When discovering your dream home lots of questions can arise. As your local real estate expert and Realtor®, I work by a code of ethics that has been in place for over 100 years. When you partner with me, I will perform my due diligence and work with your greatest benefit in mind in every transaction.
At Berkshire Hathaway HomeServices Florida Properties Group, we have the solutions to your home buying needs.
Question: What price home can I afford?
As a "rule of thumb" you can afford to buy a home equal in price to twice your gross annual income. More precisely, the price you can afford to pay for a home will depend on six factors:
Lenders will analyze your income in relation to your projected cost of the home and outstanding debts. This will determine the size loan you can borrow. Your housing expense-to-income ratio is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your loan, property taxes and hazard insurance. The sum of these costs is referred to as "PITI."
If you're purchasing a condominium or townhouse monthly homeowner association dues and private mortgage insurance are added to the PITI. Your housing income-to-expense ratio should fall in the 28 to 33 percent range. 28 percent of your gross monthly income is allotted toward PITI. 33 percent of your gross monthly income is allowed for PITI and all long term debt. Your total income-to-debt ratio should not exceed 34 to 38 percent of your gross income.
Question: How do I find out about the condition of the home I'm considering?
It is strongly recommended that you hire a professional to inspect the home. Many inspectors belong to the American Society of Home Inspectors (ASHI) in order to stay abreast of the latest developments.
Some states require sellers to complete a disclosure form revealing everything known about their property. Home sellers are required to indicate any significant defects or malfunctions existing in the home's major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems.
Sellers are also asked to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachment of easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property.
Also look for settling, sliding or soil problems, flooding or drainage problems.
When purchasing a condominium you will need to know about any covenants, codes and restrictions or other deed restrictions, as well as, if the homeowners association has any authority over the subject property and ownership of common areas with others. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you.
Question: How much down payment should I put down?
Various types of loan programs exist. Some require a minimum of 3 percent down payment (FHA Loans) or 5 percent on conventional loans. Veterans can purchase with no money down (VA Loan).
Putting down as little as possible allows buyers to take full advantage of the tax benefits of home ownership. Mortgage interest and property taxes are fully deductible from state and federal income taxes. Buyers using a small down payment also have a reserve for making unexpected improvements. It may be more prudent to make a larger down payment and thereby reduce the amount of debt that must be financed. Once a buyer puts twenty percent or more as a down payment on their desired home, they will waive the requirement for mortgage insurance.
Mortgage insurance is a requirement on all loans, with the exception of veterans guaranteed loans. That means a full years premium for the insurance is collected "up front' at the closing of escrow, plus you will be paying monthly as part of your PITI, principle-interest-taxes-insurance.
Question: What steps should I take when looking for a home loan?
It is strongly recommended that home buyers are prequalified or pre-approved for a loan as their first step in the process. By being prequalified, a buyer knows exactly how much house they can afford. They can make more informed decisions in the market place. This does not mean they will definitely get the loan because their credit reports, wages and bank statements still need to be verified before you can receive a commitment from the lender for the loan.
Almost all mortgage lenders prequalify people at no charge. Our in-house loan officer can assist with this process. In order to be pre-approved, an application will be taken. For a fee, your credit report will be pulled, and your employment, income, checking, and savings accounts will also be verified. The only things remaining will be for you to find a home, obtain an appraisal to prove its value to the bank and perform whatever inspections you may want on the property. This process considerably shortens the time frame to closing.
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