Finding and using a real estate broker
Using a real estate broker is a very good idea. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate broker will be well-acquainted with all the important things you’ll want to know about a neighborhood you may be considering — the quality of schools, the number of children in the area, the safety of the neighborhood, traffic volume and more. He or she will help you figure the price range you can afford and search the classified ads and multiple listing services for homes you’ll want to see.
With immediate access to homes as soon as they’re put on the market, the broker can save you hours of wasted driving-around time. When it’s time to make an offer on a home, the broker can point out ways to structure your deal to save you money. He or she will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and be there to hold your hand and answer last-minute questions when you sign the final papers at closing. And you don’t have to pay the broker anything! The payment comes from the home seller, not from the buyer. If you want to buy a HUD home, you will be required to use a real estate broker to submit your bid.
Coming up with a down payment
Coming up with enough money depends on a number of factors, including the cost of the house and the type of mortgage you get. In general, 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 to $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 to 20 percent of the purchase price. That’s why many first-time homebuyers turn to HUD’s FHA for help. FHA loans require only 3 percent down and sometimes less.
Closing costs, which you will pay at settlement, average 3 to 4 percent 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. If you buy a HUD home, HUD may pay many of your closing costs.
Also check out: 7 Things to know before buying a home