First Time Home Buyers Q&A
1. How much Money do I need to Buy a Home?
The up front cash you will need to buy a home will include the down payment, closing costs, property taxes and insurance with out of pocket expenses, and cash reserves - so as not to leave you short of cash at the end. This can be better explained by your lender, breaking down all of the costs connected with the purchase of your home.
2. How much House can I Afford?
I really can't tell you what you can afford, but I will get you to a qualified lender that can help you out and give you guidance toward your purchase including your budget and what your bank and life style prospective is. Basically what your personal comfort and financial zone is.
3. Can I get a mortgage with my Credit Score?
This will also be handled with a qualified lender. The basic issue is where you are on the credit score numbers. Obviosuly, the higher your score the better financing and lower down payment you will receive. Your lender usually has many programs they can show you.
4. How much Cash will I need for Closing Costs?
This will depend on the purchase price. Buyers in the Los Angeles area generally range from 2% to 5% of the home purchase. There are a few areas in the Los Angeles area as in Santa Monica and Beverly Hills, will have higher locale transfer taxes which will ultimately push the total percentage higher. An example would be a median priced property at $800,000 at 2% would be $16,000. Also keep in mind that closing costs will also include your down payment, which I will discuss next.
Not to be left out is the EMD (a.k.a.) - Earnest Money Deposit. This will be an initial deposit from 1% to 3% of the price to be paid at the start of the contract which will be credited back for the total cash needed at closing.
5. Will I need 20% Down Payment?
Having less than a 20% down payment is recommended so you can avoid PMI - Private Mortgage Insurance, which will be as added as a monthly payment. Your lender will have many programs to choose from. If you're a Veteran you can obtain a loan for 0% down and No PMI! There is a VA Funding Fee which is only a one time fee, which can be paid up front or can even be financed into the loan.
6. What is "PITI" ?
Basically PITI stands for the following: Principal which will be a portion of the payment going towards paying down the actual money borrowed-meaning the loan balance . Interest which is the cost of borrowing the money calculating as a percentage of the oustanding principal balance. Taxes come next, which will be a monthly portion of the yearly taxes collected by your lender-held in escrow and then paid to the governament when it's due. Finally the Insurance which is your home owners insurance, will be collected by your lender - held in escrow - and paid to the insurance company.
The PITI is very important, as this is how a lender will determine how much a buyer can really afford and or will qualify for a loan.
7. What is the 28/36 Rule?
This is in 2 parts-first the 28%, whch will be the maxium percentage of your gross monthly income-before taxes-that should be spent only on housing expennces to include PITI and HOA if applicable. The 36% is the back end ratio which is to cover any debt payments including PITI. Some of the payments to include but not limited to are, the complete home payment to include student loans, minimum credit card payments, car loans and any personal loan payments. The above mentioned are used as guidelines for lenders to approve your loan.
8. After I'm approved, should I ask for a Home Inspection?
Yes, Yes, Yes! The inspection will be comimg from an individual that has nothing personally to do with you the buyer, so you will get an unbiased opinion which is what you need. The inspection will cover all of the large major systems and what makes them tick in your new home. Following a significant financial commitment to your bank account, savings, etc, you need to be assured you're getting the best for what you are paying for. In my opinion this should never be put off to the side, as this is critical to your safety and enjoyent of your new home without worries!
9. What is included in the Sale - Appliances etc.?
This is a very common question buyers have at the start and during the process of the sale of the home. Any fixtures that are permanently attached will remain with the property, as if they are removed will cause damage to walls etc. If you can move around any items, they usually will go with the seller unless prior arrangements have been made as with any appliances and or furniture. Make sure that this is mentioned and written in the contract and signed by buyer and seller, so as not to have any questions at the closing of the sale.
10. How long does the process take from Begining to getting the Keys?
And the final question which is usually ALWAYS asked at the start, especially if this is coming from a First Time Home Buyer. It depends on many factors but usually from 4 - 6 months. If the sale is all cash then this can speed up the process. Just the pre-approval can take 2-4 weeks in some cases. You, the home buyer can take anywhere from 2-4 months just searching. Your contract will also have a clause known as contingencies, meaning if you or the seller has anything they might want to add or take away from the sale, then it's noted in the contract. The final loan process and final steps could take about a week give or take. In conclusion, take your time as once again this is a huge step in your life - even if you have purchased a home before.
If you have any other questions, and I know you will  - let me know.
I'm here to help you!
Federico Filippi
federico@federico4homes.com
661 904-4223
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