Appraisals. Inspections. Escrow. Titles. Mortgage. Mortgage Insurance. Flood Insurance. Whew! Home finance terms can be confusing, especially since most folks aren’t buying and selling homes every day. The good news is that they have experts to guide them through every step of the home purchase and finance process – The Trembley Group Real Estate Sales Executives and their recommended business partners at ABC Mortgage in Myrtle Beach. They routinely walk their clients through the home purchase process. They’re experts.
Buying or selling a home can be a complicated business – more so today than at any time. The Sales Executives at The Trembley Group Real Estate are committed to positively changing the lives of their clients by making the home buying and home selling process as pleasant, profitable, and seamless as possible. To that end, The Trembley Group Real Estate has partnered with select companies who share their vision and commitment – attorneys, home warranty companies, pest control operators, home inspectors, contractors, mortgage brokers, and others who are committed to doing whatever necessary to make their client’s real estate dreams come true.
How Much Money Will You Need?
Down payment. The down payment can range from 3.5 percent to 20 percent of the total cost of the home, depending on your credit score, mortgage interest rate, and current financial situation.
Closing costs. Closing costs, including inspection fees, fire insurance, property taxes and prepaid interest (points), will typically add two percent to five percent of the total cost of the home onto the final price.
Flood Insurance. Myrtle Beach and the Grand Strand is part of the Low Country of South Carolina. It’s called the low country for good reason and a mortgage lender will likely require flood insurance. Flood insurance is provided by the Federal National Flood Insurance program. The program’s goal is to reduce the impact of flooding on private and public structures by providing affordable insurance to property owners and by encouraging communities to adopt and enforce floodplain management regulations. The average cost of flood insurance is $700. Visit www.FloodSmart.gov for more information.
Moving Expenses. The money required to make a new house a home should not be overlooked. In addition to physically delivering personal possessions, other expenses crop up. New rooms may require new furniture. Older space may need redecorating. Even a brand new house may need upgrades to make feel like the perfect home.
Mortgage Payments. Will a buyer be able to comfortably keep up with their mortgage in the first few months after purchase? Some lenders require additional cash reserves to prove that a buyer will be able to make payments. Whether it’s required or not, it’s smart to know that the payment will be covered. It’s a good idea to know that taxes and insurance payments are covered as well.
Repairs and Maintenance. Chances are, a new home won’t be perfect on move-in day. Whether it’s adding a fence or getting rid of that garish yellow paint in the living room, new homeowners will want to have cash ready for repairs and maintenance.
It is also wise to plan to have a savings cushion for unexpected expenses, too, such as replacing a leaky roof or installing a security system.
Emergency Fund. Buying a home typically signifies that a buyer has reached a major savings goal, so it’s normal to see their accounts drain. But it’s still a good idea to have a separate emergency fund with three to six months’ worth of living expenses. A Trembley Group Sales Executive refers to this as a “prudent reserve.”
The Mortgage Application/Preapproval Process
Preapproval vs. Prequalification. The Trembley Group Real Estate Blog has recently addressed the importance of mortgage preapproval when making a contract for purchase. Mortgage pre-approval and mortgage pre-qualification have similar benefits for anyone considering a home purchase with a mortgage. Both show the seller that the prospective buyer is a serious contender. The buyer has taken the time and energy to sit down with a mortgage lender and provide the information necessary to know the price-range of home that will fit their budget. Many sellers will require a pre-approval or pre-qualification letter for any buyer planning to use a mortgage. And even if a seller doesn’t require it, a pre-approval letter or pre-qualification letter may help an offer stand out. This can be especially helpful in today’s competitive real estate market where multiple simultaneous offers and bidding wars are not unheard of.
There is a subtle difference, though. Pre-qualification is often seen as the first step in the mortgage process, and pre-approval is the next step. With pre-qualification, buyers supply an overview of their financial history to the lender, including income, assets, debts, and credit score. The lender reviews this information and gives an estimate of a qualified mortgage. Mortgage pre-qualification doesn’t always require documentation of a financial history. It is often self-reported.
Mortgage pre-approval is similar, but it usually requires documentation and verification of your income, assets, and debts. And it will require a credit check, creating a hard inquiry on your credit report. Pre-approval usually carries more weight with a seller, as it should. Neither pre-approval nor pre-qualification is a guarantee that a buyer will receive a loan from the lender.
“It’s a good idea to enlist a mortgage broker at the beginning of the home buying process,” says Scott Krumwiede of ABC Mortgage. “If the pre-qualification process identifies a difficult loan scenario, a good mortgage broker can shop a client’s loan and avoid any potential last minute roadblocks. There’s usually a lender willing to do what another won’t, though the mortgage rates can and will vary. The best thing a borrower can do is minimize situations where problems may surface. In other words, keep your credit score in good shape, make sure to maintain a steady job, keep money in the bank, and stay current on debts and other obligations.”
Applying for a Mortgage.
A few documents are needed to get a loan file through underwriting. Some of the information will be gathered online or over the phone. A lot of it will already be stated on some of the required documents, like the employer’s address which can be found on a pay stub. While the list looks long, it generally doesn’t take much time and effort to round them up. A good loan officer will also indicate which items will not be needed and also help prioritize which items to send in first.
Employment. Name of current employer, the employer’s phone and street address, length of time at current employer, position/title, and salary including overtime, bonuses or commissions
Income. Two years of W-2s, profit & Loss statement if self-employed, pensions, Social Security, public assistance, child support, and alimony.
Assets. Bank accounts (savings, checking, brokerage accounts), real estate owned, investments (stocks, bonds, retirement accounts), proceeds from sale of current home, and gifted funds from relatives (e.g. down payment gift for FHA loan).
Debts. Current mortgage, liens, alimony, child support, car loans, credit cards, and real estate debt.
Property Information. A Trembley Group Real Estate Professional will provide some of the harder-to-find items such as property taxes. The mortgage broker will also require the property’s street address, the expected sales price the type of home (single family residence, condo, etc.), the size of the property, the annual real estate taxes, homeowner’s association dues (HOA), and an estimated closing date.
Financial Blemishes. A homebuyer needs to be prepared to explain any missteps in their financial background. It’s good to have dates, amounts and causes for any bankruptcies, collections, foreclosures, and delinquencies.
Type of Mortgage Desired. The homebuyer needs to specify fixed or adjustable, forward or reverse, conventional, government insured (VA, FHA, USDA), or jumbo.
VA Certificate of Eligibility (COE). If applying for a VA loan, the homebuyer will need proof of military service. The VA can provide a Certificate of Eligibility (COE). A mortgage lender will be able to pull it or it can be found on the eBenefits website.
All of this documentation is compiled to produce the loan estimate. The Loan Estimate describes the terms and predicts the costs associated with your loan. By law, a loan applicant must receive it within three days of application.
The Loan Estimate includes closing costs, the interest rate and monthly payments (principal, interest, taxes and insurance). A notification is included if interest rates can change in the future, as would be the case with Adjustable Rate Loans (ARMs). It also includes information about any special features such as pre-payment penalties or if the loan balance can ever increase in spite of you paying on time (called negative amortization).
At this stage, the loan is still not yet approved nor denied. A loan estimate is simply a statement of the terms and estimated fees in plain English. It’s like getting an estimate for car repairs; no one has picked up a wrench yet, the borrower is just getting a sense of the work that will be done and how much it’ll cost.
Quick note: Most types of loans — but not all — use the loan estimate at the application stage. Some loan products, like reverse mortgages, still use two older forms – the Good Faith Estimate (GFE) and Truth-in-Lending (TIL) disclosure.
You can get a sneak peek of what Loan Estimates look like plus an even more detailed explanation of each section of it on the Consumer Financial Protection Bureau (CFPB) website.
Whether an experienced and seasoned real estate investor or a first-time buyer, the Trembley Group Real Estate Sales Executives and their recommended business partners walk their clients through the real estate buying and selling process, making it as easy and seamless as possible.
At The Trembley Group, we pride ourselves on being the experts at more than just selling real estate. We are local residents, some of us have been here for a lifetime. The rest of us will be here until the end of time. We love living, working, and playing in the diverse backyard of Coastal Carolina, and look forward to helping you live and love your dreams soon too. Please reach out to us by phone or email for personalized service and one-on-one advice.