Metro Phoenix Relocation Guide 2008 - (Page 78) Mortgages Home Buying Nowadays, many buyers get qualified for a mortgage even before selecting a specific home. he first step in buying a home is choosing the advisors who will guide you through the de-tails. A reputable, motivated real estate broker is very helpful in locating the proper home and formulating a purchase offer. An attorney who regularly practices real estate law may be also valuable, both to make sure the prospective house is clear from title defects and other liens (by examination of the title abstract) and to properly consummate the title transfer and recording of the deed. The final player on your team helps you with financing. In most cases, this is a banker or mortgage company. How-ever, because of the new financing techniques available, other parties may now play this role as well. Prior to making a purchase offer, you must determine what you are buying. Your attorney should examine the legal description of the property to see what it includes. The offer itself should determine when the transaction will be consummated, and how the various costs (insurance, taxes, utilities, etc.) are to be prorated between the buyer and seller. Finally – and perhaps most importantly – be sure your offer is contingent upon obtaining adequate financing so you can cancel the agreement without liability if necessary. There are several ways to finance a home: 1. Pay cash for the total price 2. Obtain a new mortgage loan 3. Assume the seller's mortgage 4. Utilize a wrap-around financing technique While it is somewhat unusual to pay cash for a home, it does happen. If, how-ever, you will be applying for a mortgage at a lending institution, do some background work before you apply. First, you can verify current mortgage interest rates by phoning a number of area financial institutions or looking at tables often published on a regular basis in the local newspaper. You may want to make a chart showing the rates T for a 15-year and a 30-year mortgage at fixed and adjustable rates. In addition to interest rates, find out about points. Points constitute a fee paid at the time of closing and are based on the amount of money you borrow. This deter-mines, in part, the cost of your loan and how much cash you'll need at closing. Nowadays, many buyers get qualified for a mortgage even before selecting a specific home. You’ll be told what to bring along but usually you’ll have to furnish proof of earnings in the form of W-2 forms, tax returns, pay stubs and/or letters of employment. You’ll need accurate figures on how much money you have in assets (liquid and non-liquid), as well as a list of your debts. Account numbers for bank accounts as well as credit cards, loans and other mortgages are a must. Have on hand the purchase agreement for your new home. Mortgages come in a variety of shapes and sizes. The conventional 30-year fixed rate mortgage is still popular. Its advantages include knowing what the payment will be over the life of the mortgage and spreading the payment over a long period of time, allowing for lower payments than on a shorter term loan. Many lending institutions have switched to 15-year mortgages as their primary type of mortgage. The advantages to a 15-year loan are that the overall amount of money paid for the home is a fraction of what is paid on a 30-year loan. In most cases, the interest rate is .25 to .50% lower than on a 30-year loan; and there is a more rapid buildup of equity. The disadvantage on this type of loan is that the monthly payment is higher than on a comparable 30-year mortgage. (This may be detrimental to a buyer who can't qualify for a larger monthly payment.) For the more adventurous buyer, adjustable rate mortgages (ARMs) are another option. An ARM usually starts at an interest rate that is up to two percentage points below the rate for fixed rate mortgages. The interest rate fluctuates based on the Treasury Index or the California Cost of Funds Index. ARMs are usually recommended for people who expect their income to in-crease over the term of the mortgage. It allows the buyer to borrow at a low rate and risk having higher payments at a time when his income may have increased. Many buyers apply for a mortgage at more than one lending institution. Although there is usually a fee, it is sometimes efficient to apply at two or three places because one may process new mortgage applications faster than another, some have more lenient guidelines and some guarantee the lowest rate in case of fluctuations. 78 Relocation Guide™
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.