First time home buyer guide

First Time Home Buyer

Buy a New Home in Maryland 1920 Greenspring Dr. Timonium, MD 21093 443-531-9715 www.marylandnewhomepurchase.com

Guide Book

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Table of Contents

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Credit Scores Home Affordability Steps to Buying a Home Loan Types Down Payment Help FAQ’s from Home Buyers

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Credit Scores Credit scores are an important factor for poten al home buyers. Credit scores are used to determine both purchase loan eligibility and interest rate. The higher the credit score the higher the chance for loan approval and a lower overall interest rate.

Are you trying to make a major purchase and are in need of improving your credit score to do so? Our team of licensed Realtors and Loan OďŹƒcers have decades of experience helping people to repair their credit with the three major credit bureaus. Here are 13 credit repair ps that we have uncovered in our years of assis ng others to improve their credit scores in order to get qualiďŹ ed to buy a home. These are all tried and proven methods for ge ng your credit scores up.

1- Your payment history to creditors that report to the credit bureaus account for about 35% of your given credit scores. This is the most important part of star ng to repair your credit. Make NO 30 day late payments to those creditors. This will begin to have a great impact on your credit score. If you have a bill due in a given month make sure that payment posts before the end of the month.

2- Seriously consider se ng up auto payments to your creditors through a checking account or debit card to assure that there will be no future 30 day late payments.

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3- Account balances account for about 30% of your given credit scores. If you want to improve your credit score keep the balances owed on your credit card at about 30% or lower than your available credit limits. If you have a credit card with a $1,000 credit limit keep the balance at $333 or lower for example.

4- Establishing and then keeping accounts open accounts for about 15% of your given credit scores. Keep old accounts in good standing open. The older that your credit accounts are the be er that they are for your credit.

5- Establish different types of credit. This accounts for about 10% of your given credit scores. It is great to have revolving accounts and these help your credit significantly when managed well. However, establishing installment loans along with your revolving accounts demonstrates the ability to manage different types of credit.

6- Do not take on more than you can reasonably manage to pay. All you really need is 3-4 accounts repor ng on your credit that you are managing well. Excessive credit too fast can have a nega ve effect on your credit scores. This accounts for about 10% of your given credit scores.

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7- Open new trade lines. Credit cards are a great tool for improving your credit when they are managed correctly. There are several types of credit cards. Retail store credit cards, bank credit cards, secured credit cards. Applying for and being approved for 2 or 3 credit cards is a BIG step toward ge ng your credit scores up. If you do not have the best credit and know it, do not apply for credit cards designed for people with good credit. CapOne, First Premier (secured credit card), JC Penny are easier cards to get if you have challenged credit. Fingerhut reports payments to the credit bureaus and these accounts can help your credit too. We do not endorse nor make any expressed guarantees that you will be approved. But these are a good place to start if your credit is not the best. Applying for an auto loan, being approved, paying all payments on me, will also improve your credit scores.

8- Being added as an authorized user on someone else's credit card whom is managing their card correctly can also improve your credit scores. The older the card and the higher the credit limit the more it will improve your credit scores. By being added as an authorized user that account would then begin repor ng on your credit report each month. Of course you would only want to consider doing this with someone who pays their card on me each month. If they do not then that card would have a nega ve impact on your credit scores.

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9- Increasing your credit card limits can also help improve your credit scores.

A er six months of on me payments credit card companies will o en approve a credit limit increase. Doing this while maintaining a low balance will have a posi ve eect on your credit scores. It signals that you have available credit yet are not in need of using it.

10- Get current on any repor ng late payments and stay current. Credit reports only report payments that are late 30 days or more. If you have a 30+ days late report on your credit that will con nue to report un l you bring it current. This will kill your credit score. For example, if you did not make a payment in May on your credit card or card or car payment and then make a payment in June.

You have just made May's payment and June is s ll due. If you do not make another payment un l July then you have what's called a running 30 day late payment. This will have an even worse aect on your credit scores.

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11- Se le collec on accounts and charge offs. The goal is to have all your past due accounts marked paid, current, or se led. When it comes to mortgage loans the extent to which this must be done varies. Contact us for more details.

Some debts do not necessarily have to be paid off to qualify for a mortgage loan. Se ling these accounts will improve your credit scores. Collec on that are 180 days late or more usually go into charge off status. This has a worse impact on your credit then a collec on does. If you have collec ons try and resolve them before they go to charge off. You can usually nego ate the debt with the creditor and o en offer a lower agreeable se lement offer. If you se le a debt make sure to get a le er from the creditor or collec on company sta ng that your account has been se led with a 0 balance. You will need that le er to get that nega ve account off of your credit report. The older the charge off is the lesser affect it has on your credit scores. Do not a empt to se le these accounts if it will cause you to become late on your accounts in good standing. It is cri cal that you keep your current accounts paid on me.

12- Remove old delinquent accounts that have reached 7 years since their repor ng date on credit. Old delinquent accounts greater than 7 years old can usually be removed at your request to the credit bureaus. Removing these will improve your credit scores.

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13- Review your credit report and work to ďŹ x errors found on it. Errors do happen on credit reports. A er review of your report inaccuracies can be disputed with the 3 major credit bureaus. Just keep in mind that the credit bureaus will personally contact the creditors involved and ďŹ nd out their side of the story.

Disputes that are not answered within 30-45 days which happens some mes but not o en will be removed from your credit report. However, if the creditor s cks by the reported debt then the credit bureau will note that on your credit and the debt will remain. You will then have to back up your dispute with proof that the debt is reported inaccurately. Some credit repair companies promise to improve your credit and what they do is simply write the credit bureaus a dispute le er for all your nega ve collec ons and charge os hoping that the creditor does not reply. However, usually they do. If you are trying to buy a home your credit report cannot have any unresolved disputes on it. Keep this in mind if you choose to dispute an account have proof to back it up. If not, then any temporary increase in your credit score will be lost when the lender forces you to remove unresolved disputes from your credit report.

Source: Credit Repair Tips

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Home Affordability Considering the major housing bust that the economy is s ll a emp ng to recover from it is cri cal that home buyers seriously consider the affordability of a home purchase for them.

Buying a home is an exci ng experience, a great accomplishment. For many it is in fact the fulfillment of the American dream. That dream can become a nightmare if you do not buy within your means.

As you consider purchasing a home be careful not to bite off more of a mortgage payment than you can easily afford. Because at the end of the day that is what you own in the beginning a mortgage payment. The house belongs to the bank if you do not keep up with your payments.

You may be told by your lender that you qualify for a very large home loan. That does not mean that you should shop in that price range. Most Financial Advisors suggest that you do not go over a total debt to income ra o of 43. Your lender can tell you what your debt ra o is for any given loan amount. Shop within a reasonable total debt to income ra on. If the 350,000 purchase price that you may qualify for puts you over a comfortable debt to income ra on then maybe you should be shopping for a home below 300,000. Be prac cal do not fall in love with a home that you will struggle hard to pay for. You do not know what emergency financial situa ons may loom in the future.

It is also advised that you should try and have a savings a er the purchase equivalent to 6 full months of your normal monthly debts before going into a home purchase.

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Steps to Buying a Home 1-Contact a Mortgage Lender to get a credit and affordability analysis.

2-Get a pre-qual le er from the Lender. This is necessary in order to get a real estate agent to represent you and make an offer on a house.

3-Connect with a Realtor to assist you with finding the type home you are interested in buying.

4-Search un l you find the right home. Decide what areas you would be interested in buying a home in. Consider the crime, schools, property tax, and likely apprecia on of the areas.

5-Make an offer on a house. Your Realtor will draw up the purchase offer for you.

6-Nego ate and agree on all terms between you and the seller. Nego ate the price, seller's closing cost assistance, and whether items in the home will be le behind.

7-Arrange for the home inspec on and appraisal. The lender will order the appraisal for you.

8-Provide all necessary documents requested by your lender so you will get the official loan approval and clear to close.

9-Go to the se lement table, sign all final purchase documents,and close on the home.

10-Get the keys to the house and move in.

Source: Steps to Buying a Home 10

Loan Types When a emp ng to buy a home an individual should learn about all available loans that there are to do so. There are many different loan programs available to buy a home and each has it’s plus and minuses. By evalua ng each of these loan programs you will be able to find the loan program that best fits your unique situa on.

Coven onal Loans: Conven onal loans are a great op on for financing a new home purchase. Conven onal loans extend up to 97% financing opportuni es for home buyers. There are however some banking ins tuons and credit unions that will go 100% financing on a conven onal loan. However, with enrollment in one of the down payment assistance programs available it could cover much of any necessary down payment.

Conven onal 1st me home buyer loans approval guidelines are a li le more restric ve than other loan programs. With conven onal loans their is no upfront funding fees like USDA, VA, FHA Loans. Although these upfront fess can be financed into the home purchase they nonetheless are being paid for by the home buyer. With Conven onal loans the monthly mortgage premium can be avoided with a 20% down payment on a home. If you choose conven onal financing but do not put 20% down there will be a mortgage insurance. However, that mortgage insurance premium can be requested removed once the home buyer reaches a 80% LTV. Once the loan balance equals only 80% of the homes appraised value it can be removed.

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Veteran Loans (VA): Veteran Administra on loans are a great op on for financing a new home purchase for Veterans. Veteran home loans extend 1OO% financing opportuni es for Veteran home buyers. Veterans affairs home buyer loans are by far the one of the best new home purchase program available. To qualify for a Veterans Home Purchase Loan, you must be an ac ve or honorably discharged veteran of the armed forces. You must apply for a Cer ficate of eligibility, which our team can help you do. Veteran loans do have an upfront fee which can be substanal. That upfront funding fee can be avoided only if the Veteran has an service related disability percentage of 25% or more.

Benefits of a VA home loan, includes; Low&Affordable fixed interest rates No monthly mortgage insurance 0 down payment.

Large loan limits Gi funds and grant funds accepted Seller concessions are allowed Eligible proper es include new construc on, exis ng homes, manufactured homes, condos, PUD's, and new manufactured homes

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FHA Loans: FHA first me home buyer programs are a great op on for financing a new home purchase. FHA loans extend 96.5% financing opportuni es for home buyers. However, with enrollment in one of the down payment assistance programs available it usually covers much of the necessary down payment. FHA 1st me home buyer loans are the easiest of all purchase loans to qualify for. The credit score and income requirements for FHA loans are less restric ve than any other first me home buyer loan program. The FHA has a 203K Loan op on which is a rehab loan that can provide up to $30,000 in home improvements on your new home purchase. FHA Loans have both upfront funding fees and lifeme monthly mortgage insurance.

Some of the reasons why an FHA loan in Maryland is a great choice, includes; Low&Affordable fixed interest rates Only a 3.5% down payment.

Large loan limits Gi funds and grant funds accepted Down payment assistance programs allowed Seller concessions are allowed Eligible proper es include new construc on, exis ng homes, manufactured homes, condos that are FHA approved, PUD's, and new manufactured homes

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USDA Loans: USDA loans are a great op on for financing a new home purchase. USDA loans extend 100% financing opportuni es for home buyers. USDA Loan programs were started to encourage development in rural areas of the USA. The USDA loan assists low to moderate income families in achieving their homeownership dreams. To qualify, the borrower must meet USDA minimum income and credit score standards, and purchase a home in one of the USDA eligible rural areas in their state. USDA Loans so have an upfront funding fee and a life me monthly mortgage insurance.

Some of the reasons why a USDA loan is a great choice, includes; Lower mortgage insurance premiums than FHA Affordable fixed interest rates 0 down payment.

No maximum purchase price Gi funds and grant funds accepted Seller concessions are allowed Eligible proper es include new construc on, exis ng homes, manufactured homes, condos, PUD's, and new manufactured homes Not limited to first me home buyers.

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Down Payment Help There are various down payment assistance programs for first me home buyers in the US. There are also some forgivable grants for down payment assistance and closing costs for first me home buyers in various states in the US. One of the biggest obstacles to home-ownership is coming up with a required down payment. Down payment assistance programs and grants help many achieve their home-ownership dreams that otherwise would not. State or Local County Employees may be eligible for addi onal down payment assistance.

Not every first me home buyer qualifies for down payment assistance or grants. There are statewide down payment assistance programs and there are some mes county or city specific programs within states. Here is a great resource if you are looking to apply for a down payment assistance program within you state. h p://downpaymentresource.com/areyou-eligible/

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FAQ from Home Buyers How much money will I need to buy a home?

The overall money that will be needed by a person to buy a home depends upon several factors.

There are basically three separate categories of costs that a home buyer is expected to pay for in some way.

First off there is the down payment. The down payment could be up to 10% of the purchase price. This depends upon what loan they are offered or qualify for. VA and USDA Loans offer 100% financing, elimina ng the need for a down payment. FHA Loans for first me home buyers require 3.5% down. Conven onal loans usually require 10% down. However, there are many down payment assistance programs that are available that can reduce or eliminate the down payment cost to the home buyer.

Secondly, there is the buyer's por on of closing costs that must be paid. Title fees, state taxes, stamps, tle fees, home owner's insurance, etc. These fees, although they are the buyers, can be covered by a nego ated closing cost percentage agreed to by the seller. Generally up to a 6% seller's assistance is allowed with most loan types. If enough seller's contribu on is nego ated as part of the purchase contract, generally most or all of the buyer's por on of closing cost fees can be covered.

Lastly, there is the cost of the appraisal, op onal home inspec on, termite inspec on. These services if chosen or necessary, must be paid in advance of loan se lement. If the home buyer chooses an experienced lender with first me home buyer programs, down payment assistance programs, they can o en buy their home with very li le out of pocket costs.

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FAQ from Home Buyers Do I really need to use a Real Estate Agent as home buyer?

Buyers do not have to use a Real Estate Agent of their own to buy a home. However, here is a list of good reasons to hire one.

1-A real estate buyer's agent represents the home buyer's interest while the home seller's realtor is trying to get the best deal for the seller.

2-The buyer's agent is paid from the real estate fees charged to the home seller.

Buyer's do not pay anything for the services of their realtor.

3-A buyer's real estate agent can assist the home buyer with ďŹ nding the type home they are looking for.

4-The buyer's agent will help a home buyer get a fair price on a house, nego a ng with the seller's realtor in behalf of the home buyer.

5-The buyer's realtor will prepare the necessary purchase contract that gets presented to the home seller by their realtor.

6-The buyer's realtor will set up appointments for the home buyer, accompanying them in seeing the home's they are poten ally interested in purchasing.

7-The buyer's realtor oers their experience and advice about the home buying process to the client.

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FAQ from Home Buyers What is private mortgage insurance (PMI)?

Private mortgage insurance o en referred to as PMI, is an insurance policy that protects the lender in the case of a borrower defaul ng on their loan. The home buyer pays the annual premium in 12 equally divided payments added to the mortgage payment. The lender is the beneďŹ ciary of the policy.

PMI is required on all FHA and USDA Loans. At one me PMI insurance ended on FHA loans once the borrower's loan to value reached 80%. That policy has changed.

FHA PMI remains for the life of the loan with FHA Loans except for home buyer's that take out a 15 year loan when they buy their home. In this case, once the loan to value reaches 78% the home buyer can request the PMI to be removed.

USDA Loan PMI remains for the life of the loan. However, the PMI insurance is only about 1/3 the cost of FHA and Conven onal Loan PMI. VA Loans have no PMI insurance requirement. Conven onal Loan PMI can be removed once the loan to value reaches 80%.

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FAQ from Home Buyers Should I get a home inspec on?

If you are thinking about buying a home one of the decision you will face is whether or not you should get a home inspec on done on the house you are interested in buying.

Home inspec ons are not actually required in order to buy a home. Unless you are applying for a down payment assistance program and that program requires one.

Although home inspec ons may not be required they are generally suggested by realtors and lenders as a precau on against buying a home that has serious issues that cannot be easily seen. So although maybe not required, a home inspec on is worth the extra cost to assure you are buying a sound home.

Home inspectors will do a complete inspec on of the home, including; Plumbing RooďŹ ng Siding Electrical Founda on Gu ers and Downspouts Furnace Insula on

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