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The first thing to understand about buying a house is that you don’t have to have all the cash saved up in order to make your purchase. If you have a steady job and a reasonable credit history, there is a good chance that you can find a home lender who will lend you most of the purchase price of your new home.
First, determine your gross monthly income. This will include any regular and recurring income that you can document. You can also use unearned sources of income such as alimony or lottery payoffs. And if you own income-producing assets such as real estate or stocks, the income from those can be estimated and used in this calculation.
The housing market is complicated because the stock of homes for sale is always in flux. It is important to know as much as possible about the choices in preferred markets, and the way to do that is by working closely with a local realtor who has a good “lay of the land.”
Don’t let your emotions overrule a reasonable assessment of whether a particular home really meets your needs.
A written proposal is the foundation of a real estate transaction. Realtors have a variety of standard forms that are kept up to date with the changing laws. When you use a realtor these forms will be available to you. Realtors cover the questions that need to be answered during the process. Certain disclosure laws must be compiled with by the seller, and the realtor will ensure that this takes place.
Settlement is a brief process where all of the necessary paperwork needed to complete the transaction is signed. Closing is typically held in an office setting, sometimes with both buyer and seller at the same table, sometimes with each party completing their papers separately.
Closing costs are the actual expenses that the lender incurs in the origination of a new home loan. Some of the costs are related to your loan application, such as the expense of newly updated credit reports on all applicants. Other fees are related to the house itself, such as the appraisal of the property. Others are payment to the lender for processing your application, such as the loan origination fee. This area of expenses is charged to the buyer, and often runs between 2 and 3 percent of the amount being borrowed.
Don’t choose the wrong mortgage: Investigate all your options, then lay your choices side-by-side and do the math, making sure to compare worst-case scenarios.
Don’t confuse “pre-approved” and “pre-qualified” with a loan commitment: When you are “pre-qualified,” the lender is making an educated guess about how much you can borrow based on information you’ve provided. When you are “pre-approved,” the lender has verified everything you have told him or her and is offering to lend you up to a given amount at current interest rates – under certain conditions. Final clearance and a check at closing – a loan commitment – are subject to an appraisal satisfactory to the lender, good title, a last-minute credit check and other verifications.