It was good to work with someone we could trust. Thanks!"
- Cathy & Brandon B., South Portland, ME
- Sarah B., Portland, ME
The idea of purchasing your first home is bound to bring many questions to mind. This is a natural reaction, as it is one of the biggest decisions you will ever make. Rest assured, my team and I are here to assist you with understanding the loan process with our goal being to make your experience a pleasant one.
The process starts with a meeting between you and me. This is called "getting pre-approved". During this meeting, which can take place in person or over the phone, I will gather information about you, including:
- Full name, Social Security Number, Date of Birth
- 2 year address history
- 2 year employment history
- Clarification of all income sources. (i.e. Social Security benefits, child support, alimony, VA benefits, retirement income, pensions, etc.)
- Total amount of liquid assets or gift funds to be received
- Credit Report
- Supporting documentation, including Federal Tax returns for 2 years, pay stubs, w-2's, bank statements, photo ID, and any other required documents specific to your situation.
We will then verify all information including a thorough review of your credit report. You will be provided with a complimentary copy of your credit report at this meeting. If you determine that there are any inaccuracies on your credit report, we have the ability to help expedite their removal.
After gathering all of your information and documentation, I will prepare your loan file and detailed information showing all of the loan programs that you qualify for. We offer all Conventional and Government loan programs, including FHA, VA, USDA, Maine State Housing and more! I will take all of the time you need to discuss the pros and cons of each loan program including interest rates, monthly payments, closing costs, fees, penalties, etc. I encourage all of my customers to call me at any time as questions arise.
Once you are comfortable with your loan options, and have chosen the right program to fit your needs, it's time to shop for a home! I'm happy to provide referrals to my extensive list of Real Estate Agents for you to assist with finding your perfect home.
We can also disuss the possibility of New Construction financing, and renovation financing. Renovation financing has become more popular recently, as there are many "distressed" properties on the market at great values. This type of financing allows you to include the cost of any necessary repairs into your mortgage. A popular renovation program is the FHA 203K loan.
Having worked with first time home buyers for 12 years, I pride myself on my knowledge and my ability to explain each loan program and the loan process so that it makes sense.
This page covers the basics about buying a home. It is designed to answer commonly asked questions and provide clear definitions of terms that you may be unfamiliar with, even if you have been through the home buying process before.
Shopping for the best interest rate possible has always been the consumer's primary objective when borrowing money. As well it should be! The problem with this strategy is that there is much misleading information on the subject released by various media. Internet websites and email marketing, along with other media, such as radio, television and billboard advertising have brought the importance of interest rates to the forefront of consumer's minds.
The problem for the consumer with this type of marketing is that it's designed to make the lender's phone ring. Often, the advertiser offers a rediculously low interest rate with the intent of using the "bait and switch" technique once the consumer is reeled in. This is often done through "short pricing". Short pricing is when a lender offers a very low interest rate, but only locks it in for a very brief period of time.
The average consumer enters into a contract to purchase real estate for at least 30 days. Pricing on an interest rate locked for only 7 days is of no use to the average home buyer. It simply is not enough time to complete the transaction. While the internet ad or billboard banner may offer a very attractive interest rate, the lock in period is often not long enough to negotiate a purchase contract and close the deal. Be very careful when shopping for interest rates. Make sure you ask the lender what the lock duration is, and make sure the lock duration allows enough time to complete your purchase transaction.
Another common marketing ploy that makes interest rates appear attractive involves the manner in which fees are presented. All lenders are required by law to present the true cost of financing through the Annual Percentage Rate (APR) each time an interest rate is quoted in advertising. Unfortunately, even though ads disclose the real cost of financing by listing the APR, they often don't do a good job of explaining the difference between the APR and the interest rate.
The reality is, the APR takes into account many of the fees associated with obtaining the loan, and is usually listed in fine print as a disclaimer. So, while the APR can be helpful when comparing interest rates listed in advertising, it's important to remember that lenders use different methods to calculate the APR. Hence, it is not always the best method for comparing interest rates.
Additionally, the consumer must take into account that the interest rate is not the only important factor in obtaining financing. Another important question is: "How long to you intend to borrow this money?"
The length of time you will be borrowing the money may have a profound impact on whether or not you should be paying upfront fees (points), and likewise has bearing on your loan program selection.
Statistically, homeowners move every 7 to 10 years. One of the common mistakes made buy home buyers is selecting the 30 year fixed rate loan program for financing instead of investigating other options. The chance of needing the financing for 30 years is actually slim to none. If the buyer is somewhat transient in their job or is planning a family in the near future, the home may not really meet their long term needs.
Buyers are often solicited with loan programs that are contingent upon 30 year fixed rate financing. The interest rates that are offered, how ever low they might be, are often irrelevent as rates are dependent upon several factors, including credit scores and down payment. If you have at least 5% for a down payment (at least 3.5% for an FHA loan), and interest rate that is fixed for three, five or seven years may be a much more realistic option. This often allows you to capitalize on a low introductory rate and save a significant amount of money, which can then go toward the down payment on your next home. As always, current market conditions dictate what the best loan programs will be at the time you want to buy a home. The most important thing is to look at all of your options and available programs.
The Nuances of Your Purchase Contract
The process of purchasing a home is often much more complex than the average individual expects it to be. Items involved in your purchase contract can have a significant impact not only on the success of your purchase transaction, but on your stress level as well. I have listed some of the important items you should be aware of, that require you to make decisions as a buyer entering into a purchase contract.
Loan or Financing Contingency
Loan contingency is the period of time the seller is giving you to obtain full, formal loan approval. It is important to include a financing contingency in your offer, as it makes the transaction dependent on you receiving the mortgage you've applied for. It specifies your cancellation rights if you are unable to obtain financing.
This contingency is typically between 15 and 30 days depending on what has been negotiated in the contract. The earnest money deoposit you make at the time the offer is accepted will be put in jeopardy once the contingency for the loan has expired. In fact, pursuant to the terms of the contract, if the loan contingency has expired and you fail to close the purchase transaction, your could lose your earnest money deposit and not have the failure of obtaining loan approval to lean on as an excuse. Written pre-approval will help eliminate problems in this area. Please note: Pre-approval is not the same as Pre-qualification.
Seeking pre-approval for financing prior to making an offer on a property is a sound strategy that can help youget the best deal possible, especially if you plan to make the minimum down payment. The seller is often leery of the stability and reliability of the buyer if the buyer is only capable of making a down payment of 10% or less. This can cause the buyer to lose a significant amount of negotiating ability, by being perceived as a weak buyer rather than a strong one. This is why it is very important to get a full loan credit approval in advance and provide a written confirmation of the pre-approval when the offer is made. This shows it is a done deal and you are perceived to be a cash buyer.
The contract period is the period of time in which all due diligence must be completed, including obtaining loan approval, property appraisal, home inspection reports, water tests, termite inspections, etc. Give yourself enough time for all due diligence to be completed for this very important purchase you are about to make. Typically, purchase contracts are drawn up for a period of 30, 45 or 60 days. However, while it is not typical, a purchase contract can be written for a term in excess of 60 days if the parties involved need that long of a period to complete all aspects of due diligence.
Home Inspection Condingency
As part of the negotiation in your purchase contract you and the seller will mutually agree on the amount of time needed to complete all of the home inspection procedures that are required. Utilizing and outside third party service to complete these inspections is highly recommended.
You will be provided with a report by the home inspection company that you should review very thoroughly to make sure there are no material defects in the property that you were not aware of, and which could subsequently have an impact on the value of the property. Once your home inspection contingency has expired, you no longer have the leverage to go back and renegotiate with the seller to resolve any issues revealed by the home inspection. If there are material defects, you and your real estate agent should renegotiate either a reduction in the purchase price to offset the cost of any necessary repaires or have the seller make the repairs prior to the close of the transaction. Buyers with limited cash reserves should most likely negotiate to have the repairs made prior to closing.
A termite inspection may or may not be required by the lender. Typically, in Maine this is not required unless the appraisal states that there is evidence of termite damage or if there is active infestation. If termites are present it is up to both parties to determine who will be responsible for remedying the problem.
Seller Rent Back
It is often the case that when the buyer and seller are unable to agree upon a specified closing date for the transaction, the real estate agents will negotiate a "rent back" period. This means the transaction closes, the loan funds and the ownership of the property is transferred into the buyer's name, but the buyer does not take occupancy of the property until several days later. In this scenario, the buyer sets up a rental agreement, in which the property is leased back to the seller.