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FAQs
Q: How much house should I buy? How much can I afford?
A: The answer to this has a lot to do with your income and the amount of your debt
load. As a rough rule of thumb, most homebuyers purchase houses that cost between
2 and 4 times their annual income. For example, a homebuyer earning $60,000 per
year would buy houses costing between $120,000 and $240,000. There is, however,
a degree of variation due to the individual market prices of the area in which you
are interested. In some areas, there may not be houses available within that range,
so you may need to spend a bit more. In general, however, your monthly mortgage
payment cannot exceed approximately 30% of your gross monthly income. Your total
debt payments (car payments, credit card payments, etc. plus the monthly mortgage
amount) cannot exceed approximately 40% of your gross monthly income. These ratios
will depend on the type of mortgage for which you are applying. For more information
on mortgages and to begin the application process, contact one of our mortgage advisors.
Q: Do I really need to use an Agent to buy a house?
A: No. See next.
Q: Should you use an Agent to buy a house?
A: Probably, for two reasons. First, in virtually all situations, the buyer does
not pay a commission, so the seller pays for the services of an Agent. Second, without
an Agent, you may be missing valuable representation of your interests. Looking
to find an Agent? Our mortgage advisors can identify the right agent to fit your
needs.
Q: How do I know if I am getting a good deal on a mortgage?
A: Obtain a referral from a trusted source. Ask friends and family who they have
partnered with in choosing the right mortgage advisor. Ask the advisor to give you
three references of borrowers who have utilized their services. Make sure the advisor
works for a company that has the ability lend or broker a loan when necessary. A
lender controls the process from beginning to end; from application to closing.
A lender has control of the process, which normally makes for a smoother process.
A mortgage broker is a middleman; they can search the market for the perfect loan
for your needs. The broker surrenders control of the process to the lender. FRMC
is a licensed mortgage lender and broker. This allows our advisors to offer the
most competitive rates and programs while controlling the process.
Q: What First Time Buyer Programs are available?
A: There are literally hundreds of different programs available, depending on your
location (city, state, or province) and the mortgage source that you use. The requirements
and benefits vary greatly from program to program. Consult one of our advisors or
your local housing authority for more information.
Q: How much will my closing costs be?
A: The amount of closing costs will depend on what items are customary for buyers
and sellers to pay for in your area. Traditions vary greatly from one area of the
country to another. In some areas, for example, the buyer pays for title insurance.
In other areas, it is the responsibility of the seller. In still other areas, the
cost is split between buyer and seller. Your mortgage advisor can give you specific
information on the items that are customarily paid for by buyers in your area. In
addition, the amount of closing costs will depend on the amount of points you will
be paying with your mortgage loan, since these are generally paid for up-front.
(A point is 1% of your mortgage loan amount). If you plan on staying in your home
for an extended period of time and won’t refinance the mortgage, it may make sense
to pay points to lower your rate. Contact one of our mortgage advisors to determine
if paying points make sense for you.
Q: How much should I offer for a house?
A: There is no simple answer to that question, since each property stands on its
own. A particular house may be overpriced (you should make an offer BELOW the listing
price), "on-the-money" (you should make an offer at or just below the listing price)
or under priced (you should grab it before someone else does!) Your mortgage advisor
can refer you to a qualified Realtor who can help you make a qualified offer.
Q: What about foreclosures?
A: Can you save a huge amount of money here? Save money, usually; a huge amount
of money, occasionally. In many cases, though, these will be homes that need work.
Ask your mortgage advisor about a rehabilitation loan that may assist in acquiring
a foreclosure property.
Q: Should I spend the money to have a home inspection?
A: Absolutely. The $200 to $500 that a professional home inspection costs could
be the best money you ever spend on your house. Not only does the home inspection
seek out any defects (and gives you some peace of mind), the home inspector will
often give you tips on maintaining and repairing your house.
Q: What is an appraisal? Will I need one?
A: An appraisal is an opinion of value of the home you want to purchase. Virtually
every lender will require some sort of appraisal before the loan is approved. Your
mortgage advisor can offer additional details.
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