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How much can you afford?
Use the following calculator to ensure that you know the price of a home you can afford. This will help you and your real estate agent to create targeted searches of homes that you are certain that you can afford. Home buyers that skip this crucial step may lose time and become frustrated to know that some of the homes they are looking at are out of their affordable price range.
Determine how much you can afford
Know your rights
Fair Housing
The fair housing act prohibits discrimination in housing because of:
- Race or color
- National origin
- Religion
- Gender
- Familial status (including children under the age of 18 living with parents or legal custodians, pregnant women and people securing custody of children under 18.)
- Handicap (disability)
Real Estate Settlement Procedures Act (RESPA)
RESPA is about closing costs and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD.
RESPA required disclosures:
At the time of loan application
When borrowers apply for a mortgage loan, mortgage brokers and/or lenders must give the borrowers:
- a Special Information Booklet, which contains consumer information regarding various real estate settlement services. (Required for purchase transactions only) and
- a Good Faith Estimate (GFE) of settlement costs, which lists the charges the buyer is likely to pay at settlement. This is only an estimate and the actual charges may differ. If a lender requires the borrower to use a particular settlement provider, then the lender must disclose this requirement on the GFE.
- a Mortgage Servicing Disclosure Statement, which discloses to the borrower whether the lender intends to service the loan or transfer it to another lender. It also provides information about complaint resolution.
If the borrowers don't get these documents at the time of application, the lender must mail them within three business days of receiving the loan application.
Disclosures before settlement/closing occurs
The terms "settlement" and "closing" can be and are used interchangeably.
An Affiliated Business Arrangement (AfBA) Disclosure is required whenever a settlement service provider involved in a RESPA covered transaction refers the consumer to a provider with whom the referring party has an ownership or other beneficial interest.
The referring party must give the AfBA disclosure to the consumer at or prior to the time of referral. The disclosure must describe the business arrangement that exists between the two providers and give the borrower an estimate of the second provider's charges.
Except in cases where a lender refers a borrower to an attorney, credit reporting agency or real estate appraiser to represent the lender's interest in the transaction, the referring party may not require the consumer to use the particular provider being referred.
Disclosures at settlement
The Settlement Statement shows the actual settlement costs of the loan transaction. Separate forms may be prepared for the borrower and the seller. Where it is not the practice that the borrower and the seller both attend the settlement, it should be mailed or delivered as soon as practicable after settlement.
The Initial Escrow Statement itemizes the estimated taxes, insurance premiums and other charges anticipated to be paid from the Escrow Account during the first twelve months of the loan. It lists the Escrow payment amount and any required cushion. Although the statement is usually given at settlement, the lender has 45 days from settlement to deliver it.
Disclosures after settlement
Lenders must deliver to borrowers an Annual Escrow Statement once a year. The annual Escrow account statement summarizes all escrow account deposits and payments during the servicer's twelve month computation year. It also notifies the borrower of any shortages or surpluses in the account and advises the borrower about the course of action being taken.
A Servicing Transfer Statement is required if the loan servicer sells or assigns the servicing rights to a borrower's loan to another loan servicer. Generally, the loan servicer must notify the borrower 15 days before the effective date of the loan transfer. As long the borrower makes a timely payment to the old servicer within 60 days of the loan transfer, the borrower cannot be penalized. The notice must include the name and address of the new servicer, toll-free telephone numbers, and the date the new servicer will begin accepting payments.
Borrower's Rights
This may be the largest and most important loan you get during your lifetime. You should be aware of certain rights before you enter into any loan agreement.
- You have the RIGHT to shop for the best loan for you and compare the charges of different mortgage brokers and lenders.
- You have the RIGHT to be informed about the total cost of your loan including the interest rate, points and other fees.
- You have the RIGHT to ask for a Good Faith Estimate of all loan and settlement charges before you agree to the loan and pay any fees.
- You have the RIGHT to know what fees are not refundable if you decide to cancel the loan agreement.
- You have the RIGHT to ask your mortgage broker to explain exactly what the mortgage broker will do for you.
- You have the RIGHT to know how much the mortgage broker is getting paid by you and the lender for your loan.
- You have the RIGHT to ask questions about charges and loan terms that you do not understand.
- You have the RIGHT to a credit decision that is not based on your race, color, religion, national origin, sex, marital status, age, or whether any income is from public assistance.
- You have the RIGHT to know the reason if your loan was turned down.
Shop for a loan
Ask friends and trusted business associates for recommendations on lenders who offered favorable experiences and good rates. It’s always a good idea to shop for the best rate. Get at least 3 quotes from Lenders and compare rates. Check out www.bankrate.com for online recommendations.
Shop for a home
Use a Realtor® who holds themselves to a strict code of ethics and is working on your behalf as a buyer’s agent to get the best deal possible. Trust your agent to provide you with timely updates on listings available in your price range and with your desired home characteristics. Agents can save you time by previewing homes for you, coordinating all showings on your behalf and getting details regarding listings that may not be advertised.
Make an offer
Your buyer’s agent will assist you with fair market value for the property and provide you with current comparable home values for active, pending and sold homes in the area. In addition, your buyer’s agent will complete a residential purchase agreement with your specific terms and will negotiate on your behalf with the seller’s agent.
Get a home inspection
As buying a home is one of the largest investments that you will make, you should hire a professional home inspector and make your offer contingent upon a satisfactory inspection. An inspection can assist you in identifying problems prior to purchasing a home and can assist you in negotiating a price adjustment to offset any required repairs.
Shop for home owners insurance
Homeowner’s insurance is required by your lender and covers your home, possessions and people on your property. There are both basic and extended policies and the extent of coverage is up to you. A homeowner’s policy typically covers property protection or hazard insurance and personal liability insurance. Additional hazard insurance may be required if you live in a flood plain or earthquake zone.
Sign documents
Understand all settlement costs as provided through your escrow officer and sign final paperwork for closing. After closing, you will get the keys to your home. Congratulations!
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