Spring

It's hard to believe that last week we had a dump of more than a foot of snow and now we're heading into the 40's and 50's. That, along with the daylight savings time shift tonight and the vernal equinox less than 2 weeks away means spring is really coming!

My compter went into hibernation...actually worse, the hard drive crashed and I've been 'making do' with various computers while bringing mine back to life...a slow process. The worst part of the whole thing was the discovery that the new website I'd been working on for the last couple months wasn't backed up!! Oh, well...it will be re-built even better...only much later!

Spring season is starting...I was out with clients yesterday slopping through muck and mud...a true sign of spring. We also had multiple offers on a new listing this week...another sign that spring is on the way.

If you're thinking about buying, it's time to spring into action. Don't neglect getting pre-approved before seriously looking, you never know when you're going to find the home you want to buy! Case in point...in reviewing the offers this week the buyer that was chosen was already financially underwriting approved, just waiting for a property.

You've no doubt heard the news stories about mortgage horror stories and companies going out of business. This makes true pre-approval, not just 'looks good' approvals, even more important.

A reputable mortgage company and trustworthy loan officer are also vitally important. Buyers need to know they will truly be able to afford their home and won't face rising payments and/or interest rates that may force them out in the future. Sellers want to feel confident their home will not just get a signed agreement, it will actually close!

Does 100% financing mean I don't need any cash to buy a home?

Well, yes and no. 100% financing usually means your mortgage covers the total purchase price of your home, and often covers your closing costs as well. However, you will need some cash up front for your earnest money and optional inspection costs.

Let's walk through a typical 100% financing scenario...

Let's say you're buying a house for a purchase price of $193,300 and financing the total amount, including closing costs and prepaids.

Estimated closing costs (financing and closing fees) would be about $5,000 and prepaids (interest, taxes and insurance) would be about $1,700...for a total of $6,700...adding this total amount to the sale price gives a total financed purchase price of $200,000.

The most common amount allowed in financed closing costs is 3% of the purchase price. In this case that would be $6,000...leaving an additional estimated $700 for you to pay out of pocket.

This means that nearly everything is financed at closing, but you still need some cash for earnest money to submit with your offer to purchase the property. Earnest money is usually about 1-2% of the purchase price (about $2,000 in this instance), and is held in escrow for you until closing...it's the money that says you're serious about purchasing this property because this is money the seller would keep if you change your mind and back out of the transaction before closing.

If your purchase agreement is subject to an inspection, you should also budget about $350 for this cost, payable at the time of inspection at the time of the purchase agreement. If you cancel the agreement because of the inspection your earnest money will be refunded to you.

When you finance 100% of your purchase price and closing costs, most of your earnest money should be refunded to you at closing...based on the difference between estimated financed costs and actual costs at closing.

Questions? Want more information? Just let me know...we're here to help!

Everything in this example is used for illustrative purposes only, is based solely on estimates, and is not guaranteed.