Home Buying Process

You've just made one of the biggest decisions you will ever make and in order to purchase the home of your dreams, you need the money to do it! You've applied for a mortgage with your lender of choice and they have approved you. Your approval is subject however to certain inspections, appraisals, and other data discovery. Are you confused? You don't do this everyday, you should be.

Your loan approval is subject to several lender requirements. Different types of companies are needed to perform different kinds of services in order to meet these requirements. Of course all of these services cost money and that cost is charged to you! This process will explain each lender requirement, the type of service needed, what type of company performs this service and the average cost of such a service.

After reading this process you should feel confident that these services and costs are indeed not frivolous. Therefore, you've made the right choice and are able to enjoy your new home to its fullest.

Here is a list of services and costs of loan requirements

Credit report: A history of how you pay your bills. The lender needs to be sure you have established a pattern of paying your debts on time. If they are going to loan you a large amount of money, they need to feel confident that you are responsible enough to pay them back in a timely manner. The charge for a credit report can be anywhere from $10.00 to $55.00 and the service is provided by the Credit Report Agency in your region.

Tax Service Fee: A lender representative will verify with the IRS that the tax information you provided to qualify for the loan is not fraudulent. The cost for this fee is $60.00 to $80.00.

Survey: A detailed review of the public records and your "legal description" of the property. The survey will let the lender know the structures on your property are not overlapping on your neighbor's property and/or there aren't any encroachments, such as your garage being located on your neighbor's property. If there are encroachment problems, the lender would be at risk if your neighbor decided they wanted to take you to court and try to have the garage moved. This service is performed by an approved Surveyor of your choice and usually costs between $200.00 and $400.00.

Appraisal: An appraisal is a written report from a qualified appraiser of the estimated fair market value of the home you are purchasing or refinancing. An appraiser gathers information on recent sales of homes located within a predetermined mile radius of the subject property. He then uses this information to arrive at the fair market value. The lender needs to know how much the property is worth if they are going to lend you money. The appraised market value must be at least 20% over the amount of money you are borrowing to purchase the home. An appraisal costs anywhere from $250.00 to $500.00.

Underwriting Fee: This is the service provided by an Underwriter at the lending institution that will evaluate all of your data and all of the data provided by the required sources. They will then determine if you qualify for the amount of funds requested, and they are the final authority to approve your loan. The fee for this service is $200.00 to $300.00.

Loan Origination Fee: This is the fee your broker/lender will charge for gathering all your data needed to quality for the loan. He/she will submit all of the data to various lenders trying to find the best loan for you. He/she will then explain to you all of the terms of your loan, such as your interest rate and monthly payment.

Discount Points: This is a voluntary fee. If your lender has approved you for an 8% interest rate, you can "buy it down" to 7% by paying 1% to 2% of the loan amount upfront. Your monthly payment would then be lower per month. This is strictly up to you if you want to pay these points to get a lower payment. Some lenders do not offer this alternative.

Inspection Fee: Usually charged on new construction. An inspector will visit the property to make sure the home is completely finished and ready for occupancy. The charge for this is around $100.00.

Settlement Fee: When all the requirements of the lender have been met and your loan has final approval, an appointment will be made for you to sign all the necessary paperwork, such as Note, Mortgage, etc. A closing agent of your choice will be appointed to explain all of these documents to you as you sign them. A closing agent is an expert in the field that can answer any questions you have about your loan for your new home. The closing agent's fee is between $200.00 and $400.00.

Homeowners Insurance: The lender will require you to buy a homeowners insurance policy which will protect you from flood damage, fire, etc. The premium on this policy is determined by the value of your home and is paid in monthly installments to the lender or insurance company.

Title Insurance: Title insurance is not the same as homeowner's insurance. Title insurance is required by the lender and is a policy of insurance issued by a Title Company. Title companies provide two types of policies. One policy insures the lender that they have the 1st lien on the subject property. Therefore, if you default on your payments and the lender is forced to sell the property, they will get the proceeds from the sale to cover the balance on your mortgage note. If there are other liens on the property that would prohibit the lender from getting the proceeds from the sale, then their insurance policy issued by the title company will cover them. The title company would be responsible for paying the balance you owe on the mortgage. This policy does not protect you, only the lender. The other policy issued by title companies is known as an "Owners Policy" and protects you and your home from any title defects. When you buy a house, you get more than a building. You get title to a piece of Mother Earth - a piece that others have owned before you, dating back to the 1700's. With over 100 types of forgeries and mistakes that could have been made by previous owners, you now want to make sure you have clear title to that piece of mother earth you bought.

Imagine your second week in your new home and unexpectedly the previous owner, Mrs. Smith, shows up at your door. She informs you that she is completely unaware that her home has been sold by her ex-husband. It seems funny; this Mrs. Smith does not look like the Mrs. Smith you met at closing. An owner's policy will protect you from this type of illegal sale. The title company would be responsible for defending you (including all costs for legal fees) against the claim filed by the real Mrs. Smith. It makes sense to purchase both types of coverage when buying your home. The cost for this insurance is usually never more than $5.00 to $6.00 per thousand of coverage and is a one time premium paid at the closing. The coverage is good as long as you own your home.

Title Search and Examination: This service is also provided by the Title Company and relates specifically to the insurance policy, just like a medical insurance company would not insure a preexisting condition, a title insurance company would not insure a piece of property with known title defects. Therefore, a search of the public records at the courthouse is made regarding the subject property. The courthouse holds all records relating to land. Any defects found on your subject property will then be corrected by the title company and an insurance policy would then be issued. The cost for the Title Search and Examination is $150.00 to $400.00.

There may be a few other fees not listed here, such as filing fees and courier fees. Please review your individual loan fees.

Summary of the Process

• Here you find an outline of the entire process, and how it flows, once you have decided to buy a home.
  
  
• 1st you get pre-qualified.
  
  
• You hire the services of a real estate agent to find the perfect home for you and your family.
  
  
• You find the perfect home and make an offer to the seller.
  
  
• The seller accepts your offer and you now apply for financing through a broker/lender of your choice.
  • Fill out a loan application
  • Supply Documentation
    
    
• You have been pre-approved for financing, subject to data not yet received but needed (as explained above)
  • The lender will now order a credit report, appraisal, survey, title insurance, flood certification, inspection and a tax check.
  • The lender's underwriter will evaluate the information provided by you and outside sources as required above and will give your loan the final approval.
  • You will now be required to purchase the Homeowners Insurance through an agent of your choice.
    
    
• The Settlement Agent will now set up an appointment with the sellers and yourself to sign all the necessary papers to finalize your purchase, including all of the lender's documents.
  
  
• The title company will now issue the Lender's Policy to the Lender and the Owner's Policy to you!

Again, buying or refinancing a home is something that most people just don't do everyday. We hope we've explained the stressful process to you so that you feel confident you have made the right choices. We really want you to know how important the whole process is and why you truly need Title Insurance. We wish you all the best in your new home!

What Any Homebuyer Should Know - Valuable Home buying Tips

1. Know your creditworthiness. Your approval will be based on three factors; if you pay your bills on time, your debt to income ratio and your employment/income history. To increase your chances for approval over time, you can pay your bills on time, do not apply for credit, reduce your credit card balances or obtain additional credit, if you have limited credit. Also, establishing a good working pattern with the same employer or being self employed for a sufficient period of time will increase your chances for approval.
   
   
2. Be Pre-qualified or Pre-Approved before you begin the process. Realtors and Sellers alike are more likely to accept/deliver a pre-qualified or pre-approved offer.
   
   
3. Get all the Seller's promises and verbal agreements in writing in the form of a Purchase Contract. Do not exclude any details you have agreed to verbally. A written purchase agreement will take precedence over a verbal agreement.
   
   
4. Request that the home be inspected for any damage and/or termites. You’re likely to incur the cost for these inspections, but it is worth the price. Any repairs that need to be completed by the Seller should be in writing and included in the Purchase Contract. You may need to amend your original agreement to include these repairs, once the inspections have been made.
   
   
5. The minute your offer is accepted, get homeowner's insurance. This could delay the closing by as much as a week if you don't have it.
   
   
6. Avoid PMI. Lenders charge PMI to help protect them against loss in a foreclosure action. Private Mortgage Insurance is required when you buy a house with less than 20% down and can be canceled after one or two years. A monthly insurance premium is added to your payment to cover this cost. Not all lenders require PMI, so shopping around for different lenders may help you avoid PMI. Guardian National Mortgage does have programs available without PMI. Ask us about them today!

Rent vs. Buy

The Home Buying Advantage
The National Association of Realtors has reported record breaking numbers in the home buying industry in the last 5 years. We can contribute most of this recent boom in home buying do to lower interest rates and more lenient lenders than ever before. What we mean by lenient, are lenders that are approving loans for buyers who are younger, with minimal credit history, no employment history, self employed or even scarred credit. In fact, sometimes it's just as easy for these types of buyers to get financing as someone with a decent credit history. Today, home buyers are also buying houses with no money down. All of this is called creative financing and it works! The statistics prove it. Helping you purchase your new home is our specialty.

ADVANTAGES of BUYING
Obviously, you can build home equity. Helping you purchase your new home is our specialty. You actually own the home and its value should continue to rise at about 3% per year and your payments go towards paying off YOUR home, not paying off your landlord's home.

ADVANTAGES

• YOUR OWN PARKING
• PEACE AND QUIET
• PRIVACY
• MORE LIVING SPACE/ MORE LUXURIOUS BATHS
• BETTER/FASTER MAINTENANCE AND REPAIR
• MORE CLOSET STORAGE SPACE
• YOU CAN DESIGN YOUR HOME/LANDSCAPING
• TAX ADVANTAGES
• MORE FAMILY ORIENTED
• PAYMENT IS THE SAME AS RENTING

RENT VS. BUY CALCULATOR

Hopefully all of this information will help you decide if buying a home is right for you, rather than renting. Before you begin your search, there's a lot of other information you should be aware of. Some of this information includes facts about your credit, and what a pre-qualification means vs. a pre-approval. You should be educated on the entire process before you begin. Learning as you go is not recommended when buying a home for the first time.