Monday, July 17, 2017

Single Parent Home Buying Guide Part Four: Single Parent Homebuyer: Putting It All Together

While a new single parent might be tempted to jump ahead to the fun part and start looking at homes, it’s important to educate and prepare yourself first. You'll take many steps (and maybe stumble a few times) before achieving
homeownership for your single parent household.

Save Your Down Payment

As a single parent relying on one income, your ability to save for a down payment may be constrained by limited resources. It's easier if you establish a house-buying account and have your bank make regular automatic transfers to it.

Still, you have two things on your side: First, many mortgage programs require down payments under 20 percent. Second, you can look for resources beyond your own savings for a down payment.

Mortgages with zero down payment are available to veterans and active members of the military through the VA loan program. Income-eligible buyers in rural areas may finance 100 percent through the USDA Rural Housing program.

You can also find loans with a down payment of three-to-five percent from conventional lenders and 3.5 percent through the FHA loan program.

You may qualify for homeowner assistance programs that provide down payment funds. You can find these programs at www.downpaymentresource.com.

Determine What You Can Spend For A Home

There are many formulas used by mortgage lenders to calculate what you can afford to spend on a house.

However, your first check should be with your own gut. What are you used to paying for housing now? How much more (or less) would be comfortable for you with your current income and bills?

Include that information when you consult with mortgage lenders, because it matters. If your lender's numbers say you can afford $800 a month, but you can prove you've had no problem paying $1,000 a month to your landlord, that makes a difference.

The flip-side is that just because your lender says you qualify for a $2,000 monthly payment, doesn't mean you have to take the bigger loan. You're the one who has to sleep at night -- stay in your comfort zone if it makes sense.

Lender Affordability Calculations

Most loan programs allow a maximum debt-to-income ratio of 43 percent. This means that your monthly obligations, including your future house payment and the minimum payment for accounts like credit cards, auto loans and student debt, should be 43 percent or less of your gross (before tax) income.

If you're relying on one income, you might want to stay well below that maximum, or make sure your emergency savings -- at least three-to-six months of expenses -- is solid.

Lenders can pre-qualify you for a home purchase, which means they look at your income and assets and estimate what you "should" be able to afford. This is helpful, but it is not a loan pre-approval and should not prompt you to start home shopping.

Go Shopping -- For Homes And Loans

Work with an experienced real estate agent who completes many transactions in your area and price range. This person, called a selling or buyer's agent, is supposed to represent your interests during negotiations. The agent advertising the home is called a listing or seller's agent.

Understand that there is no way that the selling agent, who is supposed to get you the best deal, can do this without being in conflict with the listing agent, whose job it is to get the most money for the seller.

Get your own agent. And don't rely on him or her exclusively for everything.


Get Your Own Lender

The Internet makes it easy for you to do some work on your own -- look at neighborhood crime statistics and school ratings, for example -- that real estate agents are not legally allowed to provide.

The Internet also makes it easier for you to find and compare mortgage offers. The agent might find you the best deal, or he might know little about mortgage rates and just send you to his golf buddy.

Find your own loan.

Mortgage Pre-Approval: The Real Deal

In order for sellers to take your purchase offer seriously, you’ll need to obtain pre-approval for a mortgage.

Mortgage pre-approval requires you to complete an official mortgage application, consent to a credit check, and document your job history, income and assets.

If you pass inspection, you receive a pre-approval letter. That's a conditional commitment from the lender, stating that as long as your situation doesn't change for the worse, and the property meets the lender's guidelines, and the program doesn't change, you'll be able to close on your purchase.

It's the closest thing to a cash offer you can provide.

You Found Your Home! Now Open Escrow

You and your agent should look at multiple homes so you have a full understanding of your local market and your options. Once you identify a home that you like and that you can afford, you and your agent can determine the appropriate offer to make.
You’ll need to include an earnest money check with your offer. Once your offer is accepted, escrow opens and the check is deposited.

Here's what happens during the escrow process:

Home inspection

Everyone should have at least a basic home inspection before completing a home purchase. For older homes, you may want to go further -- electrical, septic tank, roofing, etc. As the buyer, you get to choose the inspector if you want to.

Your contract may require the seller to make minor repairs or give you a credit to have them made. Major problems can take you back to Square One -- either you walk away, the seller agrees to fix the problem or lower the price, or the seller walks away and the deal is dead.

Property appraisal

If you're financing your purchase, your lender will order an appraisal to make sure the sales price is fair. Neither you, nor the seller, nor anyone else benefiting from the transaction gets to pick the appraiser.

Title search

You and your lender will want to be certain that the seller has the right to convey the home to you. Sometimes, unknown heirs, parties in lawsuits and other problems like illegal foreclosures may void your title. To protect you and the lender, a title search is conducted, and title insurance must be purchased. In many states, you, the buyer, get to choose the title company.

Shop for homeowners insurance

Your lender will need proof of your homeowner’s insurance before you can close your purchase, so get it while the inspections and appraisals are going on. Complete the necessary paperwork to purchase your policy. Your proof of insurance is called a "declarations page."

Lender approves property and issues final approval

Once the home has been appraised, the lender analyzes the property value and completes the final underwriting. Any questions that come up or requests for additional paperwork should be taken care of as soon as possible. Once all conditions are cleared, final documents can be drawn up.

Loan documents are prepared

If you can, ask for copies of your final documents a few days in advance, so you can ask any questions or make any needed corrections. Review all your loan documents before settlement day and contact your lender, your real estate agent or your title company if you have questions.

If your lender can't get the documents to you early, ask your loan officer to attend your closing or at least be available by phone.

Close on your home

Before your closing appointment, finalize your moving arrangements, including having utilities transferred to your name and hiring a moving van.

You’ll need to sign numerous documents and bring certified funds or arrange for a bank transfer for your down payment and closing costs.

You are responsible for anything you sign at this point, so be very comfortable with the terms of your loan and your property purchase. You'll get a reconciliation of the last set of disclosures, comparing the estimated costs and terms of your loan and other services, and the actual terms and costs.

If there are significant changes, you should get an explanation, and you may be owed some cash.

Finally, you get your keys. And you can exhale. Congratulations on your home purchase as a single parent!

My name is Scott Grebner and I have been helping my clients realize their own personal real estate dreams. Real estate is a relationship-based business that works best when client relationships are built on trust and confidence. My goal is having clients be completely satisfied with the professional and caring service they have received.

The role of technology is rapidly changing how the real-estate market functions in this country today. Re/Max Preferred Choice is embracing these new mediums of communication to better serve our customers. We have created our company to better place important information in your hands to help you with your housing needs. For a personal consultation please contact me at my Website.

It seems that the dream of past generations was to pay off a mortgage. The dream of today’s young families is to get one. I would love to hear from you, about your Real Estate Dreams and questions.

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