The Official Homebuyers Guide is brought to you by PittsburghLender.com and John Cushma.
This guide will cover all the details and steps of purchasing your next home. Whether you are a first time homebuyer, or purchasing a new home, this guide is an invaluable tool to help you navigate the real estate market.
"A journey of a thousand miles begins with the first step." This is a quote that I really enjoy, and getting pre-approved by a mortgage lender is the first step on your journey to homeownership.
Getting pre-approved should be quick and easy. To get started, you can contact a Loan Officer like myself or complete the mortgage pre-approval application on our website.
We will discuss information such as your work history, income, living/rental history, credit profile, and money to be used towards down payment/closing costs.
After we determine that you are credit worthy to obtain a mortgage loan, we will then discuss the different mortgage loan products available, and find the one best suited for you.
5 Things to Know When Shopping for a Home
Even though you are pre-approved, you must maintain a good credit history until closing. This means making payments on time, avoiding new debt, and not running up balances on existing debt. During the loan process, your credit is monitored 24/7 for any new inquiries or debt on your credit report.
The #1 most important rule during the loan process is to avoid obtaining any new debt until you close on your new home. That new car, living room furniture, or vacation will need to wait. Every loan officer can share a few stories about a client who went out and bought a new car right before closing, or ran up the balances on some credit cards. Maintain the same credit profile from the day you call for pre-approval, until the day of closing.
If your job income or hours fluctuate, you will want to make sure to continue working the same number of hours, or continue declaring the same tips until your home loan closes. Income is always a variable point that can change depending on your line of work, so continue to work hard before and during the loan process to make sure your income is consistent.
One of the biggest headaches for some homebuyers is documenting assets in the bank. The governments US Patriot Act requires lenders to verify deposits and transfers made to your bank accounts, with the exception of payroll direct deposits that are labeled with the employers name.
To prepare for this part of the loan process, you will want to provide your two months most recent bank statements. Glance at your bank statements and look for any "large deposits". A large deposit is a gray area in terms of what deems it large, so most lenders assume any non-payroll deposit that is more than 25% of your income needs sourced/documented. This means, if you deposited a check, you will want to ask your bank for a printout of this check that was deposited. If you made a transfer into your account from another, you will need to provide 2 months of statements for the account where the transfer initiated. If there are any "large deposits" into that bank account, you will need to obtain the same proof/printouts from that one as well.
Avoid any and all large purchases until after closing. This is the golden rule. Avoid any new debt.
Typical Fees When Buying A Home
The down payment + closing costs will need to be brought to the mortgage loan closing in the form of a cashiers check. The loan officer will tell you who the check needs to be made payable to (usually the settlement company handling the closing). The down payment will vary depending on how your loan is structured. The minimum down payments differ between mortgage types, but a USDA loan can usually be structured with $0 needed at closing, FHA with only 3.5% needed at closing, VA with $0 needed at closing, and Conventional with only 3% needed at closing.
Closing costs include a wide array of fees from many different parties. These can include, but not limited to the following items.
Lender fees - usually range between $900-1,500 depending on the lender you choose
Settlement company fees - usually range between $0-500 depending on the settlement company
Title Insurance (lender & owner policy) - These fluctuate depending on the purchase price. The state of Pennsylvania sets title rates and premiums.
Appraisal fee - Each appraiser that we use is different, but the fee typically ranges from $350-450 depending on the property.
Transfer Taxes - The government charges a "transfer tax" that is typical split 50/50 by the buyer and seller. This tax is charged based on the purchase price of the home and varies from area to area in Pennsylvania. This can range from as low as 1% to as high as 4%.
Government recording charges - The government charges a recording fee for each page of the documents that are recorded. This fee can range from $140 to $400 depending on the area of Pennsylvania.
Realtor admin fee - Depending on your realtors company, they may charge you an "admin fee", which can range from $0 to $500 depending on their company and agreement you have worked out.
Pest Inspection - Most loans require a pest inspection, which can range from $75-150.
Survey - A survey is optional and not usually required. These can range from $100-500 if you opt for one.
Depending on the time of year that your loan closes, you will need to "pre-pay" your property taxes and insurance by building an escrow account that is attached to your loan. The amount of money that is held in escrow will vary depending on when each of your various taxes and insurance premiums are due. The pre-paid column of the financial estimate usually makes up the largest chunk of money you will need at closing. Have no fear though, because all you are doing is pre-paying yourself.
Homeowners Insurance (Hazard Insurance)
For some odd reason, mortgage lenders like to call homeowners insurance by the name Hazard Insurance. During the loan process, you will be required to obtain homeowners insurance. You can opt to pay the first years premium up front, or you can bring the money to closing along with your down payment.
A home inspection is a very important part of the home buying process. Your Realtor should be able to assist you with finding a very good inspector that can help review your potential new home, and any serious problems or safety issues. These typically range from $350-500, but is the best money you will ever spend should some serious issue appear.
Negotiating For Your Home
One of the most important tools to consider when negotiating on your home is sellers assistance. Seller Assistance means that the seller agrees to pay percentage of your closing costs as documented on your signed sales contract. The amount of seller assistance that you can ask for depends on the type of mortgage that you are seeking.
FHA - 6% maximum seller assistance allowed
USDA - 6% maximum seller assistance allowed
Conventional - 3% to 9% maximum seller assistance allowed depending on your down payment
VA - 6% maximum seller assistance allowed
Typically transfer taxes are split 50/50 between buyer and seller, but you are able to negotiate for the seller to pay ALL of the transfer taxes during your negotiation to purchase the home.
As a lender, I am very fast at closing mortgage loans, with an average turn time of 21 days. However, just because we are quick doesn't mean that you need to close right away. While the usual purchase agreement is for 30-45 days, there are times when buyers need 60-90 days for closing, due to a number of factors. These could include: Waiting for your old home to sell. Potential job relocation. Birth of a child. etc...
John Cushma is a hands on Loan Officer from start to finish
For informational purposes only and is not a commitment to lend. Programs, rates, terms and conditions are subject to change at any time. Availability dependent upon approved credit and documentation, acceptable appraisal, and market conditions. Not all programs available in all areas. CrossCountry Mortgage Inc. is a Pennsylvania Corporation headquartered at 22 Rutgers Road, Pittsburgh, PA 15205. NMLS# 1423174 #3029; www.nmlsconsumeraccess.org; Equal Housing Opportunity.