A PRACTICAL GUIDE TO

BUYING YOUR FIRST

HOME

A PRACTICAL GUIDE TO BUYING YOUR FIRST HOME

Brought to you by

Beverly Sheriff

&Crossroads Financial Mortgage, Inc.

818 Garrison Avenue

Teaneck, NJ 07666

201-357-5253 (Office)

201-281-9853 (Cell)

)

Contents

INTRODUCTION ......................................................................................................................................................................... 1

REASONS WHY I AM YOUR BEST OPTION TO HELP YOU PURCHASE YOUR FIRST HOME. .............................................. 2

THE BASICS OF BUYING YOUR FIRST HOME! .......................................................................................................................... 3

WHAT DO I NEED TO CONSIDER WHEN BUYING MY FIRST HOME?..................................................................................... 4

HOW DO I KNOW HOW MUCH HOUSE I CAN AFFORD? ...................................................................................................... 5

WHAT DO I NEED TO KNOW ABOUT THE CURRENT MARKET? ............................................................................................ 5

WHEN I’M READY TO MAKE AN OFFER, THEN WHAT DO I DO?.......................................................................................... 6

IS A HOME INSPECTION IMPORTANT? .................................................................................................................................... 7

BUT WHAT IF THE INSPECTION REVEALS BIG PROBLEMS? .................................................................................................... 7

SO, HOW DO I FIND A HOME INSPECTOR? ............................................................................................................................ 8

OKAY, I’VE AGREED TO BUY MY FIRST HOME. WHAT’S INVOLVED IN CLOSING THE DEAL? .......................................... 9

WHAT ARE CLOSING COSTS? ................................................................................................................................................... 9

CONCLUSION ...........................................................................................................................................................................10

GLOSSARY ................................................................................................................................................................................12

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1 A Practical Guide to Buying Your First Home

Introduction Congratulations, you’ve started on the path to buying your first home! So, let’s get straight to the point by telling you about the two people you’ll absolutely need to make this exciting journey a successful one – your Realtor and your mortgage loan officer.

Why do you need these two individuals? After all, isn’t a Realtor (also, called a Real Estate Agent) simply a person who finds you a home and a Lender, one who finds you the money to buy that home?

The answer to that question is “No!” because great realtors and loan officers go far beyond those basic services to meet your needs! They’re your expert guides through a sometimes-complicated forest of regulations and requirements.

Diving into the housing market without their knowledge and experience is like wandering into the woods without a map, compass or GPS! You’re likely to get lost, stressed out, and possibly lose money along the way.

So, Realtors and Lenders work together to keep you safely on the road to buying your first home and provide you support all along the way!

Let’s see how my experience as a Realtor can help you achieve your dream of becoming a home owner.

I am always here for you!

Beverly Sheriff

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2 A Practical Guide to Buying Your First Home

Reasons Why I am your Best Option to Help You Purchase Your First Home.

Reason 1: Time & Energy- I will save you a lot of time and energy by zeroing in on houses and neighborhoods that most closely match your needs. This means no fruitless and tiring trips to look at houses that don’t match your tastes or your budget!

Reason 2: Pricing & Negotiations- I am an expert at pricing. In other words, through my expertise, I know whether a home is overpriced or underpriced and can negotiate the best deal for your budget. I am a helpful buffer in negotiations. I remain objective and can deal with difficult sellers so you don’t have to! For example, if a seller won’t budge on, say, replacing a door or sink, I stand in for you and take the heat until the situation is resolved. This reduces your stress.

Reason 3: Know the Market- I can expand the number of houses available for you to look at because I know the market better than anyone else! Sometimes, for various reasons like divorce, health problems, etc., owners don’t want to advertise the fact that they’re planning to sell their house. In cases like this, only a Realtor like me will know these homes are available!

Reason 4: I have in-depth knowledge of their neighborhoods. That means that I can find you a home that better fits your specific needs because I have all the inside information!

Reason 5: I can ensure a smooth closing. I am an expert at spotting problems that can crop up – a missed deadline in financing, a distant relative who hasn’t signed off on the title, etc. – and taking care of them so you can get the house of your dreams right on time.

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3 A Practical Guide to Buying Your First Home

The Basics of Buying Your First Home! Knowledge is your best friend when it comes to buying a home. Learning about the housing market will save you time, frustration and money! Below, we’ve provided you with the basics so you can make an informed decision when working with a Realtor and a Lender.

First, we want you to be aware of the first step you absolutely need to take to make the entire buying process a lot easier and smoother – get pre-approved for a loan!

This is vital for a simple reason: without pre-approval, you may find that you don’t qualify for the home that’s at the top of your wish list! Avoid this unfortunate scenario by getting pre-approved for a loan first! By doing so, you can determine your right price range and neighborhood and find your dream home much faster – and without undue complications!

There’s another important reason to get pre-approved – your Realtor can do a better job for you! That’s because he or she knows the deal isn’t likely to fall through. In addition, they’re able to find your dream home faster because they know exactly what your needs and preferences are within your price range.

A distinct benefit of having a pre-approval is that it gives you more room to negotiate; sellers may be more willing to lower their asking price, cover closing costs, include appliances, etc…

In summary, there are significant advantages to getting pre-approval for a loan:

Less hassle and stress!

Increased negotiating power!

Greater flexibility for your Realtor in finding your perfect home!

Sellers won’t consider an offer without having a pre-approval from you

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How Do I Know How Much House I Can Afford? Obviously, this is an important question that must be answered upfront. The best way to determine how much house you can afford is to speak to a loan officer.

In general, you need to decide what your comfort level is in making a monthly mortgage payment. Don’t forget to calculate non-mortgage expenses as well. For example; transportation, utilities, insurance, groceries, etc.… Also, be sure to leave room in your monthly budget for taxes, emergencies, home maintenance costs, and so forth.

Here’s another important part of determining how much house you can afford – your credit score. The higher your credit score, the more house you’ll qualify for and the lower the interest rate you’ll have to pay on a mortgage loan. A loan officer can help you learn your score.

By the way, credit reports sometimes have errors and discrepancies that can lower your score. Be sure to go over your credit report carefully. If you find any mistakes, contact the creditor or the credit bureau to rectify them.

What Do I Need to Know About the Current Market? The first thing to understand about markets is that they change all the time (depending on the area). That’s why it’s important to understand current conditions so you can get the best value in a first-time home.

When it comes to the current market, ask your Realtor some or all of the following questions:

How much house can my budget get me in the neighborhoods I’m interested in?

What’s the past market value of the home I’m interested in buying?

What’s the current value of that home?

Historically, how much can I expect the home to increase in value over time?

What are current interest rates and how can I get the lowest rate?

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When I’m Ready to Make an Offer, Then What Do I Do? Once you feel you are ready I am here for you! Things I will take into consideration while giving you advice

The home’s asking price (Is it within your budget? If you want the house badly, are you prepared to pay a higher price?)

The home’s condition

How long has the home sat on the market (typically, if a house has been on the market for a longer time, it’s easier to negotiate a lower price.)

Recent home sales in the area

Current market conditions, etc.

When you’ve decided upon an offer, I will prepare all the documentation you need to support that offer. These documents include:

The Purchase Agreement: This is a binding document which indicates the amount you’re offering for the home. It often includes other details such as the date you’d like to take possession, what appliances stay with the house, etc.

Earnest Money: This is a deposit to show that you’re serious about buying the home. Most often, earnest money is a small percentage of the asking price and is later applied to your down payment. The realtor holds this check or deposit (made out to the seller) until your offer has been accepted.

Counteroffer: This is the seller’s response to your offer and is a typical part of the process. In short, you want the lowest price possible, and the owner wants the highest price possible. Typically, I will negotiate in the following way:

I will present your offer.

The seller agrees to that offer or refuses it.

The seller makes a counteroffer (usually within 24 to 48 hours).

You either agree to their terms or make a counteroffer.

The process continues until everyone is satisfied with the agreement.

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Is a Home Inspection Important? Darned right, it is! In fact, any offer you make should be contingent upon a home inspection because it’s for your own protection. It can happen that a home has obvious problems (old roof, old windows, etc.) or even problems that the current owner isn’t aware of (leaking pipes, outdated electrical, etc.). Obviously, you don’t want to be stuck with the bills for those!

That’s why you need to hire a qualified home inspector. He or she will analyze the home you want to buy and let you know what’s in good shape and what isn’t. The inspector should do a thorough job of looking at the following areas so you know exactly what you’re getting into:

HVAC (heating, ventilation and air conditioning)

Septic systems

Plumbing and electrical systems

Walls, floors, ceilings

Foundation

Roof, gutters, downspouts,

Insulation and ventilation

Major appliances

Garage, etc.

But What If the Inspection Reveals Big Problems? If this situation occurs, you have a couple of choices. First, you can ask that the seller to make the repairs or re-negotiate your offer price to absorb the repair costs. Second, if the repair costs go beyond what you’re willing to deal with, then you can withdraw your offer, get your deposit back and start house hunting again. I will walk you through this if necessary.

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So, How Do I Find a Home Inspector? I will recommend one to you.

Somebody with experience, references, and is licensed and insured. Depending on location, property and any additional tests, inspection costs typically vary from $250 to $600. When you consider the cost of repairing many home problems, it’ll be the best investment you’ve ever made!

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Okay, I’ve Agreed to Buy My First Home. What’s Involved in Closing the Deal? The “closing” is the final step in the transaction and is the legal transfer of possession of the home from the seller to you. Before you do the actual closing, be sure to take a final walk-through of the property so you’re sure that the home is in acceptable condition.

At the closing itself, you’ll sign documents that give you possession of the home and sign your mortgage documents. Then, your mortgage company professional will pay the seller on your behalf. Once that’s done, you’ll be provided with the keys to your new home and payment information for your mortgage.

Before your closing, you’ll receive a document that outlines the costs you’ll pay at closing. You’ll be asked to bring a valid driver’s license, a certified check (if applicable) and any additional documents your circumstances may require. Depending on the situation, the people at your closing may include the seller, the lender, you, the seller’s mortgage holder and your Realtor.

What Are Closing Costs? They’re fees paid at the end of a real estate transaction. In other words, you (and the seller) are paying money to various individuals and agencies involved in the deal for the services they provided. By law, lenders are required to disclose in writing your estimated closing costs and fees. This is known as a Loan Estimate (LE).

Closing costs vary, depending on your type of transaction. They can range in cost but traditionally are around 3%-4% of the purchase price. I will work with you to determine if you will be covering all closing costs or if we will ask the seller to give you some assistance as part of the negotiation process.

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Conclusion We hope we’ve provided you with the vital basic information you need to purchase your first home! Our recommendation is use our guidelines as a springboard to gain further knowledge.

The most important resource you have is ME, your Realtor! I am here for you and I will walk you step by step through this process.

You can always reach me at the information below. Best of luck on your journey!

Beverly Sheriff

201-281-9853 or email bbev56@yahoo.com

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About Crossroads Financial Mortgage, Inc.

My name is Richard L Bolt.

Our company is a locally owned and operated and has been doing business for over a decade.

Since I started originating loans in New Jersey, I have found that there are many things that are important when looking for the right lender to help you purchase or refinance a home. Here are some of expectations you can have about our service:

We will not mislead or tell you something that is not true. If I quote you a rate, I will make sure it can be locked so there is not change.

Our Fees are low and we are upfront about our fees and we stand behind them.

Every time, somebody in my team will return all calls the same day.

My team will update you on your loan constantly by phone/text, or email. You will not be left wondering what is the status of your loan.

I am a firm believer that service and value are more than just a low rate.

Thank you again for your time, we are looking forward to working with you!

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Glossary Adjustable Rate Mortgages (ARM): Loans with an initial fixed-rate period (usually 5, 7 or 10 years). After the fixed-rate period, your interest rate may change once per year – either up or down depending on market conditions. ARMs are almost always lower in rate than fixed loans and can offer large savings to first-time home buyers, especially if you don’t plan on staying in your first home for more than 10 years.

Amortization: The gradual reduction of debt over the term of the loan. Amortization occurs through repayment of principal.

Annual Percentage Rate (APR): This is the yearly cost of a mortgage, including interest and other expenses or charges such as private mortgage insurance and points expressed as a percentage.

Appraisal: This is a written estimate of a property’s current market value.

Closing: The end of your real estate transaction when legal documents are signed and funds are disbursed.

Closing Costs: Expenses over and above the cost of the property. Such costs can include items such as title insurance, appraisal, processing, underwriting and surveying fees.

Credit Report: An independent agency report that details credit history and previous and current debt to help determine creditworthiness.

Credit Score: A mathematical formula which predicts an applicant’s creditworthiness based on credit card history, outstanding debt, type of credit, bankruptcies, late payments, collection judgments, too little credit history and too many credit lines.

Deed: The legal document that transfers property from one owner to another.

Down Payment: The amount of your home’s purchase price you pay upfront. It’s a deposit made by a buyer toward the down payment to show good faith when the purchase agreement is signed.

Equity: The monetary difference between your mortgage balance and the actual market value of your home.

FHA Loan: Fixed- or adjustable-rate loan insured by the Federal Housing Administration. FHA loans are designed to make housing more affordable, particularly for first-time home buyers.

Fixed-Rate Mortgages: Mortgages with an interest rate and a payment that don’t change over the term of the loan. If the current market interest rate falls below your fixed rate, get in touch with your mortgage expert right away to discuss the benefits of refinancing.

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13 A Practical Guide to Buying Your First Home

Good Faith Estimate: Written estimate of the closing costs the borrower will likely have to pay to obtain the loan.

Interest-Only Loan: Mortgage that gives you the option of paying just the interest, or the interest and as much principal as you want in any given month during an initial period of time.

Interest Rate: The percentage rate a lender charges to borrow money.

Lock or Lock-In: A lender’s guarantee of an interest rate for a set period. The lock-in protects you against rate increases during that time.

Mortgage: A loan you take out to finance the purchase of a home. It’s also a legal contract which states that you promise to pay back the loan monthly. The monthly payment typically goes toward paying back the principal (which is the basic loan amount) and interest. Your monthly payment may also include money for your taxes and insurance.

Points (or Discount Points): Points are upfront fees paid to the lender at closing. Typically, one-point equals one percent of your total loan amount. Points and interest rates are inherently connected. The more points you pay, the lower your interest rate.

Principal: The balance (not counting interest) owed on a loan.

Private Mortgage Insurance (PMI): This is insurance to protect the lender in case the borrower defaults on the loan. With conventional loans, PMI is typically not required with a down payment of 20% or more of the home’s purchase price.

Term: Number of years you have to pay back the loan.

Title: Document that shows ownership of a property.

Title Search: Examination of municipal records to ensure that the seller is the legal owner of a property and that there are no liens or other claims against the property.

Underwriting: In mortgage lending, the process of determining the risks involved in a particular loan and establishing suitable terms and conditions for the loan.

 

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1 A Practical Guide to Buying Your First Home

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