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Published by Jenniferlee32, 2018-08-27 13:30:17

Homebuyers Guidebook (KW)

Homebuyers Guidebook (KW)

GETTING STARTED

BUYING A HOME IS ONE OF LIFES MOST EXCITING ADVENTURES.
Being a homeownergives you the opportunity to put down roots, become part
of a community, and build your wealth for the future. But the trek to becoming
a homeowner is no small feat.

The good news is, you’ve come to the right place. This Homebuyer’s Guidebook
has everything you need to get acquainted with the homebuying process,
from getting a mortgage to receiving the keys to your new home. As you move
through the process, remember, we’ll be here to answer any questions you have
and guide you each step of the way.

Ready to embark on your homebuying journey?

Below is an overview of the major steps you’ll encounter along the
way. Read on for more detailed information about each part of the

process.

STEP4Close onMove in!5

STEPyour home
STEP
STEP
STEP
3Find a
2home
Get the right
mortgage

1Get pre-

Approved

Pre-Approval Find a Home Get a Mortgage Closing Move in!

Know how Discover your Choose the right Become the legal One journey ends
much home dream home and mortgagefor your owner of your and another begins!
you can afford. makean offer. situation. new home.

YOUR GUIDES

A look at everyone involved in the homebuying process

Lending Team Real EstateAgents

Loan Officer: Your guide from start to finish. Helps you determine Buyer’s Agent: Helps you find a home and negotiates the
what you can afford, choose a loan program, and keepsyou informed offer on your behalf. Ask your loan officer for a referral to
throughout the loan process. a reputable agent. Be sure to talk to a few agents before
choosing one.
Processor: Reviews your loan application to makesureit’s
complete and accurate before handing it off to the underwriter. Listing Agent: Represents the seller and helpsthem
negotiate the prices and terms in the sale of the home.
Underwriter: Makes the final decision to approve or deny your
mortgage loan based on your specific financial situation.

Home Inspector Appraiser Title Company Closing Agent

Inspects your soon-to-be Determines the value of the Ensuresthe property title is Acts as an impartial third party
home to assessits condition home you’re buying, which clear of any liens or claims who plays the important role of
helps the lender know how and prepares a title insurance overseeing the final details of the
and identify any needed much money to lend you.
repairs before you buy. policy for the property. real estate transaction.

Costs That Come With
Buying a Home

Get Pre-Approved

2.0

Anatomy of a Mortgage Payment

2.1

Understanding Escrow

2.1

What Is Mortgage Insurance?

2.2

Closing Costs: Fees You Should Know About

2.3

Other Expenses to Save For

2.4

KNOW WHAT YOU CAN AFFORD

Get Pre- Approved The 4 Cs of Credit

Before you start looking at houses, work ü Character represents your credit history or financial
with your loan officer to get pre- integrity. Your credit score, how much credit you’ve
qualified, which will let you know how used in the past, and whether you make your payments
much home you can afford. This can on time are examples of your financial integrity.
help you narrow your home search to
houses within your budget, give you an 1 ü Capacity represents your ability to repay a loan. The
idea of how much you’ll need for a down amount of your income and assets are compared
payment, and help you identify budgeting against your monthly debts to make sure you can
goals to work toward. afford a loan.

To determine the loan amount you can qualify for, your lender will ü Collateral is the asset securing the loan — in other
look at your income, debts, savings, and assets. words, the value of the home itself. If you default on
your payments, the home can be repossessed by the
As a general rule of thumb, your monthly housing expense lender.
should not exceed 28%of your grossmonthly income.
ü Capital is how much money you’re able to invest in
While getting pre-qualified can be a big advantage during your the collateral, represented by your down payment.
home search, it’s not a guarantee for a loan. Getting approved The amount of capital you contribute shows that
for a mortgage happens later in the process. Jumpto page 4.2 to you have “skin in the game” and reduces the risk to
learn more about the mortgage application and approval the lender.
process.

Homebuyer’s Guidebook

2.0

COSTS THAT COME WITH BUYING A HOME

Anatomy of a Mortgage Payment Understanding Escrow

Your monthly mortgage payment is made up of the following You may have noticed that taxes and insurance make up a portion of
elements: your monthly mortgage payment. These are called escrow
payments.
Principal: Interest:
The actual amount What it coststo borrow Each month, yourlenderwill collect moneyfromyou (inyourmonthly
you are borrowing the money for your home mortgage payment)and putthatmoneyintoan escrowaccountto pay
your property taxesand insuranceon yourbehalf. This notonly
JOHN SAMPLE 5/23/17 protectsthe lender’s investmentbut alsomakesit easierforyou to pay
theseexpenses,ratherthan having to plan for hefty tax bills or
125 Cherry Street 1,056 insurance premiums on your own.
Anytown USA, 12345
Your escrowpaymentsinclude the following:
XYZMortg age Company
Onethousand &F ifty nine dollars • Real Estate Taxes: A percentage of your home’s

JohnS ample assessed value that gets paid to your local government to fund
roads, schools, and other local services.(1)
Taxes: Insurance:
Real estate Homeowner’s insur- • Homeowner’s Insurance: Protectsyour home in case of
(or property) ance (andmortgage
taxes insurance, if applicable) theft or acts of nature, suchas fire, hail, or tornadoes.(1)(2)

• Mortgage Insurance (if applicable): If you put

down less than 20% when you buy your home, you’ll have to pay
mortgage insurance. Let’s take a closer look at how mortgage
insurance worksnext.

1 This amount is estimated by your lender, so keep in mind that you may get a refund or have to pay a balance
at the end of the year.

2 Typically excludes floods and earthquakes.

Homebuyer’s Guidebook

2.1

COSTS THAT COME WITH BUYING A HOME

What Is Mortgage Insurance?

(Sometimes called PMI)

Mortgage Insurance (MI)protects the lender in the event that you fall

behind on your mortgage payments. If you put down lessthan 20%when

you buy your home, you’ll have to pay MI (also

Bytheway... referred to as private mortgage insurance [PMI] or a

mortgage insurance premium [MIP], depending on

Some loan programs, the type of loan product you choose).

like VA loans, don’t How Mortgage Insurance Can Benefit You
require MI, no matter

how big or small your While MI places an added expense on your monthly
down payment.
mortgage payment, it can be worth it by helping you
purchase a home sooner. For example, let’s sayyou only

have 5% saved up for a down payment. Rather than waiting to save up for a Whatis Equity?
full 20%downpayment, which could take years, you could purchase a home
Equity is the amountof home you actually own. Equity builds gradually
now with your 5% down payment and pay MI as a tradeoff. as you pay down your mortgage and can also increase as your home’s
value appreciates over time.
Once you have enough equity built up, you may be able to cancel your
MI. That’s because as you build equity, your LTV decreases. Remember You can get rid of MI once you have 20% equity in your home.
in an earlier section how we said borrowing $90,000 to purchase a
$100,000home would equal a 90%LTV? In that scenario, once you’ve
built up enough equity and your LTV reaches 80%(i.e., once you owe
$80,000),you can request to have your MI canceled.

Talk to your loan officer to learn more about howMI works.

Homebuyer’s Guidebook

2.2

COSTS THAT COME WITH BUYING A HOME

Closing Costs: • Home Inspection Fee: A fee paid to the home inspectorfor
Fees You Should Know About
assessingthe home’scondition and identifying any needed repairs.
In additionto yourdownpaymentand monthlymortgage payment,
there are severalothercoststhatcome with buyinga home.These are • Origination Fee: A fee charged by the lender for originating or
called closingcosts.
creating the loan. Typically 1% of the loan amount.
Closing costsoften representone of the mostunexpected expensesfor
homebuyers. They typically account for 2%to 5%of the home’s • Prepaid Expenses: A portion of your property taxes,
purchase price, soit’s important to savefor themahead of time.
Closing costsare due on closingday, or the day you signyour loan homeowner’s insurance, and accrued mortgage interest will need to
paperworkand the property title istransferredinto your name. be paid up front at closing.
Everyone’s closing costsvary slightly, but below are someexamplesof
whatmightbe included: • Recording Fees: Feespaid to your local governmentfor

• Appraisal Fee: A fee paid to the appraiser to estimatethe recording the real estate purchase and making it a part of public
record.
fair market value of your home.
• Title Service Fees: Feespaid to the title companycovering
• Credit Report Fee: A fee paid to the lender that coversthe
the title search, title examination, title insurance, and in somestates,
costof pulling your credit report. Your lender looksat your credit the fee for facilitating your closing.
history to determine your creditworthiness, or how likely you are to
repay your debt. • Transfer Taxes: A tax imposedon the transferof the title from

• Discount Points: An optional, upfront fee that you can pay the seller to the buyer.

to loweryour interestrate over the life of your loan. One point NegotiationTip
typically equals1% of the loan amount. You can negotiate with the seller to pay some or all
of the closing costs. If the seller won’t pay and you
can’t afford your closing costs, talk to your
lender about adding the closing costs into your
loan.

Homebuyer’s Guidebook

2.3

COSTS THAT COME WITH BUYING A HOME

DO NOT HOWEVER, DO

1. Thou shalt not change jobs, become self-employed or quit ü Stay current on your existing
your job. accounts.

2. Thou shalt not buy a car, truck or van (or you may ü Call Me or the Lender if you have any
be living in it!). questions or concerns.

3. Thou shalt not use credit cards excessively or let current ü Provide documents for your loan as
accounts fall behind. quick as possible

4. Thou shalt not spend money you have set aside for
closing.

5. Thou shalt not omit debts or liabilities from your loan
application.

6. Thou shalt not buy furniture on credit.

7. Thou shalt not originate any inquiries into your credit.

8. Thou shalt not make large deposits without checking with
your loan officer.

9. Thou shalt not change bank accounts.

10. Thou shalt not co-sign a loan for anyone.

Homebuyer’s Guidebook

2.4

FINDING A HOME

Finding a Real Estate Agent
3.1

Finding the Right Home
3.1

Making an Offer
3.2

The HomeInspection
3.3

FINDING A HOME

Finding a Real Estate Agent Finding the Right Home

Your real estate agent isa valuable partner in the homebuying process. He or Home hunting can be an exhilarating yet draining process. What should
she will help you find your dream home and present the offer to the seller on you look for, and how do you keep track of the features you loved, as well as
your behalf. the things you didn’t? Here are some things to consider each time you
view a new property.
When looking for an agent, start by asking your lender, a friend, or a
family member for a referral. Be sure to talk to a few agents before RESEARCH q Local Neighborhood Values
choosing one. q Neighborhoods q Additional Fees
q Cell Phone Coverage
Here are a few things to consider when looking for an agent:
INTERIOR FEATURES EXTERIOR CONDITIONS
Licensing. All agents and brokers are required to be licensed by the
state in which he or she does business. Do a quick internet search to verify q Flooring, Windows & q Roof
your agent’s license is in good standing and that no disciplinary action has Ceiling
been taken against them. q Foundation, Driveway &
q Walls Pool
Experience. Has the agent been around for just a few years, or are they a
seasoned professional? Do they have experience in your market?Are they q Bathrooms& Kitchen q Siding
unafraid to negotiate to get you the best deal? These are all important to Rooms
factors to consider to make sure you find an agent that’s right for you. q Landscaping & Curb Appeal
q Stairs Doors Garage
Reputation. One of the best ways to identify a good agent isby what Systems
past customers say about them, sobe sure to read reviews online before q Patio/ Deck Pests
choosing your agent. Doing sowill give you insight into the opinions and
experiences of other homeowners and will help you make a more
informed decision.

Homebuyer’s Guidebook

3.1

FINDING A HOME

Making an Offer What is Earnest Money?

Once you’ve found the home you love, it’s time to make an Earnestmoneyisa deposityou putdownwhenmakingan offer.
offer. The offer, or purchase agreement, is a legal document It’s a signof good faith to showyou’re seriousabout the
that outlines the terms and conditions of the sale. This may transaction. The amountvaries, but it could be between1% and
include but is not limited to: 3%of the purchaseprice. The moneygetsheld in an escrow
account until the transactionisfinalized, at which point it will go
• Address and legal property description towardyour down payment.
• Purchase price
• Down payment amount ConfusedAbout Escrow?
• Earnest money that must be paid
• Expiration date for the offer An escrow account is simply a third party accountused to
• A commitment by the seller to provide a clear title to the hold money for two parties during a transaction.
If you recall, the term escrow accountwas mentioned earlier
property when we talked about the taxes and insurance that your
• Target closing date lender collects as part of your monthly mortgage payment.
• Target move-in date This is just one example of escrow. The earnest money you
• Any contingencies the agreement is subject to, such as put down when you make an offer on a home is another
scenario where escrow is involved.
the buyer’s need to obtain a mortgage or get a home
inspection

In some states, your real estate agent will prepare this
document, or the state may require an attorney to draft it.
Be prepared for the seller to come back with a counter
offer before fully signing off on the deal.

Homebuyer’s Guidebook

3.2

FINDING A HOME

The Home Inspection

After both parties have signed the purchase
agreement, it’s time to get a home inspection. A
home inspection is not typically required to buy a
home, but it is strongly recommended. In some
cases, it may be a contingency on your purchase
agreement, meaning it must take place, or the deal
will be void.

Why You Should Get a Home Inspection
A home inspection is a thorough examination of the
property that identifies the home’s structural and
mechanical condition and points out any needed
repairs. On average, an inspection costs between $300
and $500, although cost varies depending on the
location, age, and size of the house. While a home
inspection will cost you a small sum of money up front, it
can help you know what you’re buying. For instance, if
the property needs major repairs, an inspection will help
you know ahead of time. Keep in mind, you may be able
to negotiate with the seller to pay for repairs.

Homebuyer’s Guidebook
3.3

SECTION 4

Closing On Your Home

What IsClosing?

4.1

Before You Close

4.1

On Closing Day

4.2

CLOSING ON YOUR HOME

What Is Closing? BeforeYou Close

Closing isthe final part of the homebuying process where you commit To ensure a smooth closing, make sure you’ve taken the following stepsprior
to your mortgage and become the legal owner of your new home. On to closingday:
closing day, you’ll sign your loan paperwork, and the property title will be
transferred into your name. Get a home inspection.
Get a homeowner’s insurance policy.
Who will be present at closing?
Determine who your closingagent will be.
• You (the buyer) • Title company
• Mortgage lender • Attorneys (ifapplicable in your state) Review the Closing Disclosure and make sure any errors are corrected.
• Seller • Closing agent The lender isrequired by law to provide this three days before closing.
• Seller’s Agent After the Closing Disclosure isissued, you mustwait three days to close. If
any fees change, another disclosure mustbe issued and you mustwait an
additional three days.

Ask your lender to provide you with a copy of your other closing
documents soyou can review them in advance. These include the
promissory note and mortgage (alsoknown as the security instrument
or deed of trust).

Find out how much money will be needed to close and how to transfer
payment (e.g., cashier’s check, wire transfer).

Do a final walk-through of the home 24 hours before closing to ensure
all repairs have been made.

Homebuyer’s Guidebook

4.1

CLOSING ON YOUR HOME

On ClosingDay

The big day has finally arrived! Make sure it goes off without a hitch with these tips.

What to Bring What toExpect

Photo ID Be prepared for a lot of paperwork. You’ll likely be required to sign two,
Cashier’s check or proof of wire transfer to cover your down payment possibly three, copies of each document. Plan for this to take a few hours.
and closingcosts Don’t rush it, and be sure to aska lot of questions. If something doesn’t
make senseto you,ask.
Checkbook (in case there are any last minute changes)
If your statedoesn’trequire an attorney to be present,it maybe a good idea to
Proof of homeowner’s insurance, your purchase agreement, and a arrange for one anywayto ensureyou understandeverything you’re signing.
copy of the home inspection

Homebuyer’s Guidebook

4.2

SECTION 5

Moving In

Congratulations! You’re a homeowner!

5.1

We’re Here to Help

5.1

MOVING IN

Congratulations! You’re a homeowner! We’re Here to Help

You’ve finally made it past closing. Now it’s time to move in! Part of being your lender means not just guiding you during
Below are some final reminders to help you get started on the the mortgage process but also staying in touch after your loan
right foot as a homeowner. closes. We’ll reach out periodically to let you know of any
changes in the market and whether there is an opportunity
• File your closing packet in a safe place for you to save money, so you will always know where your
mortgage stands.
• Change your addresswith:
–The US Postal Service If you ever have questions about your mortgage, just
–Your bank and credit card companies reach out to us. We’re here to help.
–The Department of Motor Vehicles (updateyour ID or
driver’s license)
–Your insurance company, internet provider, and phone
company

• Switch utilities to your new address
–Water
–Electric
–Gas
–Garbage

Homebuyer’s Guidebook

5.1



NOTES

Homebuyer’s Guidebook

Jennifer Lee
Keller Williams Realty

303.456.5227
[email protected]


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