First-Time Homebuyers FAQs

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This article will cover frequently asked questions about first-time homebuyers FAQs with low credit scores. We will discuss common FAQs from first-time home buyers with low credit scores on home purchases.

Dino Hasapis is one of the top real estate agents in the state of Illinois. Dino is one of the top referral partners of Gustan Cho Associates. Realtor Dino Hasapis is the referral realtor partner of choice for Gustan Cho Associates. This is not just because of his expertise in all aspects of real estate, home values, and knowing the Chicagoland Area like the back of his hands, but also due to hus passion for helping a first-time home buyer with low credit scores.

Being accessible to all his buyers and sellers is priority number one for Dino. Dino Hasapis has a practice of being available seven days a week, evenings, weekends, and holidays. In the following paragraphs, we will cover first-time homebuyers FAQs.

About Illinois Realtor Dino Hasapis

The word AMAZING is an understatement to describe Dino Hasapis. Dino Hasapis always goes beyond the call of duty, and every single one of his clients becomes his lifelong friend. Dino’s partner is a prominent Chicago Area loan officer Alex Carlucci of Gustan Cho Associates is also Dino’s partner and best friend.

Anytime a home buyer, home seller, or loan officer may have a legal question, Dino has access to Alex 24/7. Dino Hasapis is an associate contributing editor for Gustan Cho Associates.

Dino Hasapis has written a book on real estate that will be published soon. His upcoming book focuses on helping a first-time home buyer with low credit scores, The Three-Legged Dog KNOCKS,  with the home-buying process. Dino has asked Alex Carlucci to answer the common first-time home buyer questions most first-time home buyers have.  In the following paragraphs are the most common 11 FAQs by homebuyers and our answers.

Choosing a Loan Officer and Getting Pre-Approved

The first of the 11 questions FAQ by homebuyers is what I need to know when obtaining a mortgage. Once a homebuyer has decided to become a homeowner, the first step is to consult with a mortgage loan officer to get pre-approved for a home loan. For buyers who have already been looking at homes, the realtor can refer them to loan officers they have worked with.

Real estate agents need to feel very comfortable with the loan officer. The real estate agent will need to feel confident the loan officer will not just close the home loan but will close it on time. Real estate agents are extremely selective in referring loan officers. Most will not refer anyone who they have not worked with in the past or had bad experiences with them.

Real Estate Agents are the quarterbacks in the overall home buying and mortgage process. This is because they are the professionals who must ensure everyone in the process is on the same page. This includes homebuyers to sellers, buyers and seller’s attorneys, and the loan officer. Besides getting a loan officer referral through a real estate agent, homebuyers can shop for a loan officer through other means. Research loan officers online, ask friends and family members, or do your due diligence. Start interviewing loan officers who they feel comfortable with. Buyers must be comfortable with their loan officer because the mortgage process can be stressful.

Second Common First-Time Homebuyers FAQs Low Credit Mortgage Process

The first buying process is to get pre-approved by a mortgage lender. Consulting a lender and getting a pre-approval letter will not cost anything. By law, residential lenders cannot ask for any upfront money except for the home appraisal fee. Credit reporting fees cannot be charged upfront.

If borrowers need rapid rescores during the mortgage process, the lender pays the rapid rescore fee. Once homebuyers have chosen a lender and a loan officer they feel comfortable, and the next step is to get qualified. Once the loan officer thoroughly qualifies the borrower, a pre-approval letter is issued.

After getting pre-approved, the next step is to shop for a home with the buyer’s real estate agent.  Homebuyers can shop for a home until they find one they like. Once the homebuyer enters a real estate purchase contract, the mortgage process begins.

Common First-Time Homebuyers FAQs Getting Pre-Approved, Can The Interest Rate Change?

The third Common FAQ for a first-time home buyer with low credit scores is if I got pre-approved, can the interest rate change? The answer to the above question is YES. Interest Rates can change, and interest rates are not set in stone until the loan officer LOCKS the borrower’s mortgage interest rates. Normally, most mortgage loan officers lock the borrower’s interest rates after the borrower gets conditional approval.

Loan officers can lock interest rates before approval. However, before locking any mortgage interest rates, borrowers need to submit an executed real estate contract, and the loan has to be registered with the mortgage company. Most interest rate locks are for 15 days to 30 days. If the closing gets delayed and the interest rate lock period expires, the loan officer will ask for extensions.  Keep in mind the longer the lock period is, the more it will cost via pricing adjustments.

Locking a mortgage interest rate is like getting insurance, where if the rates skyrocket during the locked-in period, the mortgage company still needs to get the interest rate that it was locked. Extensions are not free and cost money, so it is in the best interest that the loan officer does everything possible to close the loan on time.

What Difference Between Pre-Qualified Versus Pre-Approved

The fourth common FAQ by the first-time home buyer with low credit scores is. Difference between being pre-qualified versus pre-approved. Most home sellers’ realtors will not let you submit a real estate purchase offer without a solid pre-approval letter.

When a borrower calls me to get pre-approved for a home loan, I interview the borrower for about 30 minutes. This phone interview process is the pre-qualification process, and once I feel that the borrower qualifies, then we move to the pre-approval process.

During the pre-qualification process, some of the questions asked by loan officers may be the following:

1. What is the price range of the home they intend to purchase?
2. Does the home buyer have an estimate of the property taxes, homeowners insurance, flood insurance if applicable, and HOA  if applicable  ( I can normally estimate the homeowner’s insurance)

Qualified Income and Debt-To-Income Ratio

What is the borrower’s source of income? Is the home buyer self-employed or a W2 wage earner? Whether the borrowers are hourly or salaried. Whether they get the following:

• Social security income
• Pension income
• Part-time income
• Overtime income
• Alimony income
• Child support income
• Other income

First-Time Homebuyers FAQs on Monthly Debts

Besides income, the loan officer will ask about all of their monthly minimum debts. The loan officer will ask whether they have child support and alimony payments. The loan officer will ask about credit before pulling credit. They might ask you if they had bankruptcies, foreclosures, deeds in lieu of foreclosures, or short sales. The reason is that there are federal minimum mandatory waiting periods after bankruptcy and foreclosure to qualify for home loan programs.

First-Time Homebuyers FAQs Derogatory Credit Tradelines

Loan officers will question whether or not there are the following:

• Outstanding judgments
• Tax liens
• Delinquent federal student loans
• Outstanding collection accounts

FHA does not require the outstanding collection and charge-off accounts to be paid off. Outstanding collections and charge-off accounts do not have to be paid to qualify for a home mortgage. However, most lenders have lender overlays and may require the borrower to pay outstanding collections and charged-off accounts. This holds even though agency mortgage guidelines do not require outstanding collections and charged-off accounts to be paid. If one lender has overlays on outstanding collections and charged-off accounts, contact us at Gustan Cho Associates. Gustan Cho Associates is a five-star national mortgage company licensed in multiple states with no lender overlays on government and conventional loans.

Qualifying For Mortgage In Community Property States

Common FAQ By First Time Home Buyers on community property states. Illinois is not a community property state. However, there are nine community property states. Our neighbor to the north, Wisconsin, is a community property state.  Many loan officers make a simple yet serious mistake where they do not ask about the monthly debt obligations of spouses of borrowers of community property states.

With community property states, HUD requires that the spouse’s debts be counted even though they are not on loan. Credit scores do not matter. Poor credit does not matter. However, monthly debt obligations, judgments, and tax liens do matter for spouses on community property states on FHA loans. Fannie Mae and Freddie Mac do not require the spouses’ debts to be counted on conventional loans.

Once the loan officer deems that the mortgage applicant qualifies, the loan officer will take a four-page mortgage loan application called 1003 either over the phone. Or the borrower can complete it online. With the mortgage loan application, the loan officer will run credit. The loan officer will request certain documents such as W2s, two years’ tax returns, two months’ bank statements, copies of driver’s license and social security card, and other applicable documents. Once the loan officer reviews the borrower’s loan application, credit report, and documents and runs the file through the automated underwriting system, the loan officer will issue a pre-approval letter if the borrower qualifies for a mortgage.

The Pre-Approval Stage of The Mortgage Process

The Pre-Approval Stage is the most important phase of the mortgage process. The number one reason why borrowers go through stress during the mortgage process and the reason for last-minute loan denials due to not being pre-approved correctly. Or because the loan officer issued a hasty pre-approval without properly doing his or her due diligence

Many borrowers want a pre-approval within minutes of them getting pre-qualified. However, for the loan process to go smoothly, borrowers need to cooperate with a loan officer and make sure that the loan officer has all grounds completed.

With the 1003 and the credit report, the loan officer can run it through Fannie Mae’s Automated Underwriting System called Desktop Underwriter, commonly referred to as DU, and Freddie Mac’s Loan Prospector, often referred to as LP. Because borrowers get automated approval, the loan will not be guaranteed to close.

First-Time Homebuyers FAQs on Automated Underwriting System

Borrowers need to understand that DU or LP will only go by the information listed on the mortgage loan application and the items reported on the credit report. Credit reports can contain errors. All pre-approvals are not pre-approved the right way.  Some loan officers are pickier than others.

Some loan officers will issue a pre-approval without looking at all of the documents provided by the borrower, or sometimes, many loan officers will not even ask for documents.  A loan officer should carefully review the borrower’s two years tax returns and pay special attention to the borrower’s unreimbursed expenses.

Tax returns for self-employed borrowers are averaged for the past two years. However, if the most current year’s tax returns have a significant decrease in income, most underwriters will not average the two years but will only use the year with the lower income. Suppose the borrower needs overtime, a bonus, or other income to qualify for the loan. In that case, the loan officer should get a verification of employment before issuing a pre-approval letter.

First-Time Homebuyers FAQs Assets and Bank Statements

A loan officer is on the borrower’s side and will do everything possible to make the deal happen, but he needs the borrower’s cooperation. 60 days of Bank Statements are required. The loan officer should pay attention to overdrafts in the past 60 days and any overdraft fees on bank statements.

If you have overdrafts in the past year but do not have overdrafts in the past 60 days, then an astute loan officer will tell you to go to the bank and get him 60 days of bank printouts that are signed, stamped, and dated by the bank teller. Year-to-date overdraft fees are reported on the actual bank statement. But they are normally not reported on computer bank statements provided by the teller. Proof of funds needs to be provided for the down payment. Closing costs can be covered either by a seller’s concession or by a lender credit by the lender in lieu of a higher interest rate.

The loan officer should carefully review your credit report. The loan officer must ensure the borrower has no credit disputes on non-medical collection accounts. Medical credit disputes are exempt from retraction. Credit disputes that are two years old or older are exempt from retraction. Credit disputes with zero balances are exempt from retraction. If the total aggregate balance of all outstanding collection accounts does NOT exceed $1,000, then the credit disputes do not have to be removed.

First-Time Homebuyers FAQs Credit Disputes During Mortgage Process

Credit disputes are not allowed on non-medical collection accounts when the total outstanding balance of unpaid collection exceeds $1,000 or on any charge-off account. Borrowers can have credit disputes on non-medical collection accounts with zero balances or on medical collection accounts. Removing credit scores will drop credit scores. Borrowers who barely meet the minimum credit scores on FHA or Conventional loans may no longer qualify once they retract those credit disputes if their credit scores drop. Once the loan officer has reviewed the following:

• Mortgage application
• Credit scores
• Credit report
• Income docs
• Bankruptcy and foreclosure paperwork, if applicable.
• Divorce decree, if applicable, to see if the borrower is obligated to pay and receive child support/alimony.
• Other potential items a mortgage underwriter may question, the mortgage application can proceed to processing and underwriting.
• The pre-approval process should not take long.
• How long it takes depends on how fast the borrower can get all the docs to the loan officer.

All Pre-Approvals from Gustan Cho Associates are full credit mortgage loan approvals and are fully underwritten and signed off by our mortgage underwriters.

What Is The Difference Between FHA and Conventional Loans?

FHA loans are by far the most popular loans today. FHA loans are residential mortgage loans that are originated and funded by banks and mortgage companies.. Still, it is guaranteed by the United States Department of Housing and Urban Development, HUD, which is the parent of FHA. Most folks think that FHA is a government mortgage lender. FHA does not originate, process, underwrite, or fund FHA loans. The role and purpose of the Federal Housing Administration, FHA, is to ensure private lenders.

HUD insures lenders who are FHA-approved when borrowers default on their FHA loans. For FHA to insure these FHA-approved lenders, borrowers who these FHA lenders approve and fund need to meet FHA Lending Guidelines. If the borrowers do not meet any aspect of FHA Guidelines and the lender makes a mistake, FHA will not insure the FHA loan that they originated.

Nor can the lender resell the FHA loan on the secondary market. This is because no institutional investor will purchase an FHA loan that was not originated and funded correctly. This is the main reason lenders can be knit pickers by asking for conditions after conditions by borrowers during the mortgage process. Mortgage rates on FHA loans are lower than on Conventional loans. This holds even with the borrower only putting in a 3.5% down payment. This is because the risk tolerance to lenders is low due to the guarantee by FHA.

First-Time Homebuyers FAQs on Conforming Loans

Conventional loans are called conforming loans because they need to conform to Fannie Mae and Freddie Mac lending guidelines for the lender that originates and funds to resell the Conventional loan to Fannie and Freddie.

If the lender does not conform to Fannie Mae/Freddie Mac standards, Fannie/Freddie will not purchase the loan. Mortgage lenders use their funds originally to fund the loan from their warehouse lines of credit and package up all of the loans they fund, and resell them to Fannie/Freddie.

They sell it to relieve their warehouse lines of credit and reuse it to originate and fund more loans. It is like using a credit card to purchase something, reselling that merchandise for a profit, and paying off the credit card balance. This process is repeated to go and purchase more items and repeat the process all over again.

Credit Score Requirements

To qualify for a 3.5% down payment home purchase FHA loan, the minimum credit score required is 580 FICO. FHA has much more lenient lending requirements than Fannie Mae’s and Freddie Mac’s Conventional loans.

First-Time Homebuyers FAQs FHA Versus Conventional Loan Guidelines

FHA loans require a 3.5% down payment for home buyers with at least a 580 FICO Credit Score. With Conventional loans, the minimum down payment is a 3% down payment for first-time home buyers or a 5% down payment for those who owned a home in the previous three years.

The minimum credit score to qualify for a Conventional loan is 620. Homebuyers with credit scores between 500 and 579 can qualify for FHA loans. However, a 10% down payment is required. The maximum front-end debt-to-income ratio is capped at 46.9% DTI, and back end debt-to-income ratio is capped at 56.9% DTI for borrowers with at least a 620 score.

Maximum debt-to-income ratios to qualify for Conventional loans are capped at 50%. There are no front-end debt-to-income ratio requirements. Maximum debt-to-income ratios are capped at 43% DTI for borrowers with credit scores under 620 scores.

Mortgage With Outstanding Collections and Charge-Off Accounts

FHA does not require paying off the outstanding collection and charge-off accounts.

Often, borrowers are told that they do not qualify because their credit scores are not 640 FICO and that they must pay off all their outstanding collection accounts and judgments.

Any lender can have higher lending standards that surpass the minimum FHA Guidelines, and these additional requirements are called mortgage lender overlays. Some applicants may not qualify with this particular lender with higher standards than FHA, but they can find FHA Lenders with no lender overlays.

FHA Lenders With No Lender Overlays

You will find Lenders that will go off FHA Lending Guidelines and will not ask for any other requirements as long as you meet the minimum FHA Lending Requirements. Fannie Mae and Freddie Mac have similar guidelines on collection accounts and charge-off accounts.

Any outstanding accounts that are past due need to become current to qualify for a Conventional loan. Conventional loans are somewhat tougher regarding outstanding collection accounts than FHA loans.

This is because a government entity like FHA does not insure it. Any home buyer with less than a 20% down payment will require private mortgage insurance. The private mortgage insurance company may require additional requirements to insure the conventional loan.

First-Time Homebuyers FAQs Mortgage After Bankruptcy

There is a 2-year waiting period to qualify for an FHA loan After A Chapter 7 Bankruptcy. With Conventional Loans, there is a four-year waiting period to qualify after a Chapter 7 Bankruptcy discharge date. FHA requires one year into a Chapter 13 Bankruptcy repayment plan with the approval of the bankruptcy trustee. There is no waiting period to qualify for an FHA loan after a Chapter 13 Bankruptcy discharge date.

There is a two-year waiting period to qualify for a Conventional loan after a Chapter 13 Bankruptcy discharge date. There is a 3-year waiting period to qualify for an FHA loan after a foreclosure, deed in lieu of foreclosure, or short sale. Sealing for a Conventional loan is seven years after a foreclosure..

There is a four-year waiting period to qualify for a Conventional loan after a deed in lieu of foreclosure and short sale. FHA treats foreclosure, deed in lieu of foreclosure, and short sale the same, and the waiting periods are all three years to qualify for an FHA loan. However, Fannie Mae/Freddie Mac have different waiting period requirements after foreclosure, which is seven years, and four years after a deed in lieu of foreclosure and short sale.

Qualifying For Loans With Mortgage Part Of Chapter 7 Bankruptcy

Mortgage Part Of Bankruptcy: For borrowers with mortgage loans as part of your Chapter 7 Bankruptcy, there is a three-year mandatory waiting period from the recorded date of foreclosure and sheriff’s sale. This holds even though the loan balance has been discharged on your Chapter 7 Bankruptcy to qualify for an FHA loan

With Conventional loans, there is a four-year waiting period after the discharge date of the Chapter 7 Bankruptcy if they had a mortgage as part of their Bankruptcy to qualify for a Conventional loan. This holds even though the foreclosure was not recorded until a much later date after the discharge date of the Chapter 7 Bankruptcy.

There are many instances where a borrower will not qualify for an FHA loan but will qualify for a Conventional loan due to the Conventional guidelines on a prior mortgage included in bankruptcy.

How Much Down Payment Do I Need on a Home Purchase?

There is a down payment requirement by the home buyer on any home purchase transaction, and there are closing costs. The two most popular loan programs today in the United States are FHA and Conventional loans. With FHA loans, there is a minimum of 3.5% down payment required on a home purchase.

With Conventional loans, the minimum down payment required is a 3% down payment for first-time homebuyers. First-time homebuyers are defined as a homebuyer who did own a home in the past three years. Otherwise, the minimum down payment required a 5% down payment of the purchase price. The down payment required depends on the particular loan program. A relative with FHA loans can gift the down payment 100%. This holds as long as the donor of the gift can sign a gift letter stating that the down payment is a gift, is not a loan, and does not need to be paid back. With Conventional loans, part of the down payment can be gifted.  VA and USDA loans do not require any down payment.

All the home buyer needs to worry about are the closing costs. Home buyers do not have to pay the closing costs if they can get a seller concession and lender credit to cover the closing costs of their home purchase. I will cover closing costs, lender credit, and seller concessions on a later question Dino Hasispis asked in this interview.

How Much Money Do I Need To Purchase A Home?

Home buyers will need the down payment and closing costs to purchase a home:

• The down payment is mandatory and can be gifted
• There are closing costs that come with every home purchase
• Closing costs are any costs that are incurred in the closing of the home purchase

Examples of closing costs are:

• Title charges
• Attorney’s fees
• Appraisal costs
• One year
• Homeowner’s insurance premium
• Origination costs

Pre-paid, which are two months of escrow reserves required by the lender. Pre-paid is homeowners insurance and property taxes held in escrow by lenders. Most home buyers only can come up with a down payment for their home purchase. Many homebuyers cannot come up with a penny more which is fine because the home buyer does not have to cough up closing costs.

Closing costs can be covered by a seller concession from the home seller to cover most or all of the closing costs. Or a lender credit where the lender can give credit towards part or all of the borrower closing costs in lieu of accepting a higher mortgage interest rate.

An experienced real estate agent will always ask for a seller concession for their home buyers. FHA allows up to 6% of seller concessions from the home sellers. Conventional loans will allow up to 3% of seller concessions towards home buyers closing costs on owner-occupant homes.

Seller Concessions and Lender Credit

Buyers can use seller concessions to cover all closing costs but cannot use them towards the down payment on their home purchase. Seller Concessions Overages cannot be given to the home buyer in cash and must be returned to the home seller.

Suppose a loan officer discovers an overage in seller concession. In that case, the loan officer can use it to buy down the mortgage rate by buying points with the overage seller concession.

If the home buyer is short of closing costs because they did not get enough seller concessions, the home buyer can get the rest of the closing costs covered by a lender credit and not worry about coming anything out of pocket.

First-Time Homebuyers FAQs Home Purchase Case Scenario

For example, let’s say a home buyer is buying a home for $100,000:

• The down payment required is 3.5% or $3,500
• Closing costs are $5,000
• But the home buyer only has a $3,000 seller concession towards the home buyer’s closing costs.
• The home buyer’s money is $3,500 and not a penny more, so where will they come up with the extra $2,000?
• The answer to this will be a lender credit.
• If the borrower got quoted a mortgage interest rate of 3.75% for a 30-year fixed rate FHA loan, the borrower could choose a higher mortgage rate where he or she can get that extra $2,000 from the lender, so the borrower does not have to worry about the shortage.
• Maybe the rate may be 4.0% for the $2,000 excess the lender can give the borrower to use for closing costs.

The borrower then can choose to lock their mortgage rate at $4,000, get a $2,000 lender credit, and not have any closing costs and worry about the down payment and close on their home.

First-Time Homebuyers FAQs Property Tax Proration Credits

There are cases where a buyer can purchase a home without any money out of pocket and, in some cases, get money back at closing due to property tax prorations. In Illinois, property taxes are paid in arrears. The home seller owes the home buyer one year’s property tax credits which are called property tax prorations. Home buyers in Illinois can use property tax prorations toward their down payment. Let’s go back to the above example of the $100,000 home purchase transaction.

The home buyer only has $3,500 for the down payment. The closing costs got covered by a $3,000 seller concession and $2,000 in lender credit. Let’s say that the home buyer has made a $1,000 earnest money check to the seller’s real estate agent which will be used towards the down payment. Let’s say the property tax prorations for this property are $5,000.

The net amount of funds the home buyer will need to bring to a close on their home purchase is zero. Actually, on this particular transaction, the homebuyer will get a check back of $2,500.00 from the title company. This is because the property tax credit by the seller of $5,000 was more than the required down payment of $2,500. The above case scenario is just an example and may not happen often. Still, there are times when home buyers either need little to no money or sometimes will get money back at their home closing due to Illinois’ property tax prorations.

FAQ By Homebuyers: Currently, I Rent How Do I Know If I Can Afford To Buy?

The most common FAQ By first-time home buyers is how much money I need to buy a house. Home buyers think they need a lot of money to purchase a home and never consider being a homeowner. However, it is not as difficult as most think it is. Sometimes, buying a home may be much cheaper than renting.

Buying a home and paying the monthly mortgage payments will pay down the mortgage loan’s principal balance. When a renter pays rent, they are just helping the landlord pay his mortgage and do not recoup any of the monthly rent payments. Many renters do not realize that they qualify to purchase a home.

But they assume that a home purchase requires a lot of money, and they assume that their monthly mortgage payments will much much higher than their current monthly rent payments. This is not usually the case. Renters who rent an apartment or home need to come up with a security deposit and the first month’s rent. If a person is renting, the landlord will most likely require one month or two months’ rent for the security deposit plus the first month’s rent.

First-Time Homebuyers FAQs Buying Versus Renting

Let’s use the above example on a $100,000 home purchase to compare renting versus buying. Most homes in the Chicagoland Area normally rent for at least $1,500 per month, a $1,500 per month rental. Renters would need at least the first month’s rent plus a one-month rent for the security deposit of another $1,500 for a total of $3,000 to get the keys. Buyers must put at least $1,000 in earnest money on a home purchase.

Home buyers will need 3.5% of the purchase price of $100,000 or $3,500 to show the lender that they have the down payment covered, which a family member can gift. Since buyers already gave the $1,000 security deposit, they need to show $2,500.

The closing costs of $5,000 is covered because, in this example, the buyer has a $3,000 seller concession in addition to $2,000 from the lender credit in lieu of the higher mortgage rate of 4.0% versus the par rate of 3.75% with no lender credit. Buyers will get a $5,000 property tax proration at closing so they will get $2,500 from the seller plus the keys to their new home.

Here is what your housing payments will be on a $100,000 home purchase with $5,000 annual property taxes and $600 annual homeowners insurance:

1. Purchase Price $100,000
2. 3.5% down payment is $3,500
3. FHA Loan Amount is $96,500
4. Upfront Mortgage Insurance Premium $1,688.75, which is added to the FHA Loan Balance
5. New Loan Balance with Upfront FHA MIP is $98,188.75
6. Annual FHA Mortgage Insurance Premium is 0.85% of the FHA Loan Balance or $834.60 or $69.55 per month
7. Annual Property Taxes is $5,000 or $416.67 per month
8. Annual Homeowners Insurance is $600 or $50 per month

Now we can do the monthly housing payment calculations:

1. Monthly Principal & Interest on mortgage balance of $98,188.75 @4.0% FHA 30 year fixed $468.77
2. FHA monthly FHA mortgage insurance premium     $69.55
3. Escrow of property taxes                                                  $416.67
4. Escrow of homeowners insurance                                  $50.00
5. TOTAL MONTHLY HOUSING PAYMENT                  $1,004.99

In this case scenario, the new homeowner would get the home with cash back at closing, and they’re buying their home will give them a monthly payment of $1,004.99 versus renting their home, which would cost them $1,500 per month. Homeownership does come with more expenses than renting. For example, the homeowner will need to pay for their expenses, and other services that are included as a renter may be the homeowner’s responsibility, such as scavenger services, water service, and maintenance.

FAQ By Homebuyers: My Home Is For Sale But I Can’t Buy A New Property Until It Sells

Home buyers can qualify to purchase another home as an owner-occupant property without selling the existing property under certain circumstances.

First, to qualify for second owner occupant property without selling the original property they own and if they intend on keeping both properties. Then the second property needs to qualify for an owner-occupant residence, and if it doesn’t, it needs to get financing as an investment property.

Home buyers can keep an existing owner-occupant property and purchase a second one if the new owner-occupant property they are purchasing is much larger and much smaller. For example, a mortgage underwriter needs to understand why the new home buyer is vacating an existing owner-occupant property and purchasing a second one.

First-Time Homebuyers FAQs Buying Second Primary Owner-Occupant Home

A good reason may be that the home buyer is moving from a condo to a single-family home because they got married and raising a growing family. A home buyer can purchase the second occupant’s property if they are moving into a larger property, at least 30% larger, due to a growing family. An underwriter will also understand if the home buyer is going from a larger home to a smaller home due to downsizing.

Many folks who have larger single-family homes and have their children go off to college and become empty nesters and decide to downsize to a townhome or condominium. Once the second property purchase can qualify as a primary home loan, the next step is to qualify for the second home purchase by having two mortgage loans.

Suppose the exiting property has at least 25% equity. In that case, mortgage lenders will let you use 75% of the potential rental income of your exiting property as qualified income in debt-to-income ratio calculations. An appraisal will be required on the exiting home to determine the value and market rental value. If the exiting home does not have 25% equity, then the home buyer can pay down the current mortgage loan balance to have at least a loan to-value of 75% LTV. If that is done, then 75% of the potential rental income of the exiting property can be used as qualified income in calculating the borrower’s debt-to-income ratios.

Common FAQ By First-Time Home Buyers: What Do I Need To Know For Closing?

A Clear To Close is when your mortgage lender has cleared all your conditions and is ready to prepare the closing documents for the title company and fund your mortgage loan.

Due to new mortgage regulations called TRID, which went into effect on October 2015, there is a three-day waiting period after the CTC clear to close for the closing to take place

Once a CTC has been issued, the closing department will contact the title company and the Closing Disclosure, also called the CD, will be prepared.

Common FAQ By First-Time Home Buyers: The Closing Disclosure

The Closing Disclosure is the replacement of the old HUD-1 Settlement Statement. The CD is a breakdown of all the charges and the proceeds that the home seller will get. It will also give the bottom line figure on how much cash to close the home buyer needs to bring to the closing table.

The closing date and time are set when the final CD is finalized. The title company and buyer’s attorney will notify the homebuyer to notify what to bring to closing and the amount of wire the homebuyer needs to wire to the title company. At closing, paperwork gets signed by both the homebuyer and seller, and once everything is signed, the final paperwork is emailed to the lender.

Once approved, the closing department will review the final signed docs by both the homebuyers and sellers. The lender will fund the loan funds to the title company. Once the title company receives the wire from the lender, the closing is complete. The home buyer will get the keys to their new home purchase, and the home seller will get the sale proceeds.

Common FAQ By First-Time Home Buyers: How Frequently Should I Communicate With My Lender

A home buyer should contact their loan officer anytime they have any questions. The mortgage process is very complex. Every loan officer has different ways of dealing with their borrowers. I run my team of licensed mortgage loan originators and have specific rules and standards for all my loan officers to adhere to.

I preach to my new loan officers that we have a great responsibility to all of our borrowers. Our borrowers trust us with their financials and rely on us to ensure they close their home loans on time. It is not just the home buyers that are counting on us. It is the home sellers, the buyer’s realtors, the sellers’ realtors, the buyer’s attorney, and the seller’s attorney.

Open communication is key, and borrowers have the right to have their loan officers accessible seven days a week. I am available seven days a week, evenings, weekends, and holidays for all my borrowers and loan officers who may have questions. Many times I may be on the phone due to my hectic schedule.

However, whenever a borrower calls me and I see their number on my calling ID, the next outbound phone call after I hang up with the person I have been on the phone with will be the borrower who has called me. I enjoy it when a borrower calls me often and encourage my borrowers to contact me anytime or text me. I represent borrowers throughout the United States from all time zones, so I start early, and my day is not done until past midnight CDT. The answer to the above question on how frequently you should communicate with your lender should often be. The loan officer’s job is to take your calls, emails, and texts and answer any questions you may have

If you are not getting that type of service, you deserve better, and plenty of loan officers will give you the service you deserve. Borrowers depend on and count on their loan officer. Your loan officer has the most private and confidential information, including financial and personal information and countless letters of explanation. If a loan officer is too busy to return your phone calls in a timely fashion, he or she needs to rethink taking on more borrowers.

In Conclusion

In conclusion, I like to thank Dino Hasispis for allowing me and my team to be the loan officer to answer his 11 FAQs by homebuyers for her upcoming new book that will soon be published. It is always a great pleasure working with Dino. Not a single homebuyer does not thank me for Dino’s outstanding service.

The team at Gustan Cho Associates is honored that Dino Hasaspis has asked us for our expertise for her book. The team at Gustan Cho Associates is always grateful for the great advice we get from Dino Hasaspis’s real estate questions. Special thanks to his loan officer partner Alex Carlucci.

Alex always goes above and beyond the call of duty in giving us guidance and mortgage advice to our borrowers. Gustan Cho Associates fully endorses Dino. Gustan Cho Associates is a national mortgage company licensed in multiple states with no lender overlays on government and conventional loans. Gustan Cho Associates has a national reputation for being able to approve/close home loans where other companies can’t.