Buyer Tips -

Financial Considerations and Terms to Know When Buying a Home

Credit Report

Obtain your credit report

Either from the lender who is pre-qualifying you for your loan (this report will contain all three credit FICO scores) or you can obtain one from: https://www.annualcreditreport.com

The website is sponsored by the nation's three major credit reporting companies: Equifax, Experian and TransUnion. They offer a free credit report, however, if you want the credit FICO scores from all three bureaus, you will have to pay a fee.

Verify the accuracy of your credit report

Review your report and find any errors or unresolved issues and contact the appropriate credit-reporting bureaus to ensure they are corrected. Keep all your letters of correspondence and other important documents you receive, so that you can later provide the information to your lender.

Your credit score: Your credit score is used by all lenders to determine if they will lend you money and at what interest rate. The higher the score – the lower the rate. Ask if you qualify for a lower rate. Your credit score will impact your overall loan costs.

Mortgage Loan

Find a mortgage broker or lender you can trust and who is responsive: Look for reputation and customer satisfaction. Supply as much information as you can and get pre-qualified, so that when you find a home, you are ready to move on it. This market is not waiting for people who are not prepared. Determine if your mortgage lender would allow you to remove any contingencies when you place an offer. Chances are that there may be multiple offers and you will need to make your offer as strong as possible.


Get pre-qualified for your mortgage loan: before you start looking for a home: This will give you a plan for how much you can afford.


Aiello & Associates can help you determine the loan amount you can qualify for. Being pre-qualified before searching for a home is very useful because it helps you look for homes within your price range. Real estate agents also appreciate buyers who submit offers on homes with a pre-qualification letter.


Visit our Mortgage website:

Down Payment: Most mortgage programs require you to make a down payment when you purchase a home. The amount of the required down payment will vary, depending on the type of mortgage program. Determine if you have enough saved to cover your down-payment and closing costs. Closing costs average between 2 percent and 5 percent of the home price.

Putting down a larger down-payment: means you will have to borrow less money and you will have more equity in your new home, but you will have less money in reserves if an emergency arises.

You Don’t Need 20% Saved for a Down Payment: Although a 20% down payment would qualify you for the best loan terms – there are many first-time home buyer programs out there, and with government loan programs a first-time buyer can often get into their new home with 5% or less down. Speak to a mortgage advisor. You may be able to buy your home and start gaining equity sooner than you think!

Find out if you can make early payments on all or part of your mortgage without penalty: Sometimes there are large fees to do so.

Financing can be tailored to you specific needs: There are special programs for Veterans and reduced interest rates for home-buyers with good credit. You may be able to negotiate for the seller to pay points.

Points are fees that you must pay at closing: One point is 1% of the loan amount. On a $100,000 mortgage, one point equals to $1,000.

If this will be your first home: look for special loan programs for first-time home-buyers. These programs vary by city and county and some have income limitations.

Always be truthful when completing all forms: especially loan applications and closing documents. The last thing you want to do is provide inaccurate information to your mortgage broker or lender and then risk having your loan denied just before closing escrow.

Your housing payment will include Principal, Interest, Insurance and Taxes (PITI): Calculating monthly principal and interest payments is difficult. You will need a special calculator, or you can ask your real estate agent or lender to give you estimated payments based on various loan amounts and interest rates.

Don't take on a payment you are not comfortable with: even if you are told you qualify for it. Just because you qualify for a larger payment does not mean it is right for you. You need to factor in all your own personal monthly expenses.

Mortgage Insurance: protects the lender if you default on your loan (stop paying your loan). If you don’t save enough money to make a 20% down payment (80% Loan-to-Value ratio) plus all costs at closing, you will likely need mortgage insurance, and this is paid monthly with your mortgage payment. This insurance can come from the federal government (FHA) or a private insurance company. Be sure to discuss your options with your mortgage broker or lender with regards to the costs and benefits of various programs. Your insurance premium is based on the down payment amount and middle credit FICO score.

If you don’t pay your mortgage on time every month: you will have to pay large fees and it will damage your credit score.

If you don’t pay your mortgage for several months: the lender will take your house away. This is called foreclosure.

Interest is what lenders charge you to borrow their money: The bigger your down payment and the higher your credit FICO score is, the lower your interest rate will be.

The higher the interest rate: the more you must pay.

A lender must disclose the Annual Percentage Rate (APR) to you: This rate includes the interest rate, points and fees and mortgage insurance. Comparing APRs is the best way to shop for your loan.

Some loans have fixed interest rates for 30 years: others are adjustable and change during the life of the loan (ARMS). Understand what happens or could happen to your payments over 30 years. Be extra careful when evaluating anything other than a 30-year, fixed-rate loan.

Make sure you fully understand your rates: and whether they change through the life of the loan.

If interest rates drop significantly: you may want to consider refinancing to a lower rate.

Escrow Accounts (Impound Accounts): If you make a down payment of less than 10%, usually many lenders will require you to make monthly escrow payments along with your mortgage payment to cover your property taxes and homeowner’s insurance payments and your lender will pay these from your account when the time comes. For most borrowers, escrow accounts are a clever idea, so they don’t have to worry about setting funds aside funds to cover the property taxes and homeowner’s insurance renewal each year. You make the extra monthly payment and your lender will take care of the rest. To fund the escrow account, you will need to pay some funds through escrow at closing (your escrow company will advise you on how much is needed).

Note: If you make a down payment of 10% or more, you have the option to choose on whether you want an escrow account or not.

An appraisal is an estimate prepared for the lender to determine your home’s value: It is not a home inspection prepared for you.

Know where your loan will be serviced and whether it can be sold.

Loan application process: In addition to determining the type of mortgage you'd like to pursue and determining your interest rate, gathering the right documents is a critical step that can save time and frustration down the road.

To ensure a smooth loan application process, you’ll need to provide some documentation.

Click below to download our Loan Document Checklist

Closing the deal: Once you've found the home of your dreams, there are steps related to sealing the deal, including negotiating a purchase price, getting an appraisal and scheduling an inspection. Once you and the seller reach an agreement, you’ll want to consider closing costs. They typically include origination fees, title and settlement fees, taxes, and prepaid items like homeowner’s insurance or association fees. Your realtor can help you determine all property-related costs.