First Time Home Buyer Guide

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First Time Home Buyer
Buy a New Home in Maryland 1920 Greenspring
Dr. Timonium, MD 21093 443-531-9715 www.marylandne
whomepurchase.com Guide
Book
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Table of Contents

• Credit Scores
• Home Affordability
• Steps to Buying a Home
• Loan Types

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1. Down Payment Help
2. FAQs from Home Buyers

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Credit Scores

• Credit scores are an important factor for
  potential home buyers. Credit scores are used to
  determine both purchase loan eligibility and
  interest rate. The high- er the credit score the
  higher the chance for loan approval and a lower
  overall interest rate.
• Are you trying to make a major purchase and are
  in need of improving your cred- it score to do
  so? Our team of licensed Realtors and Loan O?cers
  have decades of experience helping people to
  repair their credit with the three major credit
  bureaus. Here are 13 credit repair tips that we
  have uncovered in our years of as- sisting
  others to improve their credit scores in order to
  get quali?ed to buy a home. These are all tried
  and proven methods for getting your credit scores
  up.
• Your payment history to creditors that report to
  the credit bureaus ac-
• count for about 35 of your given credit scores.
  This is the most important part of starting to
  repair your credit. Make NO 30 day late payments
  to those credi- tors. This will begin to have a
  great impact on your credit score. If you have a
  bill due in a given month make sure that payment
  posts before the end of the month.
• Seriously consider setting up auto payments to
  your creditors through a checking account or
  debit card to assure that there will be no future
  30 day late payments.

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1. Account balances account for about 30 of your
   given credit scores. If you want to improve your
   credit score keep the balances owed on your
   credit card at about 30 or lower than your
   available credit limits. If you have a credit
   card with a 1,000 credit limit keep the balance
   at 333 or lower for example.
2. Establishing and then keeping accounts open
   accounts for about 15 of your given credit
   scores. Keep old accounts in good standing open.
   The older that your credit accounts are the
   better that they are for your credit.
3. Establish di?erent types of credit. This accounts
   for about 10 of your given credit scores. It is
   great to have revolving accounts and these help
   your credit signi?cantly when managed well.
   However, establishing installment loans along
   with your revolving accounts demonstrates the
   ability to manage di?erent types of credit.
4. Do not take on more than you can reasonably
   manage to pay. All you really need is 3-4
   accounts reporting on your credit that you are
   managing well. Ex- cessive credit too fast can
   have a negative e?ect on your credit scores. This
   ac- counts for about 10 of your given credit
   scores.

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• Open new trade lines. Credit cards are a great
  tool for improving your credit when they are
  managed correctly. There are several types of
  credit cards. Re- tail store credit cards, bank
  credit cards, secured credit cards. Applying for
  and being approved for 2 or 3 credit cards is a
  BIG step toward getting your credit scores up.
  If you do not have the best credit and know it,
  do not apply for cred- it cards designed for
  people with good credit. CapOne, First Premier
  (secured
• credit card), JC Penny are easier cards to get if
  you have challenged credit. Fin- gerhut reports
  payments to the credit bureaus and these accounts
  can help your credit too. We do not endorse nor
  make any expressed guarantees that you will be
  approved. But these are a good place to start if
  your credit is not the best. Applying for an
  auto loan, being approved, paying all payments on
  time, will also improve your credit scores.
• Being added as an authorized user on someone
  else's credit card whom is managing their card
  correctly can also improve your credit scores.
  The older the card and the higher the credit
  limit the more it will improve your credit
  scores. By being added as an authorized user that
  account would then begin reporting on your
  credit report each month. Of course you would
  only want to consider doing this with someone
  who pays their card on time each month. If they
  do not then that card would have a negative
  impact on your credit scores.

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• Increasing your credit card limits can also help
  improve your credit scores. After six months of
  on time payments credit card companies will often
  approve a credit limit increase. Doing this
  while maintaining a low balance will have a
  positive e?ect on your credit scores. It signals
  that you have available credit yet are not in
  need of using it.
• Get current on any reporting late payments and
  stay current. Credit reports only report
  payments that are late 30 days or more. If you
  have a 30 days late report on your credit that
  will continue to report until you bring it
  current. This will kill your credit score. For
  example, if you did not make a payment in May on
  your credit card or card or car payment and then
  make a payment in June.
• You have just made May's payment and June is
  still due. If you do not make an- other payment
  until July then you have what's called a running
  30 day late pay- ment. This will have an even
  worse a?ect on your credit scores.

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1. Settle collection accounts and charge o?s. The
   goal is to have all your past due accounts
   marked paid, current, or settled. When it comes
   to mortgage loans the extent to which this must
   be done varies. Contact us for more details.
   Some debts do not necessarily have to be paid o?
   to qualify for a mortgage loan. Settling these
   accounts will improve your credit scores.
   Collection that are 180 days late or more
   usually go into charge o? status. This has a
   worse im- pact on your credit then a collection
   does. If you have collections try and re- solve
   them before they go to charge o?. You can usually
   negotiate the debt with the creditor and often
   o?er a lower agreeable settlement o?er. If you
   settle a debt make sure to get a letter from the
   creditor or collection company stating that your
   account has been settled with a 0 balance. You
   will need that letter to get that negative
   account o? of your credit report. The older the
   charge o? is the lesser a?ect it has on your
   credit scores. Do not attempt to settle these
   accounts if it will cause you to become late on
   your accounts in good standing. It is critical
   that you keep your current accounts paid on time.
2. Remove old delinquent accounts that have reached
   7 years since their re- porting date on credit.
   Old delinquent accounts greater than 7 years old
   can usually be removed at your request to the
   credit bureaus. Removing these will improve your
   credit scores.

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13- Review your credit report and work to ?x
errors found on it. Errors do hap- pen on credit
reports. After review of your report inaccuracies
can be disputed with the 3 major credit bureaus.
Just keep in mind that the credit bureaus will
personally contact the creditors involved and ?nd
out their side of the story. Disputes that are
not answered within 30-45 days which happens
sometimes but not often will be removed from
your credit report. However, if the creditor
sticks by the reported debt then the credit
bureau will note that on your credit and the
debt will remain. You will then have to back up
your dispute with proof that the debt is
reported inaccurately. Some credit repair
companies promise to improve your credit and what
they do is simply write the credit bureaus a
dispute letter for all your negative collections
and charge o?s hoping that the creditor does not
reply. However, usually they do. If you are
trying to buy a home your credit report cannot
have any unresolved disputes on it. Keep this in
mind if you choose to dispute an account have
proof to back it up. If not, then any temporary
increase in your credit score will be lost when
the lender forces you to remove unresolved
disputes from your credit report. Source
Credit Repair Tips
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Home Affordability
Considering the major housing bust that the
economy is still attempting to recover from it
is critical that home buyers seriously consider
the a?ordability of a home purchase for
them. Buying a home is an exciting experience, a
great accomplishment. For many it is in fact the
ful?llment of the American dream. That dream can
become a nightmare if you do not buy within your
means. As you consider purchasing a home be
careful not to bite o? more of a mortgage
payment than you can easily a?ord. Because at the
end of the day that is what you own in the
beginning a mortgage payment. The house belongs
to the bank if you do not keep up with your
payments. You may be told by your lender that you
qualify for a very large home loan. That does
not mean that you should shop in that price
range. Most Financial Advisors suggest that you
do not go over a total debt to income ratio of
43. Your lender can tell you what your debt ratio
is for any given loan amount. Shop within a
reasonable total debt to income ration. If the
350,000 purchase price that you may qualify for
puts you over a com- fortable debt to income
ration then maybe you should be shopping for a
home below 300,000. Be practical do not fall in
love with a home that you will struggle hard to
pay for. You do not know what emergency ?nan-
cial situations may loom in the future. It is
also advised that you should try and have a
savings after the pur- chase equivalent to 6
full months of your normal monthly debts before
going into a home purchase.
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Steps to Buying a Home

1. Contact a Mortgage Lender to get a credit and
   a?ordability analysis.
2. Get a pre-qual letter from the Lender. This is
   necessary in order to get a real estate agent to
   represent you and make an o?er on a house.
3. Connect with a Realtor to assist you with ?nding
   the type home you are interested in buying.
4. Search until you ?nd the right home. Decide what
   areas you would be interested in buying a home
   in. Consider the crime, schools, property tax,
   and likely appreciation of the areas.
5. Make an o?er on a house. Your Realtor will draw
   up the purchase o?er for you.
6. Negotiate and agree on all terms between you and
   the seller. Negoti- ate the price, seller's
   closing cost assistance, and whether items in the
   home will be left behind.
7. Arrange for the home inspection and appraisal.
   The lender will order the appraisal for you.
8. Provide all necessary documents requested by your
   lender so you will get the o?cial loan approval
   and clear to close.
9. Go to the settlement table, sign all ?nal
   purchase documents,and close on the home.
10. Get the keys to the house and move in. Source
    Steps to Buying a Home

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Loan Types
When attempting to buy a home an individual
should learn about all available loans that
there are to do so. There are many di?erent loan
programs available to buy a home and each has
its plus and minuses. By evaluating each of
these loan programs you will be able to ?nd the
loan program that best ?ts your unique
situation. Coventional Loans Conventional
loans are a great option for ?nancing a new home
purchase. Conventional loans extend up to 97
?nancing op- portunities for home buyers. There
are however some banking institu- tions and
credit unions that will go 100 ?nancing on a
conventional loan. However, with enrollment in
one of the down payment assistance programs
available it could cover much of any necessary
down payment. Conventional 1st time home buyer
loans approval guidelines are a little more
restrictive than other loan programs. With
conventional loans their is no upfront funding
fees like USDA, VA, FHA Loans. Although these up-
front fess can be ?nanced into the home purchase
they nonetheless are being paid for by the home
buyer. With Conventional loans the monthly
mortgage premium can be avoided with a 20 down
payment on a home. If you choose conventional
?nancing but do not put 20 down there will be a
mortgage insurance. However, that mortgage
insurance premium can be requested removed once
the home buyer reaches a 80 LTV. Once the loan
balance equals only 80 of the homes appraised
value it can be removed.
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Veteran Loans (VA) Veteran Administration loans
are a great option for ?nancing a new home
purchase for Veterans. Veteran home loans extend
1OO ?nancing opportunities for Veteran home
buyers. Veterans a?airs home buyer loans are by
far the one of the best new home pur- chase
program available. To qualify for a Veterans Home
Purchase Loan, you must be an active or
honorably discharged veteran of the armed
forces. You must apply for a Certi?cate of
eligibility, which our team can help you do.
Veteran loans do have an upfront fee which can be
substan- tial. That upfront funding fee can be
avoided only if the Veteran has an service
related disability percentage of 25 or
more. Bene?ts of a VA home loan, includes
LowA?ordable ?xed interest rates No monthly
mortgage insurance 0 down payment. Large loan
limits Gift funds and grant funds accepted
Seller concessions are allowed Eligible
properties include new construction, existing
homes, manufac- tured homes, condos, PUD's, and
new manufactured homes
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FHA Loans FHA ?rst time home buyer programs are
a great option for ?nancing a new home purchase.
FHA loans extend 96.5 ?nancing op- portunities
for home buyers. However, with enrollment in one
of the down payment assistance programs available
it usually covers much of the necessary down
payment. FHA 1st time home buyer loans are the
easiest of all purchase loans to qualify for. The
credit score and income requirements for FHA
loans are less restrictive than any other ?rst
time home buyer loan program. The FHA has a 203K
Loan option which is a re- hab loan that can
provide up to 30,000 in home improvements on
your new home purchase. FHA Loans have both
upfront funding fees and life- time monthly
mortgage insurance. Some of the reasons why an
FHA loan in Maryland is a great choice, in-
cludes LowA?ordable ?xed interest rates Only a
3.5 down payment. Large loan limits Gift funds
and grant funds accepted Down payment assistance
programs allowed Seller concessions are
allowed Eligible properties include new
construction, existing homes, manufac- tured
homes, condos that are FHA approved, PUD's, and
new manufac- tured homes
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USDA Loans USDA loans are a great option for
?nancing a new home purchase. USDA loans extend
100 ?nancing opportunities for home buyers.
USDA Loan programs were started to encourage
development in rural areas of the USA. The USDA
loan assists low to moderate income families in
achieving their homeownership dreams. To qualify,
the bor- rower must meet USDA minimum income and
credit score standards, and purchase a home in
one of the USDA eligible rural areas in their
state. USDA Loans so have an upfront funding fee
and a lifetime monthly mortgage insurance. Some
of the reasons why a USDA loan is a great choice,
includes Lower mortgage insurance premiums than
FHA A?ordable ?xed interest rates 0 down
payment. No maximum purchase price Gift funds and
grant funds accepted Seller concessions are
allowed Eligible properties include new
construction, existing homes, manufac- tured
homes, condos, PUD's, and new manufactured
homes Not limited to ?rst time home buyers.
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Down Payment Help
There are various down payment assistance
programs for ?rst time home buyers in the US.
There are also some forgivable grants for down
pay- ment assistance and closing costs for ?rst
time home buyers in various states in the US.
One of the biggest obstacles to home-ownership is
coming up with a required down payment. Down
payment assistance programs and grants help many
achieve their home-ownership dreams that
otherwise would not. State or Local County
Employees may be eligi- ble for additional down
payment assistance. Not every ?rst time home
buyer quali?es for down payment assistance or
grants. There are statewide down payment
assistance programs and there are sometimes
county or city speci?c programs within states.
Here is a great resource if you are looking to
apply for a down payment assis- tance program
within you state. http//downpaymentresource.com/a
re- you-eligible/
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FAQ from Home Buyers
How much money will I need to buy a home?
The overall money that will be needed by a person
to buy a home depends upon several factors.
There are basically three separate categories of
costs that a home buyer is expected to pay for in
some way. First o? there is the down payment.
The down payment could be up to 10 of the
purchase price. This depends upon what loan they
are o?ered or qualify for. VA and USDA Loans o?er
100 ?nancing, eliminating the need for a down
payment. FHA Loans for ?rst time home buyers
require 3.5 down. Conventional loans usually
require 10 down. However, there are many down
payment assistance programs that are available
that can reduce or eliminate the down payment
cost to the home buyer. Secondly, there is the
buyer's portion of closing costs that must be
paid. Title fees, state taxes, stamps, title
fees, home owner's insurance, etc. These fees,
although they are the buyers, can be covered by
a negotiated closing cost percentage agreed to by
the seller. Generally up to a 6 seller's
assistance is allowed with most loan types. If
enough seller's contribution is negotiated as
part of the purchase contract, generally most or
all of the buyer's portion of closing cost fees
can be covered. Lastly, there is the cost of
the appraisal, optional home inspection, termite
inspection. These ser- vices if chosen or
necessary, must be paid in advance of loan
settlement. If the home buyer chooses an
experienced lender with ?rst time home buyer
programs, down payment assistance programs, they
can often buy their home with very little out of
pocket costs.
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FAQ from Home Buyers

• Do I really need to use a Real Estate Agent as
  home buyer?
• Buyers do not have to use a Real Estate Agent of
  their own to buy a home. However, here is a list
  of good reasons to hire one.
• 1-A real estate buyer's agent represents the home
  buyer's interest while the home seller's realtor
  is trying to get the best deal for the seller.
• 2-The buyer's agent is paid from the real estate
  fees charged to the home seller. Buyer's do not
  pay anything for the services of their realtor.
• 3-A buyer's real estate agent can assist the home
  buyer with ?nding the type home they are looking
  for.
• The buyer's agent will help a home buyer get a
  fair price on a house, negotiating with the
  seller's realtor in behalf of the home buyer.
• The buyer's realtor will prepare the necessary
  purchase contract that gets pre- sented to the
  home seller by their realtor.
• The buyer's realtor will set up appointments for
  the home buyer, accompanying them in seeing the
  home's they are potentially interested in
  purchasing.
• The buyer's realtor o?ers their experience and
  advice about the home buying process to the
  client.

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FAQ from Home Buyers

• What is private mortgage insurance (PMI)?
• Private mortgage insurance often referred to as
  PMI, is an insurance policy that pro- tects the
  lender in the case of a borrower defaulting on
  their loan. The home buyer pays the annual
  premium in 12 equally divided payments added to
  the mortgage payment. The lender is the
  bene?ciary of the policy.
• PMI is required on all FHA and USDA Loans. At one
  time PMI insurance ended on FHA loans once the
  borrower's loan to value reached 80. That policy
  has changed. FHA PMI remains for the life of the
  loan with FHA Loans except for home buy-
• er's that take out a 15 year loan when they buy
  their home. In this case, once the loan to value
  reaches 78 the home buyer can request the PMI to
  be removed.
• USDA Loan PMI remains for the life of the loan.
  However, the PMI insurance is only about 1/3 the
  cost of FHA and Conventional Loan PMI. VA Loans
  have no PMI insur- ance requirement.
  Conventional Loan PMI can be removed once the
  loan to value reaches 80.

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FAQ from Home Buyers
Should I get a home inspection? If you are
thinking about buying a home one of the decision
you will face is whether or not you should get a
home inspection done on the house you are
interested in buying. Home inspections are not
actually required in order to buy a home. Unless
you are applying for a down payment assistance
program and that program requires one. Although
home inspections may not be required they are
generally suggested by realtors and lenders as a
precaution against buying a home that has serious
issues that cannot be easily seen. So although
maybe not required, a home inspection is worth
the extra cost to assure you are buying a sound
home. Home inspectors will do a complete
inspection of the home, including
Plumbing Roo?ng Siding Electrical
Foundation Gutters and Downspouts
Furnace Insulation