Demystifying the Home Buying Process…

So, you've decided to purchase a home. It may be your first, it may be your 5th. Regardless of how many homes you've bought it will be worth your while to read on. Home buying and financing is a constantly evolving process that changes as time progresses.

The components to buying a home:

First, get approved for a mortgage:
You should get approved for a mortgage before you go house hunting. You can actually apply for a mortgage without having a specific property in mind. When you do, we will estimate the loan amount based on the price range you qualify for and the amount you want to put down on the home. You will get a commitment letter conditioned on at least the purchase contract and appraisal.

When you do go house hunting you will have a commitment letter in hand. Letting the seller know that your mortgage is already approved is the equivalent to some of making a cash offer. In times when homes are selling quickly, your offer carries more weight if it comes in against someone who has not applied yet. The seller may feel that the other offer comes with a longer wait for approval and perhaps a decline. Whereas your loan comes conditioned on an appraisal. In times of slower home sales your approval could create leverage on the price of the home. The sellers are more interested in a quick sale and someone with an approval in hand is a sure bet.

Second, go house hunting
That is the fun part. Enjoy it. With the knowledge you gained from getting approved first, you will know what the cost of the monthly cost of the homes will be each time you go into a house. It is more comforting to go into a home understanding the costs involved than falling in love with a home and not knowing if it is in your price range.

Fax us the purchase contract
When you fax it over, we will order the appraisal and get you closed. We might need to clear out a few conditions, but rest assured that we're working on your file quickly and diligently.

What is the actual process of home buying?
Well, really it is not that complicated. You will make an application either via telephone, fax, and overnight/mail or via the Internet. We will request from you documents to support your loan application and signatures on disclosure forms.

What are the costs are involved?
When buying a home you will need 3 things. The down payment, closing costs and, if you put less than 20% down, escrow money. How much of a down payment must I make? That depends on the type of mortgage you are getting. Some require nothing and others more. Typically most put down anywhere from 3% of the purchase price to 20% down.

What are the closing costs?
The closing costs are the fees associated with processing and closing your loan. These items include costs such as the appraisal, the credit report, title insurance, attorney fees and so forth. A detailed list of closing costs will be given to you at application.

What is the escrow?
Escrow stands for the money put aside by you in an account maintained by the lender which will pay your annual property taxes, home owner insurance and mortgage insurance, if required. At time of closing you will put some money into that account to fund it up. Every month when you pay your mortgage a portion of the proceeds will be deposited in your personal escrow account to be disbursed when the bills arrive. Your lender will pay those bills for you.

You just mentioned mortgage insurance. What is that?
When a borrower puts less than 20% down on house, the lender usually requires that the borrower pay for an insurance policy called Mortgage Insurance. The policy is just that, an insurance policy on the mortgage. The beneficiary of the policy is the lender. You, as the borrower, pays the premium. The premium is calculated into your monthly mortgage payment. The lender will collect on the insurance policy if you default on the mortgage.

Do I have to have mortgage insurance?
No. However, if you do not want mortgage insurance the loan you will get will come with a slightly higher interest rate.

Do I need an Attorney?
We always recommend that you hire an Attorney to represent you whenever you enter into a legally binding contract. If you do not have an Attorney, we would be happy to give you the names of 3 different lawyers.

What are points?
Points are prepaid interest. It is used to buy down the interest rate of the loan. 1 point is equal to 1% of the loan amount. So, if you are borrowing $100,000.00 it will cost you $1000.00 to buy down the rate. 1 point is not necessarily equal to 1% in rate. Points will buy the rate down. But, how much each point buys depends on the pricing of the day.

How are rates determined?
Rates are set by lenders who monitor various national economic statistical information along with rates driving by the Bond market and the Federal Reserve. Many factors drive interest rates.

Why do I have something that says APR on it?
APR is the cost of borrowing money, including closing costs, points and other fees expressed in an interest rate.

Can I prepay a loan?
Unless your loan has a prepayment penalty associated with it, yes you can. If you apply through The Funding Source LLC we will notify you if you have one. While some loans do come with them, most of the loans that we originate do not.

How can I reduce the term of my loan?
Did you know that by simply making 1 additional payment per year can reduce a 30-year loan to 21-years? Ask us for information on various ways to pay down your debt faster.

Isn't that a bi-monthly loan?
No. A bi-monthly loan will achieve about the same result. The above is a way for you to accomplish the same goal without paying your mortgage every other week.