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Your Home Buying Journey Starts Here.

Want to know everything that goes into owning your first home? Download our guide.

IS RENTING OR BUYING THE BEST OPTION?

While it may seem that owning a home is the best choice, that might not necessarily be the case for everyone. Consider all the factors, good and bad, that come with owning a home. Once you compare renting and owning, then you are ready to make the best decision for your current situation.

The Pros of Home Ownership


Invest in your future Your monthly mortgage payments are not going into the pockets of a landlord. Instead, with each payment, you build equity in your home and contribute to your own long-term, personal investment. Lighten your tax load You'll find homeownership opens up a world of potential tax savings. Typically, the interest paid on your mortgage is tax deductible which can provide significant financial relief. To discover all the possible tax advantages available to you upon purchasing a home, it's best to consult with a trusted tax advisor. Develop your credit further Homeownerships is one of the best investments you can make. Additionally, making monthly mortgage payments on time will further improve your credit history and will help you with future and additional investments. Remove questions With homeownership, your monthly payments are no longer subject to increases by the renewal of a lease and the discretion of a landlord. This will help you make a long term budget plan and remove variable factors in your future financial decisions. Find freedom With the only potential parameters being homeowner association guidelines or city codes, you are able to remodel, renovate, and redecorate according to your own personal tastes. You are free to make your home your own -- however you see fit.




The Realities of Home Ownership


Know the numbers Certain renting situations provide coverage for the expenses of some or all the utilities. This is not the case with homeownership. Not only will the utilities be the responsibility of the homeowner, but property taxes and homeowner's insurance also will be additional expenses. Expect repairs There's no more calling the landlord to fix what might be broken. Any repairs and maintenance that are required on the home and/or appliances will be your responsibility. And, you can expect that these will always come with a bill or invoice to pay. Stay put Renting provides flexibility. You regularly are given an opportunity to resign a lease (or not) and suffer only minimal penalties if you decide to break the lease prior to the time of renewal. On the other side, owning a home is a long term investment and will be more financially beneficial the longer you stay in the home. Project ahead; can you see yourself happy in that home and in that neighborhood 5 to 10 years down the road? Deciding to move out of a home does not remove your financial responsibility as the home owner; plus, the process of selling a home can be a time consuming and costly endeavor. It may not happen as quickly as you would like or hope. Be ready to gamble The housing market is perpetually unpredictable. While the hope is that the home will appreciate in value over the time of ownership, this is not always the case in every market. If and when the time comes to sell your home, be prepared for whatever condition the market might be at the time. Housing prices could be down, the market may be slow, and the home may have depreciated in value. Owning a home is typically a sound investment, but it provides no guarantees. UPFRONT EXPENSES Home Inspection Costs These may fall between $200 to $900. The costs depend on the running rates in your area. Down Payment The down payment for homes usually ranges from 3% to 30% of the purchase price. You will acquire more equity in your home with a larger down payment. This also will set you up with lower monthly payments. If your down payment is less than 20%, you will be required to have mortgage insurance. Closing Costs These are expenses that fall above the price of the property which are incurred by buyers and sellers in the process of transferring ownership of a property. Closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The cost of closing typically is about 3 percent to 6 percent of the mortgage amount. Closing costs will vary according to the area of the country; your PrimeLending Loan Officer is able to provide estimates of closing costs for you. ON GOING EXPENSES In addition to your monthly mortgage payment, homeownership also brings with it the following potential expenses: Homeowners Insurance (required) Mortgage Insurance (if applicable) Flood Insurance (if applicable) Utilities Property Taxes Home Repairs/Improvements/Maintenance




Things to Consider When Buying


While there are a good number of housing styles out there, each one provides unique features. The type of house you choose will depend greatly on your lifestyle and personal goals. Single-Family Home With the purchase of a single-family home, homebuyers acquire ownership of the home as well as the surrounding lot. All maintenance expenses and property taxes would be the homeowner's responsibility. Of all housing choices, this one typically provides the most privacy and flexibility. Condo In purchasing a condo, the buyer owns the areas within the walls of the living space but not the surrounding lot of land or building. Typically, a condo is governed by guidelines from a homeowner's association. These associations require monthly dues or annual fees (which are not tax deductible). In turn, the condo owner does not hold sole responsibility for repairs and maintenance to the unit and has access to property management services. Condo units are evaluated individually to determine property taxes (which are the condo owner's responsibility and are tax deductible*). Co-ops In a cooperative housing project (co-op), the buyer owns shares of a corporation which owns the building where the apartment is located. In essence, the person rents the living space from the corporation that owns the building but doesn't own it. As with a condo, there typically is a governing association for co-ops. Through the required monthly or annual dues (not tax deductible), the resident of the co-op is free from the responsible of repair/maintenance and upkeep of the external areas; property management services are provided. Unlike a condo, the co-op unit is not individually taxed. The corporation that owns the building is taxed as an organization instead. Then, according to the shares of ownership in the corporation, the amount of taxes is divided among shareholders. Planned Unit Development Also called a PUD, a Planned Unit Development is structured so that the buyer not only owns the house and the surrounding lot, but the person also purchases and owns a portion of common space that is shared with others that live in the development. These common areas are maintained through the homeowner's association. As with condos and co-ops, these fees are not tax deductible*




Choosing Your Neighborhood


The neighborhood you live in is as important as the house itself. Commuting Do you need a quick commute to work? Keep in mind short commutes limit your neighborhood options. Your Personality Do you prefer country, suburban or urban living? Family Is a certain school district important to you? Do you need to live near other family members? Outside Involvements Do you want to live close to your church or temple? What entertainment venues are nearby? Future Zoning and Development Is the park behind your house going to be developed in the future? Does this community have plans to build a large attraction of some sort? Neighborhood Age What will the neighborhood look like in 10 years? Are you satisfied with an older neighborhood? Are you content with potential changes your neighborhood could make? Time of Day Does the neighborhood feel the same at night as it does during the day? Is weekend traffic heavier than during the weekday? Extra Costs Can you afford the county or city taxes or any homeowners association fees? Homeowners' Associations What are the homeowners association rules? Are they good for protecting home values? Neighborhood Investment Have the homes in this neighborhood held or increased in value? Talk to the people who live in the neighborhoods in which you are interested. These individuals will know the most about the area and are your potential neighbors. More than anything, you'll want a neighborhood where you feel at home.





BUILDING YOUR BUDGET

Having a clear budget is key. Answering a few questions before you begin looking will help you find the best loan option to fit your budget. Do you have a down payment? What is your income-to-debt ratio? What is your credit score? These basic answers will go a long way to making informed decisions.

What is Your Debt to Income (DTI) ratio?

If a loan program uses a 28/36 ratio, this means you are allowed to spend no more than 28% of your pre-tax income on monthly payments and no more than 36% on total debt. So if your monthly gross income is $5,000, your maximum monthly payment should not exceed $1,400 while your monthly debt should not exceed $1,800.

How Much Home Can You Afford?

The down payment is based on a percentage of the selling price and is due at closing. If you can make a down payment of 20% or more, you can avoid the cost of mortgage insurance. If you are unable to make a 20% down payment,  don't worry, there are many other affordable mortgage programs that can fit your financial situation.

What Will Your Interest Rate Be?

Interest rates directly affect your payments. We also offer a float down option which gives you the ability to reduce your rate if the market improves after you lock your rate. The float down option is applied to the interest rate only and is based on the initial lock period; it may be utilized with all conforming loans – both government and conventional.

STEPS IN THE CLOSING PROCESS

You’ll review and sign all of your loan docs. Make sure that each document is explained clearly. If something is not what you expected, don’t sign until the issue is resolved.

You'll give a certified, wire or cashier’s check to cover your closing costs, prepaid interest, taxes, insurance and, if applicable, your down payment.

Next, we (your lender) will distribute or wire the funds covering your home loan amount to the closing agent.

Depending on your loan, you may be required to set up an escrow account so you can pay your taxes and insurance along with your mortgage payment.

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Prepaid Expenses

Includes homeowner’s insurance, mortgage insurance and the costs to set up an escrow account. Because they vary based on the type of property and the time of the closing, prepaid expenses are difficult to determine.

Out of Pocket Fees

Fees for appraisals, attorneys, title, credit reports, deed recording, tax services, home inspections and other miscellaneous expenses are all included in your potential out-of-pocket expenses.

Discount Points

A discount point is 1% of the loan and reduces your rate. Consider a rate at 7.75% with 2pts, or at 8.25% with no points. The lower rate would reduce your payment, but would require $2,000 (2pts) at closing.

CLOSING 
PAPERWORK
HUD-1 Settlement Statement

The itemized list of the final credits and charges, for both you and the seller, based on the terms of the contract. You should receive a copy of the HUD-1 at least one day prior to the closing for your review.

Promissory Note

The mortgage promissory note is a legal “IOU” that represents your promise to pay the lender according to the agreed terms, including the dates on which you must make your mortgage payments and where they must be sent.

Deed of Trust

The documents in which you agree to a lien on your property, as security for repayment of your home loan. For example, the lender (bank) gives the borrower (you) a loan for the house and you make monthly payments to the bank.

Want to know the lingo?

Check out our mortgage dictionary to learn more about all the necessary loan lingo. Then don't forget to apply from our site to get the process started!

1717 W. 6th St #340, Austin TX 78703

512-381-4642

Zander Blunt

Sr. Loan Officer /

Branch Manager

nmls: 188473

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*A prequalification is not an approval of credit, and does not signify that underwriting requirements have been met.