The 10 Commandments of Buying a Home

Mon, 24 Jan 2022 14:02:40 -0600

You're buying a place. Things are getting exciting--and stressful. It's a pretty bitter-sweet moment. You've been looking for weeks--maybe months--for that perfect place to call home, and you get a call from your real estate agent: "Your offer has been accepted!"

Congratulations! The next step is some weird thing called "escrow." It doesn't make much sense, but you know it's important, and that it should last about 30 days. You can hardly wait. You've been living with your in-laws for the last six weeks, and you're pretty sure that you now know the definition of "eternity", but... There's light at the end of the tunnel! You only have to get through one more month, and you'll have your new place.

Imaginations start turning: the master bathroom and ohhhh.... the closet. "How will we landscape? And more importantly, where will we buy the furniture?"

These questions, and ones like it lead to the fun stuff about buying a new home. You have a new place to make your own, and it's like starting with a blank canvas. However, that same excitement can lead to a few premature decisions that can crush those dreams before they ever get started.

When financing a home, there are a few things that really require your attention. Some of the simplest things can really cause a hiccup when it comes to finalizing your loan, and some of these things are not exactly obvious, so we want to make sure that we remind you of one general rule: wait until the loan is closed to do anything!

Although these things may not be critical in every day life, they can really make or break your chances of getting approved for a loan.

"Some of the simplest things can really cause a hiccup when it comes to finalizing your loan."

1. Thou shall not change jobs.

Changing jobs in the middle of buying a home forces us to wait at least one month to gather pay checks from the new company, and that's assuming that it's the same pay structure and the same line of work. Adding another 30 days to a transaction will most likely lead to the seller cancelling the transaction; and if they don't, it will probably lead to you having to pay extra to keep the home.

2. Thou shall not buy a car, truck or van unless you plan to live in it.

Purchasing a vehicle does a couple bad things. 1) It adds an inquiry to your credit, and 2) It will probably be a higher payment than you currently pay, so it will change your debt-to-income ratio. Both of these things are BIG changes to your loan application and very well could lead to you getting declined.

3. Thou shall not add debt on credit cards.

Very much like the purchase of a new vehicle, anything that changes your credit profile also changes your debt-to-income ration and can detrimentally affect your chances of being approved for a loan.

4. Thou shall not let payments fall behind.

This should be a no-brainer, but, you'd be surprised. If you're applying for a home loan, it will probably be the largest liability that you have on your credit. If an underwriter sees that you have recent late payments on other credit lines, it destroys your credibility in regards to paying your bills.

5. Thou shall not spend the money you have saved for your down payment.

Again... logically, no money down, no house. Set it aside, and don't touch it.

6. Thou shall not buy furniture before you buy your house.

This is more of a reminder not to let excitement encourage you to make decisions prematurely. This falls right back in line with adding credit card debt or buying a vehicle.

7. Thou shall not let anyone run your credit.

Applying for anything or letting people run your credit for ANY REASON is a no-no. This will affect your credit, and it will cause several headaches that could cause your loan to be declined.

8. Thou shall not make any large deposits into your bank account.

Every large deposit must be sourced, which means it must have a paper trail. If you can't prove where it came from, it will have to be discounted, and it could affect your ability to show proof of funds to close. If you do not have enough money without the large deposit, the loan will be declined.

9. Thou shall not change bank accounts.

Changing bank accounts causes very much of the same issues that large deposits do. If you plan to change banks, wait to do so until after you are in your house.

10. Thou shall not co-sign for anyone.

Although it may not literally affect your payments, we have to hit you with anything that is on your credit report. So if one of the kids needs a signature for a student loan, wait until your loan is closed, then sign away.

Again... when in doubt, wait until the loan is closed to do anything!

Talk with a Gapital Pro to see how you can avoid the pitfalls other buyers fall into.

Frequently Asked Questions About Purchase Costs

Mon, 24 Jan 2022 13:34:16 -0600

How much will it cost me to buy a home?

Great question. Here are the upfront costs to expect when you purchase a home:

Down payment: This is the portion of the purchase price you agree to cover.
Third-party fees: These are fees paid to third parties, not Better. These services are required to get a purchase loan no matter which lender you use and we don't mark up the prices. Some of those fees may be paid by the seller. Examples include the appraisal fee, title insurance, and transfer taxes.
Escrow deposit: If you choose to pay for your homeowner's insurance and taxes as part of your monthly loan payments, you will need to pay an initial deposit so the account can cover future payments. The number of months required will depend on when these items are due for payment relative to your closing date.
Pre-paid interest: This is a one-time upfront interest payment due at closing. It covers interest from the day of closing through the end of the month.
(optional) Loan points: We allow you to get a lower interest rate by paying points.

When will I need to pay these costs?

After your offer is accepted and you sign a purchase agreement, you will pay an earnest money deposit. This shows the seller you are serious about the transaction and typically ranges from 1-2% of the purchase price. This deposit will be applied toward your down payment.

At closing, you will be expected to pay for all remaining costs, including the down payment, third-party fees, and pre-paid costs.

Which third-party fees will I be charged?

Here are the third-party fees associated with a home purchase loan. This does not include other costs that might be negotiated into your purchase contract (ex: pest inspection fee).

Appraisal fee: A home appraisal must be done by a licensed appraiser to determine the value of the property. You will get a copy of the final report.
Credit report: We need to check your credit in order to determine your creditworthiness and monthly debt obligations.
Flood certification: We need to determine if your property is in a flood zone to ensure appropriate insurance coverage is in place.
Lender's title insurance: This fee ensures we're protected if someone later makes a claim against the title of the property.
Other title fees: You will see several miscellaneous title fees. These are charged by the title company for things such as document processing and paying the notary.
Real estate transfer taxes: Local and state governments charge a transfer tax when real-estate is sold.
Recording fees: A fee charged by your city or county to officially record the sale.
Settlement: This fee is paid to the settlement or escrow agent for coordinating the handling and disbursement of funds between the buyer and seller.
(optional) Owner's title insurance: This is an optional fee. It ensures you are protected if someone later makes a claim against the title of the property.

Which third-party fees does the seller pay?

Regional customs and laws typically determine who pays for what in a home purchase transaction. The seller might pay some of the third-party fees, like the transfer taxes or settlement costs, for instance. Consult your real estate agent to determine which party is responsible for each cost throughout the mortgage process.

Legacy Prime Lending - Resources #Purchase