Buying a New Home?[cite::98::cite]

Buying a new home is no small feat. If this is your first time buying or you just need a refresher on the basics, look no further. We've put together a collection of useful information to help you in the process.

The Home Buying Process and What to Expect

The time between your loan application and closing and move in can vary. A variety of delays can occur, including:

  1. If your inspector finds problems with the property, often the loan is held until the problems are fixed.
  2. The lender may have issues with the home appraisal and the original appraisal put under review.
  3. Problems with the title can create unforeseen setbacks.

There is no set time frame for how long a mortgage takes. Knowing more about the process and what to expect can help you monitor your progress and understand what still needs to happen.

Quick Tip: Self-Employed

Self-employed borrowers need to provide two years of their most recent tax returns when applying for a mortgage.

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Credit History, Scores, and Buying a Home

Review Your Credit Report Early In Your Journey

Your credit history and score affects getting a loan and the terms of the loan. Know your score and review your report early on and again every year. You’re entitled to a free report each year.

Equifax, Experian, and TransUnion are the credit reporting bureaus that compile credit information. Lenders get credit reports from one or all of these agencies when you apply for a loan. Your report can vary from one agency to another, so review each report carefully.

By law, you get a free copy of your report from each agency every 12 months. If you find and dispute an error, get a new report to verify that the mistake is fixed. Also get a new report if you’ve been denied credit or are the victim of fraud.

Know Your Score and How to Help Protect Your Credit

Your credit score is based on your credit history. The most widely used scoring system is the FICO score. FICO scores range from 300 to 850. The higher your score, the better credit risk you’re seen as. Lenders and creditors may review your score along with details on your credit report to assess your risk. If you’re seen as too high a risk, they may refuse to loan you money, ask for a higher down payment or charge you a higher interest rate.

Build Credit and Keep It

Opening a bank account and applying for a credit card are two easy ways to obtain credit, but be careful. Too many credit cards or loans can hurt your credit score. You’re best off having fewer cards and loans with solid payment histories than many cards and loans, even if you pay them regularly.

The Costs of a Mistake On Your Credit Report

There can be costs of a mistake on your credit report. Inaccuracies in your credit report not only lower your credit score, but can impact your interest rate, required down payment or an entire loan. The Fair Credit Reporting Act requires agencies to correct errors that may appear on your credit report.

Quick Tip: Free Annual Credit Report

www.annualcreditreport.com is the only authorized source to get a free annual credit report under federal law. Visit their site or call 877-322-8228. Or for more information from the Federal Reserve on Credit reports and scores, visit Federal Reserve Consumer Guide to Credit Reports and Scores.

Types of Mortgage Loans

Pick the Best Loan for You

The loan you pick depends on your tolerance for risk/change, the amount you make versus the amount you need to borrow, how long you want to borrow, where you buy, what you buy and other factors. To see possible loans based on your plans, select one of the options below.

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Down Payment

Down Payment Amount

The loan you pick depends on your tolerance for risk/change, the amount you make versus the amount you need to borrow, how long you want to borrow, where you buy, what you buy and other factors. To see possible loans based on your plans, select one of the options below.

Ways to Build Your Down Payment

Save and Budget

Saving for a down payment is a good first step toward homeownership. If you don’t have enough saved for a down payment, you may want to postpone house hunting to save for a larger down payment rather than looking at a low down payment mortgage program. Set up a personal or household budget to help you manage your money and see how you’re spending it. If you already have debt, a budget can help you see how to pay it off and start saving for a home.

Using Gifted Funds

For a down payment to be considered a gift, there can’t be an expected or implied repayment of the funds to the donor by the borrower. Cash gifts are okay when the donor is a relative, employer, charitable organization or a government agency with a home ownership assistance program. To use gift funds for your down payment, consider FHA financing. FHA requires a down payment of just 3.5% and it can all be from gift funds. Conventional financing requires you provide the first 5% from your own funds unless your donor is providing 20% in gift funds.

Individual Development Accounts

The Individual Development Account Network (IDAN) provides a savings match and financial education. Simply register and complete eight hours of financial training to receive a letter to take to the bank of your choice. Funds can be used for home ownership for first-time homebuyers, education or small business development or technology assistance for disabled individuals.

Home$tart and Home$tart Plus Programs

The Federal home Loan Bank Seattle’s Home$tart and Home$tart Plus programs are for nonstudents earning up to 80% of their local area median income. Qualified participants can use grants for down payments, closing costs or remodeling an owner-occupied housing unit.

The Home$tart program matches $3 for every $1 saved, up to $5,000, and the Home$tart Plus program matches $2 for every $1 saved, up to $10,000.

Local Utah and Idaho Down Payment Assistance Programs

For programs in other states, contact your local government, real estate agent or search online.

Quick Tip: Be Prepared

In addition to your down payment, have at least three months’ worth of mortgage payments in savings — what lenders call cash reserves.

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Prequalify and Preapprove

Know What You Can Borrow

Saving for a down payment is a good first step toward homeownership. If you don’t have enough saved for a down payment, you may want to postpone house hunting to save for a larger down payment rather than looking at a low down payment mortgage program. Set up a personal or household budget to help you manage your money and see how you’re spending it. If you already have debt, a budget can help you see how to pay it off and start saving for a home.

Let the Seller Know You Are Serious

Getting preapproved for your mortgage loan shows the seller that you’re a serious buyer with viable credit. It’s a conditional commitment based on underwriting review of your loan application, income and asset documentation, credit report and specific loan terms. Once preapproved, you may request a preapproval letter to show sellers that you're a viable buyer.

Quick Tip: Know Before You Move Forward

Prequalifying doesn’t guarantee you’ll get a loan. If your loan doesn’t close within 30 days of your conditional commitment, you can expect to provide updated paystubs and bank statements to verify your circumstances have not changed.

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PROPERTY TYPES AND HOAs

What kind of home do you want? A home doesn’t have to mean a free-standing house. It can be an condominium, a mobile home and more. Here are the most common options.

Single Family Residence (SFR)

The most common type of home, also known as single family detached. An SFR is a standalone structure with its own lot, unlike condominiums, townhomes, cooperatives, and multifamily homes that are all attached residences.

Multifamily Residence

A type of home or building with multiple units owned by one or more parties, such as condominiums and duplexes.

Planned Unit Development (PUD)

A PUD is a housing development not subject to the area’s standard zoning requirements. With permission from the local government, a developer establishes criteria that determine private and common areas and building guidelines. These may include street lighting designs, street width, architectural styles, building height standards, landscaping, land coverage ratios, common area park or amenity requirements. Planned unit developments are often used to cluster homes closer together than allowed by zoning laws. 

Condominium

A condominium or condo is one of a group of housing units where each homeowner owns his/her individual unit. Individual units normally share walls. Condos include no individual ownership of a plot of land. All the land is owned in common by all of the owners. Usually, exterior maintenance is paid out of homeowner dues collected and managed under strict rules.

Manufactured Home

A manufactured homes is prebuilt in a factory. Each home conforms to the US government's Manufactured Home Construction and Safety Standards (HUD code), rather than local building codes. Each home or segment of a home is labeled with a red tag that is the manufacturer's guarantee that the home was built to conform to the HUD code. Manufactured homes are built on a non-removable steel chassis and transported to the building site on their own wheels. A red HUD label with a stamped serial number should be attached to the exterior of the home.

Homeowners Association (HOA)

A homeowners association (HOA) is an organization in a planned community development, a condominium complex or subdivision that is given authority to manage common amenities and enforce covenants, conditions and restrictions (CC&Rs). An HOA may provide services, regulate activities and levy assessments. It can offer a neighborhood with common values an opportunity to achieve a community representative of those values. Ask yourself if a property you’re considering has an HOA and decide whether or not the rules and regulations fit your lifestyle.

HOA fees can vary dramatically depending on the type of association and community. Often, fees are assessed to maintain common areas, such as pools, parks and community buildings. However, fees can also include services, such as utilities, garbage pickup and private road maintenance. Looking at a copy of the HOA financials might give you a clearer picture of the distribution of the organization's funds.

Most HOAs are controlled by a board, typically made up of volunteers of the community elected by other property owners. However, an HOA property management company can be hired to perform administration and operational tasks on behalf of the HOA.

CC&Rs can vary as significantly as the fees associated with different HOAs. Restrictions for common areas can include rules and regulations on how those areas are used by the residents and their families, while other constraints on use of property might include the type and height of fencing allowed, required landscaping or the storage of boats and RVs.

Read the CC&Rs carefully before you buy, if you don't understand something ask for more information and seek legal advice if necessary.

Most HOA boards meet at least annually. However, other meetings might take place quarterly, monthly or sometimes to resolve a specific issue. Reviewing the minutes might give you information regarding the way the board conducts the organization. It can also make you aware of any challenges within the community and alert you of any lawsuits.

Sometimes special assessments are planned in addition to monthly HOA fees. These are typically assessed when major repairs or maintenance is necessary on common areas. For example, a planned unit development or condominium complex may need a new roof or updated paint or, homeowners may want to add new playground equipment to their park or a private road may need to be repaved. These are often not included in the annual budget and may require an additional assessment to cover the costs. If you’re on a tight budget this may be something you want to take into consideration.

Quick Tip: Fees

Condominiums and planned unit developments (PUD) generally charge a homeowners association (HOA) fee assessed monthly or annually to cover the cost of maintenance of the common areas and enforcement of the Conditions, Covenants and Restrictions (CC&Rs).

Buying a short sale

A short sale is the sale of a home at a price lower than the existing balance of the mortgage, and can only occur with the full cooperation of the bank holding the mortgage. Homeowners often use a short sale to avoid foreclosure. The risks of purchasing a short sale are considerable. Before you buy a short sale, consider the following.

Work With a Qualified Real Estate Professional

Working with an agent not experienced with short sales can hurt your chances of a successful closing. A qualified real estate agent can show you short sale homes, help negotiate the purchase and facilitate communications with the lender. Interview a few agents and ask them how many short sales they’ve successfully closed.

Get Preapproved for a Mortgage and Have a Down Payment In Hand

If you’re preapproved, have a large down payment and can close at anytime, your offer is more favorable than that of a buyer whose financing is less secure.

Know the Terms of the Sale

Even if the lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to the sellers who may refuse to go through with the sale. Lenders can also change any of the terms of the contract you’ve already negotiated, which may not be agreeable to you.

Understand that the Property Sold Is “As Is”

The bank is already taking a loss on the property and may not grant requests for repair credits. More than likely, you will be responsible for any necessary repairs.

Know the Potential for Rejection

Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than fair market value, chances are that your offer will be rejected and you’ll have wasted time. Or the lender could make a counteroffer, which will lengthen the process.

Buying a Foreclosure

Buying a foreclosed home is a little different from buying a regularly listed home. There is often little, if any room for negotiation. The home comes “as is” and it’s up to the you, the buyer, to pay for repairs.

Before buying a foreclosed property:
Get Approved for a Mortgage

Unless you plan to pay cash, you’ll need a recent preapproval letter from a lender. Home buyers make the mistake of assuming that the bank selling the property will also finance the mortgage. The really good deals on bank owned properties go quickly and the buyer doesn’t necessarily have time to work out the financing after an offer’s been made.

Find an Agent that Specializes in Foreclosures

Banks usually hire just one or a few real estate agents to handle their real estate owned (REO) or foreclosed properties in a market.

See real estate owned by Zions Bank.

Study Comparable Homes

There is no rule of thumb on what the bank’s bottom line is on price. Just as with any other purchase, you have to look at the recent sales prices of comparable properties. At times the bank prices the home very low and there will be multiple offers within a few hours and sometimes, it’s priced too high and you can offer a lower amount.

Understand the Home Is Sold “As Is”

Foreclosed homes are generally sold in “as is” condition, meaning you can expect to pay for any necessary repairs on the home. It may be helpful to get to know tradespeople who can assess and repair damages.

Quick Tip: Do Your Homework

Once you’ve found a home, search public records. Liens on the property can drive up the purchase price. Also we put together a bunch of questions to ask Real Estate Agents, Builders, and Lenders to help you through the process.

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