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It is important to identify your financial information before the
process begins to determine exactly how much house you are
both qualified for and are comfortable to buy.

HOW MUCH DOWN PAYMENT?

Down payments can range from zero to 99% down. There is no standard amount. It is based on your personal situation and requirements. Every individual is unique in his or her loan requirements. You lender can advise you which program is best for you. Many first time homebuyers put 3% or 5% down. This will require the buyer to purchase private mortgage insurance (PMI). This of course adds to your closing costs and monthly payments. Buyers putting 20% or more down will not be required to purchase PMI.

WHAT WILL MY CLOSING COSTS BE?

These are expenses associated with the transfer of property ownership. As a rule of thumb, these costs can range from about 4% to 8% of the cost of the home. They can include attorney fees, lender fees (points), escrow fees, recording fees, the San Juan County Land Bank tax and title insurance. Other upfront costs that you will want to earmark some of your funds would be for things like; a building inspector to evaluate your home's soundness, an optional expense, but one worth considering strongly. And you may want to make a few immediate repairs prior to moving day. Don't hesitate to discuss these costs with your Realtor. The sooner you know what you will need, the sooner you'll be able to determine an accurate down payment figure.

HOW HIGH SHOULD I ALLOW FOR A MONTHLY PAYMENT AMOUNT?

This answer will depend on how much you require for other living expenses. One thing you certainly do not want to do is make yourself 'house poor' or 'payment poor', so that you cannot afford the quality of life you envisioned in your new home. As a rule of thumb, your monthly house payment, including principal, interest, taxes and insurance (PITI), should not be more than one third of your gross income. Of course, you should adjust this figure for unusual or extraordinary monthly expenses, such as special schooling, unusual health care expenses, and so forth.

In order to get specific numbers to the closing costs and monthly payments outlined above, consult with your loan officer. They will customize a lending program that suits you best. At that time they can also pre-qualify or pre-approve you for a home loan.

What does this mean and will I need to do either?

Pre-qualification or Pre-approval are the seller's assurances that the buyer has the capacity to execute any contract they enter and will more than likely complete the transaction. It also allows your real estate agent to know that you are a qualified buyer, and what price homes to be searching out for you. In this market sellers require preapproved or at least Pre-qualified offers, before they will even consider them.

PRE-QUALIFIED basically means you have been asked by a lender, a series of questions concerning your employment history, income and debt status and other financial considerations, like savings accounts, etc. Based on the answers to these questions the lender will compute your debt to income ratios and determine what price loan you will be able to qualify for.

PRE-APPROVED means you have done the above plus you have paid for a credit report, and submitted pay stubs, W2's and bank statements to your lender, to have your credit, income and employment verified. Getting pre-approved can be done relatively quickly, ranging in time from a few hours to a day or two, depending on circumstances. Your lender will then issue a letter or certificate to your agent, that he in turn presents to the seller at the time of the offer, displaying that you are an approved buyer. What this tells the seller is that you are not a financial risk to buy this house. What this means to you is that it puts you in a better or stronger negotiating position.

Always opt for Pre-approval. You will be required to do this within a specific number of days after your offer is accepted. Therefore, it's in your best interest to do it before you make an offer, putting you in a stronger position of acceptance or negotiating.

It is important for you to know and understand, that most sellers consider Prequalification of no real value and will only accept Pre-approved offers.

Double offers or multiple offers are not uncommon in real estate transactions in this market. Sometimes sellers have more than one offer to consider at the same time. Price is not always the deciding factor. If you offer as an example, $2,000 less than another party and you are approved and they are not, the seller could easily decide to go with you, the sure thing, as opposed to the other offer that is just a probable or maybe. Or another example might be; two offers are made at one time and the price offered is the same, but you are pre-approved and the other buyers are just pre-qualified. Your offer would probably be accepted over the other buyers.