Financing Process & FAQ's
I have had issues with poor credit in the past and do not have much saved for a down-payment. Can I still own a home?
Answer: yes - there are many products to assist buyers with little-to-no money down. Also, you may be a good candidate for one of the federal mortgage programs that are available.
Why should I buy, instead of rent?
Answer: Your mortgage loan interest is tax deductible from your federal income taxes, and usually from your state taxes, too. Depending on your financing program, interest typically will comprise nearly all of your monthly payment for many of the initial years of payment Therefore; there are pretty significant savings at the end of each year. You are also allowed to deduct the property taxes you pay as a homeowner. Comparatively, when you write a rent check, you have the apartment for a month and little else to show for it let alone deductions. Further, owning your own home is the possibility that the value will go up through the years, not having to share a washer and dryer with 20 strangers, and a place to truly call home. On the 'Rent vs. Own' calculator on this website you can evaluate your specific monthly expenses against benefits of homeownership for an unbiased analysis.
I'm a single parent.
How would I go about buying a home without 2 incomes?
Answer: Although you won't have the benefit of two incomes on which to qualify for a loan, there's no reason that you can't become a homeowner. Become familiar with the process, pick a good real estate professional and think about getting pre-qualified for a loan. A mortgage professional will also be a great resource if there are any local home buying programs that could help you.
How do I find a Realtor?
Answer: With all of the details involved in home buying - particularly the financial ones - it can seem overwhelming. A good Real Estate Professional can guide you through the entire process and make the experience easy and positive. All Iowa Realty Professionals with Jerry's homes are well-acquainted with the important things you'll want to know about a neighborhood you may be considering...area schools, proximity to major employers, the number of children in the area, the safety of the neighborhood, traffic volume, and more. They are experts in the buying and financing process whether you are looking to move in 30-days, build-to-suit or a multi-family home.
How much money will I have to come up with to buy a home?
Answer: This will depend on several factors including the cost of the home and the type of mortgage you obtain. Generally, you need to come up with enough money to cover three costs: earnest money - the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house; the down payment, a percentage of the cost of the home that you must pay when you go to settlement; and closing costs, the costs associated with processing the paperwork to buy a house.
When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies. If you buy a HUD home, for example, your deposit generally will range from $500 - $2,000.
The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. That's why many first-time homebuyers turn to HUD's FHA for help. FHA loans require only 3% down - and sometimes less.
Closing costs - which you will pay at settlement - average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won't be caught by surprise.
How do I know if I can get a loan?
Answer: Use our simple mortgage calculators to see how much mortgage you could pay. There is also a convenient option to sort the Jerry's Home inventory for all homes that match that payment calculation so you can quickly see what is available to you. A broker will know what kinds of mortgages the lenders are offering and can help you choose a lender with a program that might be right for you. Another good idea is to get pre-qualified for a loan. That means you go to a lender and apply for a mortgage before you actually start looking for a home. Then you'll know exactly how much you can afford to spend, and it will speed the process once you do find the home of your dreams.
How do I find a lender?
Answer: You can finance a home with a loan from a bank, a savings and loan, a credit union, a private mortgage company, or various state government lenders.
In addition to the mortgage payment, what other costs do I need to consider?
Answer: If your utilities have been covered in your rent, this may be new for you. In addition, you might have homeowner association or condo association dues. You'll definitely have property taxes, and you also may have city or county taxes. Taxes normally are rolled into your mortgage payment. Again, your Real Estate Professional will be able to help you anticipate these costs.
So what will my mortgage cover?
Answer: Most loans have 4 parts;
- Principal - the repayment of the amount you actually borrowed
- Interest - payment to the lender for the money you've borrowed
- Homeowners Insurance - a monthly amount to insure the property against loss from fire, smoke, theft, and other hazards required by most lenders (this is not to be confused with Private Mortgage Insurance PMI)
- Property Taxes - the annual city/county taxes assessed on your property, divided by the number of mortgage payments you make in a year. Most loans are for 30 years, although 15 year loans are available, too.
What do I need to take with me when I apply for a mortgage?
Answer: If you have everything with you when you visit your lender, you'll save a good deal of time. You should have: 1) social security numbers for both your and your spouse, if both of you are applying for the loan; 2) copies of your checking and savings account statements for the past 6 months; 3) evidence of any other assets like bonds or stocks; 4) a recent paycheck stub detailing your earnings; 5) a list of all credit card accounts and the approximate monthly amounts owed on each; 6) a list of account numbers and balances due on outstanding loans, such as car loans; 7) copies of your last 2 years' income tax statements; and 8) the name and address of someone who can verify your employment. Depending on your lender, you may be asked for other information.
Once I am pre-approved will anything change that amount?
Answer: Right before closing a lender will typically run one final credit check to ensure no additional major purchase have been made that will impact your dept-to-income ratio. Generally, it is not a good idea to make any large purchases (car, boat) or open new lines of credit following your pre-approval and before closing. Even a small line of credit could impact several aspects of your loan or risk it entirely.
What should I expect at closing?
Answer: Typically, you will sit at a table with the Real Estate Professional and a closing agent. The closing agent will have a stack of papers for you and the seller to sign. You will be provided an explanation of each document you are signing and your lender is required to give you a booklet explaining the closing costs, a "good faith estimate" of how much cash you'll have to supply at closing, and a list of documents you'll need at closing. If you don't get those items, be sure to call your lender BEFORE you go to closing. Be sure to read our booklet on settlement costs. It will help you understand your rights in the process. Don't hesitate to ask questions.