For most today, a home mortgage is the largest single investment that one normally makes over a working lifetime. It can also be said, however — after the initial excitement of purchasing the home has been made — that dealing with the procedures necessary to buying a home can also be one of the biggest hassles in life, as well.
With the current issues of today’s economy and the most recent mortgage crisis fresh on a lot of minds, purchasing a home today, however, has become that much harder and more complicated, as well. Much of this being caused by the financial calamities of Fannie Mae and Freddie Mac and the subprime loan meltdown of 2008. I will also say that a good deal of the impetus for this month’s article came from observing my son and daughter-in-law in their recent efforts towards purchasing a home in north Mississippi recently. Needless to say, the red tape, the regulations and the “back-and-forth” conversations with the lender in getting an approved mortgage was certainly a great deal more than anything my wife and I had to endure 30 years ago. That being said, I thought it would be healthy to revisit the fundamentals of the process in purchasing a home — both from the standpoint of the lender and the purchaser.
The requirements of a bank or mortgage lender can be pretty picky. But then again, put yourself in their shoes for a minute; if the roles were reversed and it was you who was going to be lending the money, you’d want to know — particularly in today’s economic environment whether:
>> the borrower will have the money to pay you back,
>> that the borrower is financially stable, trustworthy and with a good credit history,
>> and that the borrower has something of value to put up as collateral to pay you back.
On the other side of the coin, look at the issues that the purchaser should consider. Those being:
>> how long he (and or she) plans on living in the home,
>> whether the purchaser is completely comfortable in paying the amount of the mortgage payment over of the period of time involved,
>> and does the purchaser have a clear understanding of all the processes involved in buying a home — particularly the additional costs as well those “hidden” costs that can “ramp up” the overall price to a home.
There are, in addition, additional considerations as well as expenses that have to be factored:
1 — Loan origination fees — these pertains to the costs for any upfront payment of interest you may owe the lender up front which can go from 1 percent to 3 percent of the value of the home. As a general rule, the more money or points you can pay down, the lower your overall interest rate can potentially be.
2 — The cost of homeowners insurance
3 — Any additional escrow fees that may be required
4 — Legal fees for a lawyer competent and proficient in real estate law who will fully check out the title to the property
5 — Home inspection costs
6 — A pest inspection fee, particularly if the home is a few years old
For these reasons and many more that can potentially arise makes it as important today as ever to utilize the services of a real estate professional. Hopefully, this person has the experience of dealing with “all the other stuff” that can make the purchase of a home to be a lot more complicated than you ever thought. And while this may all seem like an extra expense, it can be a real genuine bargain — in the long run.