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How Much Money Do You Need to Buy a Home?

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One of the biggest concerns of first time home buyers when they’re looking at getting their first mortgage is just how much money they’re going to require. Qualifying for a mortgage is the first step in the process, but it is important to understand if you will need cash for your purchase and if so, how much.

Understanding what you’ll be responsible for paying for in cash is good information to have before you even submit a mortgage application. The specific costs can vary depending upon the state that you live in, the cost of your home and to other factors, but here are some basic things to consider that should be considered.

Down Payment Required for a Mortgage

In order to qualify for a mortgage, you will likely have to produce a down payment. The specific amount required for a down payment depends upon state guidelines as well as the type of loan. FHA mortgage loans offer the competitive down payment options for those who qualify, requiring under 3.5% of the purchase price down.

Mortgage Closing Costs

In addition to requiring money for your mortgage down payment, you’ll need to save money for closing costs. This is something that you may be able to get paid by the seller of your new home, but as this is not something that is guaranteed, it is wise to have some money on hand to pay for all of the costs of purchasing a home that cannot be rolled into your mortgage. If you present a mortgage lender an offer that does not include closing costs covered by the seller, often as a first time home buyer, you are required to prove that you have the money to cover them. Depending on your local market environment and location, 3% to 6% of the purchase price may be a fair estimate for your closing costs, and somewhere in this range is what a mortgage lender will typically need to confirm.

Target Purchase Price and Other Considerations

Since the location, cost and your unique financial and credit attributes can affect what you will need to put down when you purchase a home, we can help you better understand the estimated amount that you’ll need to pay when buying a home. More importantly,  we can help you understand and target the home purchase price that suits your specific needs an finances so you can be prepared in advance to make your first home purchase!

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Mortgage Rate Outlook for Week of 5/23/2011

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While rates have come down in the past month, mortgage rates this week may affected by multiple bond auctions that are taking place, any of which can sway the market dependent on their volume.  For this reason, the market will be moving forward with less certainty, which makes this week a great week to lock in rates to insure you benefit from downward movement of late.

As we head into a holiday weekend with Memorial Day Weekend approaching, many market participants will be leaving early on Friday, which all but insures weak trading volume which can cause erratic movement in bonds up or down.

Market Calendar for the Week of 5/23/2011

  • Monday: 6 month bill auction
  • Tuesday : New Home Sales, Rosengren, Hoenig, Bullard and Plosser from the Fed speak
  • Wednesday : 5 Year Note Auction, Durable Goods, FHFA Home Price Index
  • Thursday :  Jobless Claims, GDP, Money Supply
  • Friday : Personal Income and Outlays, Consumer Sentiment, Pending Home Sales Index

Simplifying GFE and TIL Disclosures:

It’s easy to become confused when getting a new mortgage due to the volume of paperwork involved. Adding to this confusion are a number of recent government regulations that have been implemented that are increasing confusion when their intent is the opposite. According to Elizabeth Warren, Special Adviser to the Secretary of the Treasury for the Consumer Financial Protection Bureau:

“A simple, straightforward and consistent presentation of a credit agreement is the best way to level the playing field between consumers and lenders – and among different types of lenders – and foster honest competition.”

To help create an easier to understand experience for consumers, the Consumer Financial Protection Bureau (CFPB) has created a website where you can give feedback. Simply view their site and follow the instructions to help give them feedback on your preferences.

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How Recent Market Changes Can Affect You

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As the Real Estate and financial markets continue to move up and down, mortgage rates can also be affected. Since mortgage rates are more closely tied to the bond markets, an up or down move in the stock market may not have the result in mortgage rates that one might expects. In fact, many times the resulting mortgage rate changes are counter-intuitive.

More importantly, rates change daily and they can change quickly. Some mortgage professionals have recently noted that their rate quotes have only had shelf lives of three to four hours before market changes have deemed them inaccurate.

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How does a consumer navigate fast changing markets in order to refinance their existing loan or purchase a home with the most favorable terms possible?

  1. Plan – Define your needs ahead of time, do not wait until the last minute. This is especially true of home purchases.
  2. Consult – Talk to your mortgage professional on a regular basis so they can interpret recent market events to you and communicate how those events can affect you.
  3. Execute – When you have defined your needs and have determined that now is the best time to move forward, don’t shop yourself out of a good loan! What does this mean? It is easy to get caught up in shopping for the best rate, but it is not uncommon for home owners to miss locking their loan at a great rate because they are in search of better rates that do not exist or that they do not qualify for. It is important to shop to insure you are getting the best rate possible, but set limits to the number of companies you are going to consider doing business with and be careful of having your credit report needlessly and more times than is necessary!

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Is an FHA Loan Right For Me?

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FHA Loan FactorsWith the resurgence of FHA home loans, many home owners are wondering if they can benefit from an FHA loan. The truth is that you may or may not benefit by converting your existing loan into an FHA loan when you refinance.

Some of the factors that can determine if an FHA loan is right for you:

  • Loan To Value
  • Home Value
  • Size of Existing Loan
  • Credit Score
  • Amount of Cash You Want to Take Out

With the many changes that have occurred with FHA loans, it is possible that even if you didn’t qualify six months ago, there may be a loan program that is right for you.

One of our mortgage professionals can help you determine if an FHA loan is right for you quickly with no costs.

Home Purchase Loan Tips

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boyIf you are thinking about purchasing a new home, don’t wait until you find the perfect home to get prequalified! Make sure your credit is healthy and find out how much you can qualify for before you find the home of your dreams. This helps insure that you not only choose a home in the right price range, but help avoid falling in love with a home that you can’t afford!

Another great reason to get quaified as early in the process as possible is to insure the fastest closing possible. If there are multiple offers going in on a home, you may be at a disadvantage if you are not able to secure financing quickly. Don’t wait until the last minute!

We have home purchase specialists standing by that can give you FREE home purchase finance advice. Feel free to request a FREE Rate Quote or to Contact Us directly.

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