Buying a Home

8.20.2019

When you hear the phrase “The American Dream,” what do you think of? Most people imagine a pretty house with a beautiful yard, picture-perfect landscaping, and a white picket fence. Perhaps there’s a flag blowing in the wind and a sweet family standing in front looking towards their new home.

Buying your first home can be full of excitement and wonder, but it can also be overwhelming and stressful. Having the right tools and information can help you navigate the process with confidence.

Girl With Money#1: Understanding your financial position

 The first thing you need to do is determine if you are ready, financially, to purchase a home. Keep track of your credit score and try to improve it. Your credit score will affect your financing later on down the road.

You should also determine how much you have saved up for a down payment. Generally, homebuyers are expected to pay between 5 and 20 percent of the price of a property as a down payment. There are first time home buyer products available, along with VA loans, that are 100% financing, if the customer qualifies.

Aside from your down payment, buying a home includes other expenses. You will also have property tax, insurance, maintenance costs, and utilities. You want your house payment to be under 30 percent of your gross monthly income to allow you room to save and cover other monthly expenses.

Purchasing a home is a big investment. If the home and its additional costs put a strain on your budget, you may decide to rent rather than buy in order to save money and get your finances in order.

#2: The Pre-Approval Process

Now that you have familiarized yourself with your finances, it is time to begin the pre-approval process. Your lender will pre-qualify you based on your income and your credit score. There’s that number again!.  You will have a general idea of what your house budget will be, but your mortgage lender will determine a specific number.

While gathering your financials, the magic number to remember is “2”. During this process you will be asked by your lender where you have lived for the past 2 years and who your landlord was. You will also need to provide your previous 2 years of employment information. Once you have provided your lender with your income information, they will be able to calculate how much house you can afford.

After you find the property you want to purchase and make application for financing, the following will be needed during the application review process. The lender will need your most recent 2 months of paystubs and your most recent 2 months of bank statements. They will also require your most recent full tax return and W-2s. If you have investment accounts, you will also need to provide the previous 2 months information on those. For individuals who are self-employed, you will need your last 2 years tax returns with all schedules. If you are divorced, please bring your petition, parenting plan, and final recorded decree.

Your lender will then review different mortgage program options with you. We will be sharing a post later on discussing the different mortgage programs available.

During the home purchase process, you will also be required to obtain homeowners insurance. You need to make a decision early on, with the company you choose, and provide their information to your lender. We will also discuss homeowners insurance in a separate blog.

#3: Finding the Home of Your Dreams

Your real estate agent will provide you with helpful information, facilitate negotiations, and show you properties within your budget.

With your agent, you will be able to start viewing homes in your price range. Remember to make a list of things you want in your future home & take notes when you visit. Knowing what you are looking for will provide mental checklist when you are touring different homes.

Once you find the home you like, your agent will then negotiate an offer based on the comparable homes in the area until you and the seller reach an agreement.

#4: Inspections

Often times, offers include a contingency clause relating to the home inspection of the property. The inspection is an important part of the home buying process. Inspectors check for any damages or signs of structural concerns. It could reveal issues that may have gone unnoticed by the current owners.

The contingency gives you the opportunity to renegotiate if the inspector finds anything. You and the seller both receive a report on the findings.

#5: Secure the Loan & Home AppraisalFirst Home Image

Once you have approved the inspector’s findings and addressed any repairs required, your lender will assist you in securing a competitively priced loan program.

There are many variations of criteria when purchasing a mortgage and they differ by every home buyer. Whether you are interested in keeping your monthly payments low or a monthly payment that never increase, your lender will be assist you and make the process easier.

The lender will arranged to have the home appraised. The appraiser is a third-party individual who will calculate the value of the home. This ensures that the price of the home is fair to all parties involved. You will work with your lender and agent to ensure that all the proper paperwork is being submitted.

 #6: Close the Sale

Purchasing a home requires a lot paperwork. You will sign all the documents at closing. Subject to the contract terms, you will be able to move into your new home as soon as all of the paperwork has been completed and the seller of the house has been paid. You are now officially a homeowner!

**All loan applications are subject to credit underwriting approval.**


Types of Mortgages

9.25.2019

Purchasing a home is a fun and exciting time, but it can also leave you feeling overwhelmed. Understanding the mortgages available to you can help! We will provide some basic information about the types of mortgages available.

Conventional Loan
A conventional loan is not guaranteed or insured by the federal government.

  • Various fixed and variable terms available (e.g. rate & length in years).
  • Private Mortgage Insurance applies if you do not pay 20% down.
  • Credit Scores can be as low as 640.
  • Credit Scores of 720+ will receive the best rates.
  • As little as 3-5% down on this program.

Private Mortgage Insurance (PMI) is an insurance that protects the investor when you do not have 20% to pay down on your mortgage loan. This premium is added into your monthly mortgage payment along with your principal, interest, taxes, and insurance (PITI). This is not credit life insurance, which would pay off your mortgage in case of your death.

FHA Loans
The Federal Housing Administration (FHA) mortgage program is managed by the Department of Housing and Urban Development (HUD).

  • Various fixed and variable terms available (e.g. rate & length in years).
  • Down payment requirement is 3.5%.
  • The seller can pay up to 6% of closing & prepaid costs.
  • You have a HUD Mortgage Insurance Premium, but FHA allows you to finance that cost.
  • Credit Scores can be as low as 580 (depending on investor).
  • Requires a Mortgage Insurance Premium (MIP).
  • Requires an escrow account for taxes and insurance.

Mortgage Insurance Premium (MIP) for an FHA insured loan is a policy that protects lenders against losses that result from defaults on home mortgages. FHA requires both upfront and annual mortgage insurance for all borrowers, regardless of the amount of the down payment.

VA Loans
The U.S. Department of Veterans Affairs (VA) offers a loan program to military service members and their families.

  • Various fixed and variable terms available (e.g. rate & length in years).
  • The borrower can receive 100% financing.
  • The seller can pay up to 6% of closing and prepaid costs.
  • Requires a Certificate of Eligibility.
  • Credit score can be as low as 620.
  • Requires an escrow account for taxes and insurance.

USDA / RD loans
The United States Department of Agriculture (USDA) offers a loan program that helps low- to moderate-income borrowers buy homes in rural areas.

  • This is an income based loan.
  • The borrow can receive 100% financing.
  • The seller can pay up to 6% of closing and prepaid costs.
  • Requires a Mortgage Insurance Premium (MIP).
  • Requires a Guarantee Fee of 1% which can be added to your loan.
  • Requires an escrow account for taxes and insurance.

On government loan programs such as FHA, VA, and USDA, the property being purchased should not be one that requires numerous repairs or is considered a "fixer upper."

**All loan applications are subject to credit underwriting approval.**

This is a brief overview of the different types of mortgage loans available. We encourage you to ask questions and research each option further. Our experienced mortgage specialists are here to guide and assist you in your Home purchase or refinance. For more information, please check out our Mortgage website at https://firstcnb.mymortgage-online.com/.


One-Size-Fits-All Home Insurance Does Not Fit-All
Guest Writer: John Fry | 10.9.2019 

I was recently considering a “training” bike for my 2-year old grandson. Naturally, he needed the perfect Paw Patrol helmet to go with a perfect Paw Patrol bike. I decided to browse the web and noticed the majority of the helmets were “one-size-fits-all”.  Now, I don’t know a whole lot about bike helmets, but I can definitely tell you that a 2-year old’s head is a lot smaller than a 6-year old’s head and one-size certainly is not going to fit all.

Think of homeowners’ insurance in the same way. There is no “one-size” for insuring your home. In fact, according to FEMA, 64% of homes in the US are under-insured. In order to be certain that your home is properly protected, your insurance must be tailored to your specific home, your specific needs and your specific family. Below are just a few important questions to think about when evaluating your homeowners’ insurance.

Do you need REPLACEMENT COST or ACTUAL CASH VALUE Coverage?

Answer – it depends on what you want your claim payment to be if something happens to your home or stuff. 

Replacement cost is the amount of money it will take to rebuild your home just as it was before it was destroyed, or to purchase new items if your old ones are damaged or stolen. Replacement cost insurance is not always the default option when buying home insurance. It is possible that you may have replacement cost coverage on the structure of your home, but your “stuff”, like electronics and furniture, do not have replacement cost coverage. 

Actual cash value coverage is the alternative to replacement cost coverage. It will only pay for today’s actual value of your home and stuff. The actual cash value of your items is almost always lower than the replacement cost because things typically depreciate, or lose value, over time. For example, say you bought a television 5 years ago for $1000. The value of that same TV today maybe closer to around $100, meaning your claim payment would only be around $100 to buy a new TV. Something important to consider when thinking about needing to replace a 20-year old roof! 

Do you need to tell your insurance agent about your dog? 

Answer – YES! 

If you have a dog or have welcomed a new dog into your family since last speaking with your insurance agent, you need to give your agent a call. Pets are covered under the liability section of your insurance policy. This policy section covers you if you are found legally responsible for some type of damage. Although we hate to even think it, every dog has the capacity to bite, especially in self-defense. Last year alone, dog bite claims made up around 1/3 of all homeowners claims and totaled over $600 million in claim payouts.  Because of the financial responsibility the insurance company takes on when insuring a home with a pet, many companies have specific stipulations regarding you and your dog. 

• Do I have automatic coverage for jewelry or other high value items? 

Answer – you have some coverage.

Standard home policies typically have coverage for your personal property, but it is likely that there is a dollar limit set on how much it will pay for certain categories of valuable items like jewelry, firearms, cameras, art, etc. For example, there may be a $2,000 sub-limit on what your insurance policy will pay for jewelry, even though your overall personal property limit is much higher. So, if you were to lose your wedding ring and it is worth $1,000, you would probably be in good shape. But, if the lost ring was valued at $5,000, you would likely only receive a $2,000 claim payment to replace the ring. 


Insurance can be a tricky thing to navigate. Find an advisor you can trust that will evaluate your specific needs and provide you with the peace of mind that you will be whole again when life does not go your way.

** Insurance products are NOT FDIC INSURED, NOT A DEPOSIT, NOT BANK GUARANTEED, NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY, AND MAY LOSE VALUE. **


John Fry ABOUT THE AUTHOR
 
John Fry, Vice President of Personal Lines, joined White & Associates in 2010. He is a licensed property, casualty, life and health agent. John and his wife, Cathy, married 20 years ago and have two children, Harrison and Ashlee. John and Cathy celebrated the birth of their first grandbaby, Ellis O'Neal, in 2017 and have another on the way. John's greatest desire is to be able to give back to his community. He most recently served as the Kiwanis Lieutenant Governor for the Northwest TN Region.