Why Buy With Maralea?
This simple question is one that needs to be answered right away. Why should a first time home buyer or distressed home seller trust me to find or sell their home and negotiate the price? You want a Realtor who committed to a smooth transaction, who will take your special circumstances into account and treat you and the other involved parties as individuals and not numbers.
In my experience it best for all parties involved in the sell and purchase of real estate when the agents have the ability to work with multiple personality types. Your agent needs to be flexible to work with you, your lender, the other agent, the inspector, and the title company. I have one assistant who keeps me on track, but I work with my clients – you will not be passed from me to a showing agent, to a transaction coordinator, and to a closing agent. You will work with me. The buck stops in my lap. I’ll be available to you during working hours and for urgent questions. I’ve learned that my job as a Realtor really means earning, building and maintaining trust. And I will do that by educating and guiding you through the market, the process, and to the closing table. You will know where you are and what is next in each step.
Pre-approval used to be a convenience. Not any longer. You must have a pre-approval from a lender for me show you homes. The current market is fast paced and sellers have a special round file for offers submitted without financing – the trash bin. Getting a pre-approval is a quick process if you have your ducks in a row.
In many markets across the country, the number of buyers searching for their dream homes greatly exceeds the number of homes for sale, and Denver is not much different. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your home is to be pre-approved for a mortgage before starting your search, and knowing your budget will give you the confidence to write your offer on the home you like on the day you see it.
Freddie Mac lays out the advantages of pre-approval, and states, “It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”
YOU WILL NEED:
An ID (DL/State ID/Passport)
Social Security Number (or Resident Alien Card)
Your last 2 years of tax returns, with supporting W2’s or 1099’s
The most recent bank statement(s)
At least 3 pay stubs
Anything else that the lender asks for – and, yes, you can clarify with the lender what specific docs they will need, when they will need them, and why.
You will need to talk to the lenders, fill out the applications, ask your questions, submit the required tax and financial documents, and see what kinds of offers you get. The loan products, origination fees, closing costs, and interest rates may vary from lender to lender. I always recommend that you start with your bank or CU and you should also get quotes from three local lenders. You have about a 14 day window to shop for a mortgage loan. During this time, those credit checks will only garner one hit against your credit and will allow you to make the most educated and informed decision for your best option. Local lenders are ‘better’ in our local market because they are easier to work with, are in our same time zone, are familiar with our local market and it’s pace as well as our traditions and customs in Denver real estate.
We have a great local lender as part of this site. To get started you will need to contact her and she will have to ask you some questions and she will also request that you give her some pretty important information to get you not just qualified, but pre-approved. Don’t be upset by the questions or the required documentation – this is a business deal and lenders are regulated; so they must have all of their ducks in a row before they can close your deal and finance your home for you. Keep in mind, that the lenders are all going to need the same sort of documentation whether they ask you for it up front or once you have a home under contract. It is much easier to get through the purchase process (which takes about 30 days) if your lender is on the ball and has asked for all the right documents up front. This way you have less hassle during the contract period.
Fairway Independent Mortgage
Loan Officer / NMLS ID 292519
9064 Forsstrom Drive, Unit B1, Lone Tree, CO 80124
Direct 720-414-8777 | Cell 303-808-3947
Know Your Out of Pocket Costs
There are many potential home buyers, and even sellers, who believe that you need at least a 20% down payment in order to buy a home or move on to their next home. Time after time, we have dispelled this myth by showing that there are many loan programs that allow you to put down as little as 3% (or 0% with a VA loan). If you have saved up your down payment and are ready to start your home search, one other piece of the puzzle is to make sure that you have saved enough for your closing costs.
Freddie Mac defines closing costs as follows: “Closing costs, also called settlement fees, will need to be paid when you obtain a mortgage. These are fees charged by people representing your purchase, including your lender, real estate agent, and other third parties involved in the transaction. Closing costs are typically between 2 & 5% of your purchase price.” In the Denver Metro area closing costs average about 1-2% of the purchase price.
Here is a list of just some of the fees/costs that may be included in your closing costs, depending on where the home you wish to purchase is located:
Have You Put Aside Enough For Closing Costs?
• Government recording costs
• Appraisal fees• Credit report fees
• Lender origination fees
• Title services (insurance, search fees)
• Tax service fees
• Survey fees (rare)
EXAMPLE (not indicative of any particular purchase):
Purchase Price: $400,000 –95/5 Loan
Down Payment (5%) $20,000
Earnest Money (~1% -Subtract) ($4,000)
Remaining Down Payment $16,000
Closing Costs (~1.5% -Add) $6,000
Cash to Close $22,000
Total Investment $26,000
1. DO NOT CHANGE JOBS
2. DO NOT SPEND YOUR DOWN PAYMENT
3. DO NOT BUY A CAR OR FINANCE ANY OTHER MAJOR PURCHASE
4. DO NOT USE YOUR CREDIT CARDS WITHOUT DISCUSSING THE PURCHASE WITH YOUR LENDER FIRST
5. DO NOT OMIT ANY DEBTS ON YOUR LOAN APPLICATION
6. DO NOT BUY FURNITURE/APPLIANCES OR ANY OTHER MAJOR PURCHASES
7. DO NOT APPLY FOR ANY OTHER CREDIT
8. DO NOT MAKE ANY LARGE DEPOSITS/TRANSFERS TO YOUR CHECKING/SAVINGS
9. DO NOT CHANGE BANKS
10. DO NOT CO-SIGN OR TAKE OUT ANY OTHER LOANS
EARNEST MONEY – Earnest Money (EM) is an amount that you put forth to go ‘under contract’ on a property. It is your indication to the seller that you intend to complete the purchase and is a demonstration that you have the funds needed to close the deal. It is usually 1% -2% of the list price. All out of pocket costs that are paid at closing (lender origination fees, closing services fees, commissions owed to agents or lenders, sometimes a portion of the down payment) will all come from the EM deposit. Once those funds are used up, then the difference between what you have put down in EM and what you owe is called cash to close.
EXAMPLE (Sample only and is not indicative of actual purchase, lending or closing fees):
You find a home you love for $278,000. Your EM is $3500. Let’s say your loan amount for this example is 90% of the appraised value and comes to $235,600.
Down payment is 5% which is $13,900.
You have also qualified for a down payment assistance through the Colorado Hosing and Finance Authority (CHFA) of 4%, so CHFA is either giving or loaning an additional $11,120 (if you qualify for CHFA down payment assistance there are different programs that you may qualify for, each with it’s own repayment policy, qualifications guide lines and rules).
Lenders fees and appraisal come to $700
Closing services and title fees come to $500
Down payment due (after the CHFA assistance program) $2,780
Your total cash at closing is $3,980 — but you’ve already got $3500 on the table so you will provide only $480.00 at closing. REMEMBER, this is only an example to help you understand the math, your purchase will be an individual experience. Everyone qualifies for something different based on many factors in their individual financial situation. Some folks will actually get some money back at closing, although the majority do wire funds to the closing (title) company
INSPECTION – Inspection is not required but is definitely recommended. Buyer pays for inspections plan $400-$700 for inspection of the home, and this will be paid to the inspector at the time of the inspection. Your home has hundreds of moving and working parts and the buyer has a right to know what the home has to offer and what needs repair or replacement. The inspectors job is to point out everything that is not ‘perfect’. A good inspector will give an indication as to which items should be considered heath and safety related items. For example, you may have an electrical outlet that is installed upside down, but is not connected to a light switch. An upside down outlet is an indication that the outlet should be controlled by a switch. Maybe the switch was removed and the outlet is now independent. The seller just didn’t know that the outlet should have been turned around. Is this going to hurt you? No. Could it kill you? No. Should you demand the seller fix it? Probably not, but you could (the seller will likely say ‘no’ and he is within his rights to do so). But the inspector must point out everything that he sees to the person who contracted his services. A good inspector will provide you with a great report of everything in the house, all of its mechanical and working parts, the plumbing that he can see, the electrical that he can access, notes on foundation and exterior items and should let you know if he believes that you need to get the roof inspected by a roofer or an engineer to examine the foundation. The inspection is for your information. As the buyer, you have the right to object to the home, and request repairs. The seller has the right to refuse those repairs or he may choose to fix some things and not others. Remember, your home will have maintenance that you will have to do. It’s just like buying a car. You have to fill it with gas, have the oil and other fluids changed, get tune up, have the alignment corrected from time to time, get new tires… a home has the same needs and as a home owner, you will to do some of this for yourself.
APPRAISAL – This is always confusing to first time buyers. The appraisal is not for you. It is for your lender, but you must pay for it. The cost of the appraisal ranges from about $700-$1000 typically. If you have questions on the cost of the appraisal, talk to your lender. This cost is paid at closing in the cash to close, and it is likely already covered by the EM that you put down with your offer.
The appraisal is not the market value of the home. The appraisal is an estimation of value relative to the surrounding homes and neighborhood. There are MANY factors in the appraisal. When the lender gets the appraisal they will share that report with the buyer and if directed by the buyer to do so, they may share that report with the buyer’s agent. This report will affect your loan. The loan is based on a percentage of the appraised value of the home. The loan is not based on the purchase price of the home. If you offer $300,000 for a home and your appraisal comes back at $302,000 – that is a good deal for the lender and they will loan you the money for that home. However, if the appraised value for the home is only $298,000… the lender must make the loan based on the appraised value of the home. Your options as the buyer are to: Add another $2000 your down payment to cover the difference between the appraised value and the market value (market value is the amount that a buyer -i.e. you- is willing to pay, the offer is the market value). You can ask the seller to renegotiate the terms of the purchase with you to give a credit for the $2000 or to lower the price by $2000. They are within their rights to say ‘no’. If you simply cannot come to a conclusion for the $2000, you can end your deal and you may be entitled to get your EM back. You’ll have a conversation with your realtor about this.
DOWN PAYMENT – The amount that you put toward the purchase of the home in addition to the loan; the difference between the loan amount and the purchase price. Usually a percentage of the purchase price and is required by the lender in order to approve your loan (usually between 3%-20% depending on the type of loan and other factors)
CLOSING COSTS – Typically this is an amount required for you to pay to ‘close’ the loan (the lender will make you aware of this amount and when it is due to be paid) and to pay for the closing services of the title company and the title policy (usually 1%-2% of the purchase price).
What is a home warranty? Is it worth purchasing? Don’t worry – I typically include a home warranty on your purchase for your new home! *Unless you would rather I pay $250 of your closing costs; Home Warranty is not recommended by me for new construction. **If you do qualify for a down payment assistance program, I cannot purchase the home warranty for you, nor can I assist with any closing costs. A home warranty is still recommended in this situation.
Sudden breakdown of your home’s major systems and appliances can occur at any time. A home warranty company. offers services for homeowners that can help control the high cost of home repairs. Unlike your home owner’s insurance, where you may never file a claim for damages or things like your water heater, furnace, or dishwasher are not covered, you will use your home warranty service. Sooner or later, and at the most unexpected times, you will experience failures of your home’s major systems or appliances — a cost that can run into hundreds or even thousands of dollars!
I love first time buyers! This is why I chose real estate as a career.
5 Reasons Home Ownership Makes ‘Cents”
The American Dream of home ownership is alive and well. Recent reports show that the U.S. home ownership rate has rebounded from recent lows and is headed in the right direction. The personal reasons to own differ for each buyer, but there are many basic similarities.
1. Home ownership is a Form of Forced Savings: Paying your mortgage each month allows you to build equity in your home that you can tap into later in life for renovations, to pay off high-interest credit card debt, or even send a child to college. As a renter, you guarantee that your landlord is the person with that equity.
2. Home ownership Provides Tax Savings: One way to save on taxes is to own your own home. You may be able to deduct your mortgage interest, property taxes, and profits from selling your home, but make sure to always check with your accountant first to find out which tax advantages apply to you in your area.
3. Home ownership Allows You to Lock in Your Monthly Housing Cost: When you purchase your home with a fixed-rate mortgage, you lock in your monthly housing cost for the next 5, 15, or 30 years. Interest rates remained around 4%- 5% for the last year, marking some of the lowest rates in history. The value of your home will continue to rise with inflation, but your monthly costs will not.
4. Buying a Home Is Cheaper Than Renting: According to the latest report from Trulia, it is more than 30% less expensive to buy a home of your own than to rent in the U.S. That number varies throughout the country but ranges from 6.5% cheaper in San Jose, CA to 50.1% cheaper in Detroit, MI. Currently in the Denver Metro market, buying and renting are running nearly neck and neck in terms of monthly costs for like homes; however, renting doesn’t allow you build equity and buying does.
5. No Other Investment Lets You Live Inside of It: You can choose to invest your money in gold or the stock market, but you will still need somewhere to live. In a home that you own, you can wake up every morning knowing that your investment is gaining value while providing you a safe place to live.
2 Buying Myths
Myth #1: “I Need a 20% Down Payment”
Buyers often overestimate the down payment funds needed to qualify for a home loan. According to one Urban Institute report: “Consumers are often unaware of the option to take out low-down-payment mortgages. Only 19% of consumers believe lenders would make loans with a down payment of 5% or less…While 15% believe lenders require a 20% down payment, and 30% believe lenders expect a 20% down payment.” These numbers do not differ much between non-owners and homeowners; 39% of non-owners believe they need more than 20% for a down payment and 30% of home owners believe they need more than 20% for a down payment. While many believe that they need at least 20% down to buy their dream home, they do not realize that programs are available that allow them to put down as little as 3%. Many first time buyers may actually be able to enter the housing market sooner than they ever imagined with programs that have emerged allowing less cash out of pocket. The National Association of Realtors indicates that nearly 61% of first time buyers across the country make a successful purchase with less than 7% down payment. If you qualify for down payment assistance through CHFA, you may only have to have $1000 down payment. You will still need to have anywhere from 1%-2% of the purchase price for the EM, but you may qualify to get a portion of that money back.
Myth #2: “I need a 780 FICO® Score or Higher to Buy”
Similar to the down payment, many either don’t know or are misinformed about what FICO® score is necessary to qualify.
Many Americans believe a ‘good’ credit score is 780 or higher. To help debunk this myth, let’s refer to Ellie Mae’s Spring Origination Insight Report, which focuses on recently closed loans, and indicates that more than 53% of closed borrowers had a credit score of 600-749. Remember, the higher you credit score, the better your loan offer will likely be. So cleaning up your credit reports now is still a good idea.
To qualify for most FHA products a score of 590 or higher is needed.
To qualify for most CHFA down payment assistance programs a score of 630 or higher is needed.
Know What You Want vs. What You Need
In this day and age of being able to shop for anything anywhere, it is really important to know what you’re looking for when you start your home search.
If you’ve been thinking about buying a home of your own for some time now, you’ve probably come up with a list of things that you’d LOVE to have in your new home. Many new home buyers fantasize about the amenities that they see on television or Pinterest, and start looking at the countless homes listed for sale with rose-colored glasses.
Do you really need that farmhouse sink in the kitchen in order to be happy with your home choice? Would a two-car garage be a convenience or a necessity? Could the man cave of your dreams be a future renovation project instead of a make or break now?
The first step in your home buying process should be to get pre-approved for your mortgage. This allows you to know your budget before you fall in love with a home that is way outside of it.
The next step is to list all the features of a home that you would like, and to qualify them as follows:
• ‘Must-Haves’ –if this property does not have these items, then it shouldn’t even be considered. (ex: distance from work or family, number of bedrooms/bathrooms)
• ‘Should-Haves’ –if the property hits all of the ‘must-haves’ and some of the ‘should-haves,’ it stays in contention, but does not need to have all of these features.
• ‘Absolute-Wish List’–if we find a property in our budget that has all of the ‘must-haves,’ most of the ‘should-haves,’ and ANY of these, it’s the winner!
My mother in law recently told me a story about when she and her husband bought the home that they raised their family in and in which she still lives. Their deal breakers were a 2 car garage and a formal dining room… neither of which this home has! Yet, she has lived in that home for nearly 40 years. Be prepared as you shop and expect that your priorities will change. In looking for our home, my husband and I thought that we found the home of our dreams – until we went out to the back yard. The yard was lovely! We saw on the map that the home had no back yard neighbors! But we didn’t realize that the back yard was so close to the road behind. We don’t have kids anymore, we don’t have pets… so safety wasn’t the concern. We did learn something about our home search, though… we couldn’t tolerate road noise. Plan to spend about 30 minutes in each home and really try to picture yourself living in that home as is and where is. Pretend that you can change nothing — would this be a good place to live? If the answer is yes, then think about the changes that you want and whether or not they can be made. You cannot change the location if the home is too close to a main road, or a municipal airport, or a cattle ranch. But you could use the the extra bedroom as an office space. Or you may be able to finish the basement later.