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Frequently Asked Questions (FAQs)
- How do I know if I'm ready to buy a home?
- How do I begin the process of buying a home?
- How does purchasing a home compare with renting?
- How does the lender decide the maximum loan amount that I can afford?
- How can I determine my housing needs before I begin the search?
- What should I look for when deciding on a community?
- How can I find out about local schools?
- How can I find out how much homes are selling for in certain communities and neighbourhoods?
- How can I find information on the property tax liability?
- What should I look for when looking at new homes?
- What are "Home Warranties". and should I consider them?
- Are there special mortgages for first-time home buyers?
- How large of a down payment do I need?
- What is included in a monthly mortgage payment?
- What factors affect mortgage payments?
- How does the interest rate factor in securing a mortgage loan?
- What happens if interest rates decrease and I have a fixed rate loan?
- What steps need to be taken to secure a loan?
- How are pre-qualifying and pre-approval different?
- How should I look out for during the final walk-through?
- What make up closing costs?
- What can I expect to happen on closing day?
- What do I get at closing?
- How do I know if I'm ready to buy a home?
You can find out by asking yourself some questions:
- Do I have a steady source of income (usually a job)? Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable?
- Do I have a good record of paying my bills?
- Do I have few outstanding long-term debts, like car payments?
- Do I have money saved for a down payment?
- Do I have the ability to pay a mortgage every month, plus additional costs?
- How do I begin the process of buying a home?
Start by thinking about your situation. Are you ready to buy a home? How much can you afford in a monthly mortgage payment (see Question 4 for help)? How much space do you need? What areas of town do you like? After you answer these questions, make a 'To Do" list and start doing casual research. Talk to friends and family, drive through neighborhoods, and look in the "Homes" section of the newspaper.
- How does purchasing a home compare with renting?
The two don't really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing. Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that's an investment. Home ownership gives you freedom, stability, and security of your own home, these are worth it. You can set a more stable monthly payment system up, build your financial future, decorate how u see fit, grow with a community. There are many benefits to home ownership that everyone should have the opportunity to enjoy.
- How does the lender decide the maximum loan amount that I can afford?
The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. According to most major Banks, monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, should total no more than 41% of income. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.
- How can I determine my housing needs before I begin the search?
Your home should fit the way you live, with spaces and features that appeal to the whole family. Before you begin looking at homes, make a list of your priorities - things like location and size. Should the house be close to certain schools? your job? to public transportation? How large should the house be? What type of lot do you prefer? What kinds of amenities are you looking for? Establish a set of minimum requirements and a "wish list." Minimum requirements are things that a house must have for you to consider it, while a "wish list" covers things that you'd like to have but aren't essential.
- What should I look for when deciding on a community?
Select a community that will allow you to best live your daily life. Many people choose communities based on schools. Do you want access to shopping and public transportation? Is access to local facilities like libraries and museums important to you? Or do you prefer the peace and quiet of a rural community? When you find places that you like, talk to people that live there. They know the most about the area and will be your future neighbors. More than anything, you want a neighborhood where you feel comfortable in.
- How can I find out about local schools?
You can get information about school systems by contacting the city or county school board or the local schools. Your New Home Sales Professional in any Carraige Custom Homes show home may also be knowledgeable about schools in the area.
- How can I find out how much homes are selling for in certain communities and neighbourhoods?
Your New Home Sales Professional can give you a ballpark figure by showing you existing homes in the area as well as the show home itself. Its best if you go to the show home in the area(s) that your are interested in and talk with the sales representative. They will have all the information you will need about the communities, homes available to be built and much more that will help you to better make you new home purchase decision.
- How can I find information on the property tax liability?
The best way to ballpark this figure is to take the current years mill rate and multiply it by the value of the home you wish to purchase. Ask a Sales Representative for the community in question as most of them have this information available to them.
- What should I look for when looking at new homes?
In addition to comparing the home to your minimum requirement and wish lists, consider the following:
- What does the price include? Home, Lot & GST?
- Are appliances included?
- Does the house have a warranty/service program?
- How long has the builder been in Business?
- Does the Builder have a good reputation?
- Do you like the floor plan?
- Will your furniture fit in the space? Is there enough storage space?
- What are "Home Warranties". and should I consider them?
Home warranties offer you protection for a specific period of time (e.g., one year) against potentially costly problems, like unexpected repairs on appliances or home systems, which are not covered by homeowner's insurance. Warranties are becoming more popular because they offer protection during the time immediately following the purchase of a home, a time when many people find themselves cash-strapped.
- Are there special mortgages for first-time home buyers?
Yes. Lenders now offer several affordable mortgage options, which can help first-time homebuyers, overcome obstacles that made purchasing a home difficult in the past. Lenders may now be able to help borrowers who don't have a lot of money saved for the down payment and closing costs, have no or a poor credit history, have quite a bit of long-term debt, or have experienced income irregularities.
- How large of a down payment do I need?
There are mortgage options now available that only require a down payment of 5% or less of the purchase price. But the larger the down payment, the less you have to borrow, and the more equity you'll have. Mortgages with less than a 20% down payment generally require a mortgage insurance policy to secure the loan.
- What is included in a monthly mortgage payment?
The monthly mortgage payment mainly pays off principal and interest. Things you will want remember are, mortgage insureance if applicable, house insurance, property taxes and utility payments are all things that will have to be looked after as well.
- What factors affect mortgage payments?
The amount of the down payment, the size of the mortgage loan, the interest rate, the length of the repayment term and payment schedule will all affect the size of your mortgage payment.
- How does the interest rate factor in securing a mortgage loan?
A lower interest rate allows you to borrow more money than a high rate with the same monthly payment. Interest rates can fluctuate as you shop for a loan, so ask lenders if they offer a rate "lock-in" which guarantees a specific interest rate for a certain period of time. Remember that a lender must disclose the Annual Percentage Rate (APR) of a loan to you. The APR shows the cost of a mortgage loan by expressing it in terms of a yearly interest rate. It is generally higher than the interest rate because it also includes the cost of points, mortgage and other fees included in the loan.
- What happens if interest rates decrease and I have a fixed rate loan?
If interest rates drop significantly, you may want to investigate refinancing. Most experts agree that if you plan to be in your house for at least 18 months and you can get a rate less than your current one, refinancing is smart. Refinancing may, however, involve paying many of the same fees paid at the original closing, plus origination and application fees.
- What steps need to be taken to secure a loan?
The first step in securing a loan is to complete a loan application. To do so, you'll need the following information:
- Pay stubs for the past 2-3 months
- Information on long-term debts
- Recent bank statements
- Tax returns for the past 2 years
- Proof of any other income
- Address and description of the property you wish to buy
- Sales contract
- How are pre-qualifying and pre-approval different?
Pre-qualification is an informal way to see how much you may be able to borrow. You can be "pre-qualified" over the phone with no paperwork by telling a lender your income, your long-term debts, and how large a down payment you can afford. Without any obligation, this helps you arrive at a ballpark figure of the amount you may have available to spend on a house. Pre-approval is a lender's actual commitment to lend to you. It involves assembling the financial records mentioned in Question 19 (without the property description and sales contract) and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.
- How should I look out for during the final walk-through?
This will likely be the first opportunity to examine the house without furniture, giving you a clear view of everything. Check the walls and ceilings carefully, as well as any work the seller agreed to do in response to the inspection. Any problems discovered previously that you find uncorrected should be brought up prior to closing. It is the seller's responsibility to fix them.
- What make up closing costs?
There may be closing costs customary or unique to a certain locality, but closing costs are usually made up of the following:
- Attorney's (yours and your lender's if applicable)
- Property taxes (to cover tax period to date)
- Interest (paid from date of closing to 30 days before first monthly payment)
- Loan origination fee (covers lender's administrative costs)
- Recording fees
- Survey fee
- First premium of mortgage insurance (if applicable)
- Title insurance (yours and your lender's)
- Loan discount points
- First payment to escrow account for future real estate taxes and insurance
- Paid receipt for homeowner's insurance policy (and fire and flood insurance if applicable)
- Any documentation preparation fees
- What can I expect to happen on closing day?
You'll present your paid homeowner's insurance policy or a binder and receipt showing that the premium has been paid. The closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide proofs of any inspection, warranties, etc.
Once you're sure you understand all the documentation, you'll sign the mortgage, agreeing that if you don't make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. You'll also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed. You'll pay the lender's agent all closing costs and, in turn, he or she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state Registry of Deeds, and you will be a homeowner.
- What do I get at closing?
- 3 Service Certificates
- Manufacture Warranties (for products used in your home)
- Mortgage Note
- Mortgage or Deed of Trust
- Binding Sales Contract
- Keys to your new home
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