of your gross monthly income. • You can calculate your monthly housing budget by taking your total income, then subtracting: ° Fixed expenses (car payment) ° Variable expenses (credit cards or utilities) ° Monthly savings The result is the money you could have available to budget for housing. 

GET PRE-APPROVED FOR A LOAN

Getting pre-approved* by a mortgage lender shows real estate agents and sellers that you are a serious, qualified buyer, and helps you know your budget. To establish your employment history and financial capabilities, you must provide: • Pay stubs for 2–3 months • W-2 forms for the past 2 years • Most recent 3 months’ bank statements • All credit account and debt information

CREDIT

Pre-approval requires having qualifying credit. Like all lenders, we consider the Three Cs of Credit: • Character: Indicates your financial integrity • Capital: Provides the value of your assets • Capacity: Shows you can afford to repay your loan *Pre-approvals are subject 

SELECT A MORTGAGE

• Fixed-Rate Mortgage: interest rate never changes • Adjustable-Rate Mortgage (ARM): lower starting rate that may increase or decrease over time FHA Loans for expanded eligibility and low down payments • Veterans Affairs Mortgages for U.S. military service members • Affordable loans for low- to moderateincome borrowers

HOME APPRAISAL AND TITLE SEARCH

Once the seller accepts your offer, you may want to hire a certified home inspector who can verify there are no structural problems, code violations or other potential concerns. In addition, the lender will order an independent, third-party appraisal to determine what the home is worth. Prior to closing, the lender or seller will also order a title search to: • Discover any other claims on the property • Make sure you can get a clear title to your new home

Final Step: CLOSE THE SALE

During the closing, you’ll meet with all parties involved in the sale to make it official by signing documents and paying your closing costs, which may include: • Attorney, credit report and/or processing fees • Title search and insurance • Appraisal and inspection fees • Points — a predetermined fee similar to prepaid interest » Paid to the lender to receive a particular interest rate » Each point typically represents 1% of the loan amount • Other costs depending on your particular loan

What to Expect: From Application Through Closing Know what to expect after submitting your home loan application.

Step 1: Loan application Submitted 

Step 2: Documentation/ verify your loan income and/or assets

Step 3: Loan Estimate

Step 4: Final Approval

Step 5: Closing

Most banks will provide your closing date along with your Closing Disclosure so that you receive this information three (3) business days before the closing date. Your Closing Disclosure includes details on the terms of your loan, including the loan amount, interest rate, expected payments, closing costs and more. For the closing, you’ll need to bring your homeowner’s insurance policy and other required insurance policies, a certified check for all closing costs and valid photo ID.

The Home Inspection: What's Included?

Home Exterior/ Inspected

• Roof (signs of unusual wear such as damaged shingles)

• Flashing, trim, gutters/downspouts, chimneys and skylights (if applicable)

• Exterior walls

• Decks, balconies, stoops, porches, steps and railings

• Rafters, fascias and eaves that are visible from the ground

• Garage, carport and/or driveway

• Patios and walkways that lead up to the home

• Some aspects of landscaping (such as proper drainage, grading and retaining walls)

Not Inspected

• Inspectors are not required to walk on the roof if it could damage the roof or put the inspector in danger

• Underground systems or tanks

Home Interior/Inspected

• Walls, floors and ceilings*

• Stairways, railings and steps

• Doors and windows in the house and garage

• Garage door opener

• Countertops and cabinets

• Major kitchen appliances

*Visible cracks or damage to the walls, floors and ceiling are noted, along with whether the damage is cosmetic or appears to be a serious structural issue.

Not Inspected

• Smoke and carbon monoxide detectors (unless required by state ordinance)

• Walls are not inspected for the presence of termites

• Common walls if the property is a condominium

• Light switches or fixtures

Plumbing/Inspected

• Water heater

• Fixtures

• Draining and waste systems

• Plumbing vents

• Sump pumps, sewage ejectors

Appliances

Inspected

The American Society of Home Inspectors established inspection standards to test the functionality of certain installed appliances that are included with the property for sale. If your state does not require appliance inspection, your inspector is not required to test appliances; if it does, your inspector will check the following appliances:

• Kitchen range

• Built-in microwave

• Dishwasher

• Food waste disposal

Not Inspected

• Washer and dryer

• Refrigerator

• Freezer

Heating, Ventilation and Cooling (HVAC)

Inspected

• The proper function of installed heating and cooling equipment

• Thermostat

• Vents, exhaust and distribution systems

• Flues and chimneys

Not Inspected

• Air conditioning units installed in windows

Electrical/Inspected

The inspector will look at any electrical component that may present a fire hazard, including:

• Visible wiring is in good condition and secured

• Service panel has adequate capacity

• All cables are attached with cable connectors

• Branch circuits aren’t attached to aluminum cables

Foundation

Inspected

• Foundation of the home

• Solid floor, wall and ceiling structures

 • Environmental Hazards

Not Inspected

Asbestos, radon and other environmental hazards are not required as part of a standard home inspection. However, some inspectors offer environmental hazards testing as an add-on service.

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What Issues Are Definite Red Flags?

The American Society of Home Inspectors warns that home buyers should be concerned if any of the following problems are flagged in the home inspection report:

• The roof needs replacing

• Major foundation issues

• Aluminum wiring (this type of wiring almost always needs to be replaced, a process that can cost thousands of dollars)

• The house is in a flood zone (to find out, visit the FEMA Flood Map Service Center and enter the address of the prospective property)

Useful Links:

https://www.nmlsconsumeraccess.org/?lnksrc=relres

https://www.consumerfinance.gov/ask-cfpb/what-exactly-happens-when-a-mortgage-lender-checks-my-credit-en-2005/