3 Things to Consider Before Buying a Home

By: Glen Lazovick, SVP, Business Development

Whether you are a first time homebuyer, looking to trade up or down size your current home, the homebuying process can often be intimidating. Here’s 3 things to consider to help you plan for your homebuying quest. 

 1. Be a smart shopper. 
Begin your homebuying hunt by knowing how much you can afford. How do you determine what you can afford?

 • Prepare a budget.
Create a list of your monthly expenses. Be sure to include any current recurring debt, entertainment expense, commuting cost. Pro tip: This is a great time to ask yourself if there are any items you can cut out to reduce your monthly expenses. Take this time to review your cable and phone plan, check your insurance bill, find cost effective ways to doing the things you do regularly – like brewing your own coffee.

 • Meet with a Mortgage Loan Officer.
A Mortgage Loan officer can help you determine how much home you qualify for. While the Loan Officer can get you a loan for more than you thought you could afford, that does not mean it is what you would feel comfortable paying each month. This is where you could consider the budget you created. While your Loan Officer will review your income and credit statements he or she will not be able to account for your lifestyle expenses paid in cash, or credit cards that get paid off each month. 

2. Determine the best mortgage product for your needs.
Work with your Loan Officer to determine the best mortgage product for your unique situation. Your Loan Officer should ask you questions like how long you plan on being in your home and how much money you’re looking to put towards the down payment. The answers to these questions will help determine the best mortgage product for your needs.

 • Thinking about how long do you plan on staying in the home can help determine if an Adjustable Rate Mortgage (ARM) makes more sense than a fixed rate mortgage. Often times ARM’s provide a lower rate due to the shorter mortgage terms.

 • A down payment is an important consideration when considering a home loan. Your Loan Officer will be able to talk you through different products based on what you feel comfortable having for a down payment.

 3. Location, Location, Location. Check out and target a neighborhood.

• Visit your targeted neighborhood on several occasions at different times and days of the week. A neighborhood that is quiet Tuesday at 2:00 pm maybe noisy and traffic filled on a Saturday at 11:00 am.

• Plan a practice weekday commute from your targeted neighborhood. Leave the targeted neighborhood the same time you leave your current home. Is the commute longer or shorter is it something you can live with? It might be short as far as distance but traffic patterns may double your commute time.

• How are the schools in the neighborhood? Even if you do not have school aged children, the schools that serve your neighborhood can affect the home’s resale value.

• What surrounds the immediate area of the house? There may be a nice tree lined border in the back yard during the spring and summer months but in fall you may find out that the house is behind an Industrial complex.

• What are the future plans for the surrounding area? Check with the City or County planning or zoning board. Will a major highway be planed to cut across your back yard? The more information you have on the location, the more informed decision you can make on your future home.

While the list of considerations above should help begin the conversation about your future move, I would highly recommend meeting with a Mortgage Loan Officer who can help you plan and put you in touch with the right industry professionals to make your move as smooth as possible. If any red flags come up through your consolation, you have the opportunity to plan accordingly before your move.

Want additional information about the homebuying process? Request a copy of our homebuyer’s guide or apply online. Happy house hunting!

10 Tips to Save for Your First Home

 By: Amy Smith, Mortgage Planner

Saving money is hard!  But just like anything if you try hard enough the payoff is fantastic.  Follow these not easy but rewarding steps to save for your first home….

1.  Start a budget.  Plan your expenses and budget in an amount for savings every month 
2.  Get a travel mug!  Making your coffee at home to take with you can save you $2 or more a day. 
3. Skip the bagel.  Buy your breakfast when you do your grocery shopping and pack it.
4. Along the same lines – pack your lunch.  Savings $7 a day (or more) on lunch out could be a huge savings at the end of the month.  
5. Eat dinner at home.  We are all busy so getting delivery or eating out always seems easier.  If you cut out dinners out at least twice a month you could save $50 to $100 just for those two sacrifices. 
6.  Review your auto insurance plan.  Make sure you aren’t paying too much because you’ve stayed with the same carrier. 
7.  Stop spending needlessly!  Stick with just your needs for one month and see what that leaves at the end of the month.  Stash it away and do it again.  And again. 
8.  Get rewards cards.  Make your spending work for you!  Saving on gas because you shop one place and earning discounts on your purchases another place help to cut costs for the things you have to buy anyway.  
9.   Have the time?  Get a part time job or start consulting (as long as you aren’t planning to claim a loss on your tax returns).  
10.    Have a yard sale.  Sell all of the stuff you don’t need to drag with you to your new home.

Follow these tips and you’re on your way to putting more money away each month towards the home of your dreams. Ready to begin the home buying process? Request a copy of our homebuyers guide or apply online.

Tips for a Successful FHA 203k Renovation Transaction

By Paul Pykosh, Director of Renovation Lending/Senior Mortgage Banker

The FHA 203k rehabilitation mortgage program has grown in popularity as the nation’s housing stock has aged.  It allows a homebuyer to roll in the repair costs into the loan up front.   The 203k loan is perfect for homes that require cosmetic or major rehabilitation in order to make them livable or more desirable. These steps will prepare you for a successful FHA 203k loan transaction: 

1. Get pre-approved with an experienced 203k lender.  First, make sure your loan originator is well-versed in the FHA 203k mortgage, can explain the process in detail to you, and has a history of closing FHA 203k loans.  It is also important to obtain a quality mortgage pre-approval that states the terms of the 203k loan (sale price, approximate rehab costs, approximate final loan amount, interest rate, etc.).   To originate and close a successful 203k loan, the lender needs to have experience with navigating the complexity of the additional paperwork and additional players involved.  If your lender slips and calls the program the 401k loan, you know you are dealing with inexperience from the beginning! 
2. Do some homework!  Take advantage of the HUD Approved 203k Consultants before making an offer on the home.  They offer a preliminary feasibility study that will allow for a rough estimate of the necessary and desired repairs and the costs of those repairs.  Using the consultant for this can help you weed out potential ‘money pit’ properties.   Once you know the scope and cost of the work involved, this can help you structure your initial offer price more favorably.
3. Create your equity through negotiation of the sales price!  The equity in the home is determined greatly by the original ratified contract sale price.  Be careful not to bid too high since the property has to appraise high enough to include the cost of repairs.  The items that can be included for rehabilitation are flexible, but the after-completed appraised value has to validate the repair costs being done.  I have seen buyers end up with less equity because they did not negotiate the sales price low enough.  While it’s easy to get caught up in the whim and appeal of fixer uppers, it’s important to take your emotions out of the deal and treat it as a business transaction. Visit the property a few times and at least once with your contractor and/or Consultant so you know where to start and end the negotiations.   Remember that with FHA, a borrower can negotiate a seller credit for closing costs and pre-paid items up to 6% of the purchase price.
4. Work hard in the beginning of the process to have a smooth closing.  The sooner the consultant, borrower, contractor, and lender get the Specification of Repairs (a list of the specific details of the work to be done and the cost for each part of the work) completed and agreed upon, the sooner the appraisal and the underwriting of the loan can occur.  Be pro-active and help facilitate the process by staying on top of the people involved.
5. Take time to hire a good licensed contractor.    Start with referrals of professionally licensed contractors that have done jobs recently.  Interview a few, get references, and use web sites like Angie’s List to find out about a contractors reputation.  A good contractor is important to the entire loan process, both in the beginning when proper documentation is required and after closing the loan when being on budget and on schedule is vital.  Studies have shown that the lowest priced contractor has the highest number of delays and cost overruns.  The cheapest contractor often leads to the lowest quality work.

These 5 tips should put you in great shape for a successful FHA 203k loan transaction. If you have any questions on the process or to get started on your loan give me a call at (240) 238-2402. You can also check out our mortgage calculators, request a copy of our homebuyers guide or apply online.