Every investment has trade-offs & home buying is no different.
PROs of Buying
Build equity with each mortgage payment.
Mortgage payments will not fluctuate like rent.
Free to modify the home's interior and exterior.
Tax deductions most likely are applicable.
Appreciation means profit when you sell.
CONs of Buying
Considerable down payment often required.
Insurance must be paid and may rise.
Property taxes must be paid and may rise.
HOA dues may be required and may rise.
HOAs may impose limits on modifications.
A good starting point is the Affordability Calculator.
the Affordability Calculator looks at:
.your gross monthly income
.your monthly debts payments
.your total down payment available
Advanced figures for more details
-monthly HOA dues on property
-property taxes on property
-home owners insurance
-term of loan of 10 to 30 years
Monthly Debts included from your credit report include such items as:
-Installment loans (IE: auto)
-Student loans, even if deferred; however, if someone else pays this debt and has for the last 12 months, this might be able to be negated from your DTI.
-Credit cards (revolving credit)
-All other property owned PITIA
Monthly Debts do NOT include expenses related to utilities, cell phones, health and car insurance, membership fees, subscriptions, groceries, pet supplies to name some.
Budget Planning Need-to-Knows:
As a general rule, the cost of your home should not exceed 3 times the amount of your gross annual income.
Loan-to-Value ratio (LTV). A borrower's LTV is the loan amount divided by the cost of the home. If you have enough for a 5% down payment, your LTV will be 95%.
Debt-to-Income ratio (DTI). A borrower's DTI is recurring monthly debts divided by gross monthly income. You want to aim for a DTI of 33% or lower. Up to 43% is acceptable and you can sometimes squeak by with no more than a 49%.
Don't forget that your down payment is not the only money necessary for securing your loan. Closing costs like title insurance, recording and appraisal fees, to name a few, will also be due. Plus, often times you will be required to have extra money on hand, called Reserves, that remain after your loan closes.
total monthly housing nut =
+ Principal + Interest payment
+ 1/12th property taxes
+ 1/12th homeowners insurance
+ monthly HOA dues
= TOTAL Monthly Nut or PITIA
Click the TLJmortgage button to start your own secure loan application. 
This is a MUST before you go shopping!
Real estate agents and sellers generally do not accept purchase offers that are not accompanied by a preapproval letter from a reputable lender. Often times, the realtor actually calls the lender to get more clarity on your approval letter.
Some of the verification items I require:
Identity = drivers license or passport
Credit = signed borrowers authorization, accessible under 'my shared PDFs ' tab
Income = last 30 days of paychecks and last 2yrs of W2s * if self-employed, last 2 yrs of tax returns, both business and personal including all W2s, K1s & 1099s
Assets = last 2 mths bank statements, all pages, even if they are blank.
Click the below button to start your own loan application.
Or if you prefer to handwrite your loan application, you can download a PDF by clicking: HERE.
Homeowners Association (HOA)
If you're moving into a neighborhood or condominium complex with an HOA, ask about their requirements. Monthly HOA fees can range from $20 - $800 per month or more, depending the HOA.
HOAs all come with rules and some can be very strict so be sure the HOA pros outweigh the cons.
Relating to condos, always ask if the HOA is considered 'warrantable' by conventional guidelines. If not, that property is not privy to conventional financing.
Age
A house built in the 1950s may be charming, and often older neighborhoods don't come with strict HOAs, however, older homes come with older floors, pipes, and older kitchens. You'll need to decide if your budget can accommodate probable future renovations.
Functionality
Run the faucets & taste the water. Water quality tells you something about the quality of both your municipal water district and home's plumbing. Lift the carpeting to reveal the quality and material of what's underneath. Open and close windows and doors to gauge the age of panes and hinges. Anything worth mentioning should be in the seller's Sales Disclosure, a document that details existing issues.
Neighbors
Avoid buyer's remorse by visiting your desired neighborhoods after work and on the weekends. You'll be able to assess noise level, average age, family size and more.
Deed Restricted Properties
Pitkin, Garfield and Boulder deed restricted properties are fine. Just be sure to get with the specific housing office to be sure you get through their qualifying process. It is actually very similar to the loan process.
Deed restricted properties are NOT eligible for FHA, VA or USDA loans.
Manufactured homes
Please be aware that although conventional financing is available, these values will not be as high as the neighborhood's stick built homes.
To start the loan process, you will need to complete & sign the universal residential loan application, the 1003.
If Teree has already pre-approved you, you are most likely 90% done with this step and can skip this step and checkout Loan Milestones for what's next.
Click the below button to start your own loan application.
Or if you prefer to handwrite your loan application, you can download a PDF by clicking: HERE.
... see Loan Milestones for what's next
Within three days of your signed loan application you will be issued the standard Loan Estimate; sample Link here.
From there, the major milestones are …
1. Execute initial disclosures
The regulated disclosures are intended to help you be an informed borrower.
2. Submitted to Lender/Underwriter
This equates to getting in line for an underwriters review. Your loan file will include your signed loan application & loan disclosures along with the items you provided as verification for your income, assets and credit. If the property is part of an HOA, there are additional requirements.
3. Appraisal ordered
I will order your appraisal through a licensed appraisal management company (AMC), dictated by the lender. The property's value is a key factor in your loan approval and supersedes the purchase price if lower.
4. News from the Underwriter
Within a few days of your official loan submission, we will look for a Conditional Approval (hopefully).
A conditional approval is an approval ... But with conditions. The underwriter sets these conditions based on regulated guidelines and rules. Their job is all about verification of the details in your loan application.
5. Fulfill all Underwriter Conditions
After we conquer all of the underwriter's conditions, I will then submit them for the underwriter's review. This includes the appraisal and HOA review
6. Cleared To Close!!!
This means that the underwriter has signed off on all of the conditions and now your approval has NO conditions; although, some loans will still have 'funding conditions'.
7. Initiate & Finalize Closing Documents
The title company, myself and the lender will all work together to triple check the final numbers on your Closing Disclosure. The Closing Disclosure will compare the final figures to the initial figures from your Loan Estimate.
8. Sign Closing Documents with title
You will attend your closing at the title company to sign all of the loan documents ... and sales contract if you are in a purchase transaction. THE END!
The title company we use in a purchase transaction is the choice of the seller. In a refinance transaction it is your choice.
Click the TLJmortgage button to start your own loan application.
Or if you prefer to handwrite your loan application, you can download a PDF by clicking: HERE.
The closing itself is basically a meeting where all of the paperwork is signed and money is transferred ... and if a purchase, ownership is officially conveyed from the seller to you. Closings usually last about an hour.
Closing Costs ...
Closing costs cover lender, third party and government fees as well as prepaid costs and can total 2% to 6% of the loan amount.
These fees need to be paid by or on loan closing date, hence their name, but can sometimes be rolled into the principal balance or paid by the home seller (ask your lender).
All of these costs are disclosed on your Loan Estimate (LE). This comes from your lender within 3 days of submitting your signed loan application.
At least 3 days before you close, you will then receive a Closing Disclosure (CD) which will mirror the LE, and compare it for you.
Application Fee
Some lenders require that application fees are paid at the time the mortgage application is submitted. I do not charge for this.
Origination Fee/Point
A lender fee for processing a borrower's mortgage application. Origination fees may be flat, a portion of the loan, or not charged at all. I do not charge for processing. My origination compensation is paid by the lender, not you.
Underwriting Fee
A lender fee that covers mortgage underwriting services, or the thorough inspection of a borrower's mortgage application details. Some lenders lump an underwriting fee with their origination fee.
Many of my 25+ lenders waive this for my clients.
Flood Certification Fee
A lender fee for verifying whether or not the property is in a flood zone.
This is required by the guidelines and costs $10-$100.
Discount Points
An optional cost for reducing the mortgage interest rate, i.e. buying the rate down. Points are equal to 1% of the loan amount, and may be tax deductible.
Third Party Fees
An example of this could be a charge from your HOA for the completion of the lender required questionnaire used to prove the stability of the HOA.
Attorney Fees
Attorney fees cover services associated with home purchase and documentation. The lender, buyer and seller may choose or waive their right to an attorney during a real estate transaction and instead hold the closing at a title company, which happens most of the time.
Document Preparation Fees
Lenders may hire third parties to handle the great deal of paperwork that needs to be organized for a mortgage closing, for which the borrower will be charged.
Many of my 25+ lenders waive this for my clients.
Title Settlement/Closing Fees
Covers the costs for the closing meeting itself.
Title Insurance Fees<
Covers any legal fees associated with the investigation of a property's chain of title, as well as any losses. These fulfill the regulated loan requirements.
Appraisal Fees
Covers the service costs of the licensed appraiser.
Credit Reporting Fee<
Covers the costs associated with the credit reporting agency. Some lenders require credit reporting fees to be paid with the application fee up front.
Inspection Fees
Covers the costs associated with the inspection agency's services. Several inspections may be required: termite, structural, radon, water quality and others. Some inspection fees are due at the time of inspection.
These are all costs related to the property, not the loan.
Survey Fees
Covers the costs of the surveyor's services. Some lenders require that a property is surveyed to look out for encroachments as well as acquire exact lot size and dimensions. Some survey fees are due at the time of service.
These are all costs related to the property, not the loan.
Recording Fees
Required by the local government for entering a record of change of ownership. Recording fees may be paid by the buyer or the seller.
These run $100-$250 usually.
Prepaid/Escrow Items are ....
Prepaid Interest
Mortgage payments are paid in arrears: interest is paid in the month after the borrowed funds are used (e.g. April's interest payment pays March's interest). So you will pay the interest due from the date of your closing through the end of the current month at closing.
YOUR Homeowner's Insurance
Insures the homeowner against the event of damage to the property. Borrowers must pay a year's premium at closing, plus two months as cushion if the insurance is escrowed. This is insurance that YOU secure and has nothing to do with your loan. It is just a requirement of a loan.
YOUR Property Taxes
Property taxes will be due by the borrower starting on the date of closing. However, property taxes are due and payable to the county per their schedule, by property. So the final settlement statement will square up the property taxes due from the seller to the buyer through the closing date. From there, your escrow amount will be calculated per the date due to the county and your closing date, plus two months cushion.
Factors of Interest Rate
FICO: middle score of 3 bureaus
LTV: Loan/Value ratio
Loan type: VA? USDA? Fixed? ARM? FHA? Jumbo? Portfolio?
Loan term: 10 years to 30 years
Purpose: Buy? Refinance? Cash Out?
Occupancy: Primary? 2ndHome? Rental?
Basic Factors of Approval
FICO: must meet Loan Product rules
LTV: Loan/Value ratio
DTI: Debt/Income ratio - must meet loan product rules; a DTI <= 33 is desired, up to 43 is still ok, and any DTI between 43-50 will be challenging, but often doable.
Income: proved to be stable & consistent
Assets: must meet Loan Product rules; this can include savings, retirements, life insurance cash values and qualified gifts