The 3 most important factors to be aware of before buying your First Home:
1. Income
2. Credit
3. Assets

1.  Income. To borrow the amount of money needed to buy a home you will need to show strong employment history.  Any job gaps will need to have a make sense explanation and everything must be documented.  Your income can be supported by W2, 1099 and or tax returns.  And to verify your employment we will contact your current and previous employers

- How much can you afford?
Deciding how much house you can afford is a personal decision.  Many factors come into play.  How much can I borrow?  How much can I put toward my down payment?  What size monthly payment can I afford?   
There are no black and white answers to these questions.  It’s a matter of give and take.  If you plan on a 30 year mortgage, you can probably make a lower down payment (or perhaps no down payment at all) and still manage the monthly payments.  If, on the other hand, you plan on a 15 year mortgage, you'll probably want to make a larger down payment to keep your monthly payments in line with what you can afford. 

-What size monthly payment can I afford?
When determining what size monthly payment you can afford, you'll want to consider what other monthly expenses you have.   Tangible expenses such as car payments, day care and utility bills, all play a role in how large a monthly payment you can afford. 
There are also the intangible expenses or lifestyle expenses that you'll want to consider.  Things such as dining out, travel and when you buy your next car can affect how much you can afford.  Are you willing to curtail or delay some of these expenses in order to afford a larger monthly payment? 

-How much can I borrow?
This is a question you'll want to get answered before you begin your home search.   This is something that we're here to help you with.   
We can answer any questions you may have about the mortgage process.  But the best way we can help is by getting you pre-qualified for a mortgage loan.  To get started, simply complete our online application and we’ll contact you promptly.  We look forward to helping you buy your dream home.

2.  Credit. Your credit also is very important in determining how much you qualify for.  The debts that show on your credit report are all we will consider when determining the purchase price you qualify for.  620-850 is the range of credit scores that will allow you to capture the best rates the market has to offer.  If you have no idea what your credit score is contact us and we can help you determine where you stand.  If for some reason your credit is not up to par we offer a free credit repair service that will help you buy that first home.

What determines my credit score?
-Credit History - How long have you had credit?
-Payment History - Do you pay your bills on time?
-Credit Card Balances - How much do you owe on how many accounts?
-Credit Inquiries - How many times have you had your credit checked?

3. Assets. To qualify assets such as a checking, savings, 401k or any other accounts are not mandatory but generally help.  3 months mortgage payments is a good amount to have put aside to qualify.  If needed to qualify assets can be gifted from family members or employers.

- How large a down payment can I make?
Many buyers look at their cash on hand as their only source for their down payment.  This simply is not the case.  One way to fund or partially fund a down payment is by using a gift.   Parents, grandparents and other family members are often eager to help by making a cash gift toward the purchase of your home. 

*Each and every person’s financial situation is different.  Some people may need to prepare for months before they are able to qualify for their first home and others are ready from the moment they contact us.  The best way to start is to contact us via email or phone and we can connect you with a local realtor and put a plan in place to buy your first home.

To learn more about purchasing your first home please visit our website devoted to your first home purchase:          http://www.denver1stmortgage.com/firsthome
 
 

Your First Home Q&A:

Why should I buy, instead of rent?

Answer: Your first home is an investment. When you rent, you write your monthly check and that money is gone forever. But when you own your home, you can deduct the cost of your mortgage loan interest from your federal income taxes, and usually from your state taxes. This will save you a lot each year, because the interest you pay will make up most of your monthly payment for most of the years of your mortgage. You can also deduct the property taxes you pay as a homeowner. In addition, the value of your home may go up over the years. Finally, you'll enjoy having something that's all yours - a home where your own personal style will tell the world who you are.

Can I become a homebuyer even if I have had bad credit?

Answer: Yes.  We offer a free credit repair service that will help you get your credit where it needs to be to qualify for a home.

Should I use a real estate broker? How do I find one?

Answer: Using a real estate broker is a very good idea to find the right first home. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate broker will be well-acquainted with all the important things you'll want to know about a neighborhood you may be considering...the quality of schools, the number of children in the area, the safety of the neighborhood, traffic volume, and more. He or she will help you figure the price range you can afford and search the classified ads and multiple listing services for homes you'll want to see. With immediate access to homes as soon as they're put on the market, the broker can save you hours of wasted driving-around time. When it's time to make an offer on a home, the broker can point out ways to structure your deal to save you money. And you don't have to pay the broker anything! The payment comes from the home seller - not from the buyer.
We will be happy to refer you to an experience realtor that has a proven track record with first time home buyers.

How much money will I have to come up with to buy my first home?

Answer: Well, that depends on a number of factors, including the cost of the house and the type of mortgage you get. In general, you need to come up with enough money to cover three costs: earnest money - the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house; the down payment, a percentage of the cost of the home that you must pay when you go to settlement; and closing costs, the costs associated with processing the paperwork to buy a house.

When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies. If you buy a HUD home, for example, your deposit generally will range from $500 - $2,000.

The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. That's why many first-time homebuyers turn to HUD's FHA for help. FHA loans require only 3% down - and sometimes less.
Closing costs - which you will pay at settlement - average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won't be caught by surprise. If you buy a HUD home, HUD may pay many of your closing costs.

And remember, in your offer you can ask the seller to pay the closing costs for you!

In addition to the mortgage payment, what other costs do I need to consider?

Answer: Well, of course you'll have your monthly utilities. If your utilities have been covered in your rent, this may be new for you. Your real estate broker will be able to help you get information from the seller on how much utilities normally cost. In addition, you might have homeowner association or condo association dues. You'll definitely have property taxes, and you also may have city or county taxes. Taxes normally are rolled into your mortgage payment. Again, your broker will be able to help you anticipate these costs.

So what will my mortgage cover?

Answer: Most loans have 4 parts: principal: the repayment of the amount you actually borrowed; interest: payment to the lender for the money you've borrowed; homeowners insurance: a monthly amount to insure the property against loss from fire, smoke, theft, and other hazards required by most lenders; and property taxes: the annual city/county taxes assessed on your property, divided by the number of mortgage payments you make in a year. Most loans are for 30 years, although 15 year loans are available, too. During the life of the loan, you'll pay far more in interest than you will in principal - sometimes two or three times more! Because of the way loans are structured, in the first years you'll be paying mostly interest in your monthly payments. In the final years, you'll be paying mostly principal.

When I find the home I want, how much should I offer?

Answer: Again, your real estate broker can help you here. But there are several things you should consider: 1) is the asking price in line with prices of similar homes in the area? 2) Is the home in good condition or will you have to spend a substantial amount of money making it the way you want it? You probably want to get a professional home inspection before you make your offer. Your real estate broker can help you arrange one. 3) How long has the home been on the market? If it's been for sale for awhile, the seller may be more eager to accept a lower offer. 4) How much mortgage will be required? Make sure you really can afford whatever offer you make. 5) How much do you really want the home? The closer you are to the asking price, the more likely your offer will be accepted. In some cases, you may even want to offer more than the asking price, if you know you are competing with others for the house.

What if my offer is rejected?

Answer: They often are! But don't let that stop you. Now you begin negotiating. Your broker will help you. You may have to offer more money, but you may ask the seller to cover some or all of your closing costs or to make repairs that wouldn't normally be expected. Often, negotiations on a price go back and forth several times before a deal is made. Just remember - don't get so caught up in negotiations that you lose sight of what you really want and can afford!

So what will happen at closing?

Answer: Basically, you'll sit at a table with your broker, the broker for the seller, probably the seller, and a closing agent. The closing agent will have a stack of papers for you and the seller to sign. While he or she will give you a basic explanation of each paper, you may want to take the time to read each one and/or consult with your agent to make sure you know exactly what you're signing. After all, this is a large amount of money you're committing to pay for a lot of years! Don't hesitate to ask questions.

I don’t have money for a Downpayment or closing costs, can I still buy a home?

Answer: Yes!  A program is still available that requires a Downpayment of only $100.  This incentive is only available on certain properties so contact your real estate professionals to find out if any one of these properties will fit what you’re looking for.  An earnest money check of $1,000 but can be credited back to you at closing.

Follow the link to view homes available for $100:     http://www.denver1stmortgage.com/100dollarhomes

My parents offered to help me with the Downpayment, will the lender allow this?

Answer: Yes.  FHA loans will allow for gift funds to be applied to the Downpayment, closings costs and reserves to qualify for the loan.

How long will it take to close on our first home once our contract is accepted?

Answer: This depends on you as the borrower.  If you are organized and the seller is able to move quickly purchase transactions can close in as little as 7 days.  The average closing is 30 days out from the time of accepted offer.
How much will my real estate agent cost me?
Nothing!  The seller pays the realtor commissions!

To learn more about purchasing your first home please visit our website devoted to your first home purchase:          http://www.denver1stmortgage.com/firsthome

Sincerely,
Michael Shotnik
Direct Mortgage Banker
Summit Home Mortgage
mshotnik@summit-mortgage.com
303-800-4595