Question 1 Who pays the typical fees attached to the home buying process?
A: Buyer pays for:
- Credit Report
- Discount Points
- Escrow Payments
- Homeowner’s Association Fees
- Insurance Impounds
- Interest Adjustment
- Mortgage Insurance Impounds
- One-time MIP (FHA only)
- Origination Fees
- Prepaid Insurance
- Recording Fees
- Tax Impounds
- Title Policy
- VA Funding Fee (VA only)
Seller pays for:
- Discount Points
- Escrow Fee
- Home Warranty Program
- Interest Adjustment
- Title Policy
- Pest Inspection
- Real Estate Commission
- Tax Service
Question 2 What are some of my options for paying off my mortgage?
A: Paying a little extra on your mortgage each month can save you big money. Below is a sample payoff schedule on a $150,000 loan with an eight percent fixed rate for 30 years. Note: Paying less than 10 percent extra per month can save nearly half the price of the house!
No extra payment
- Loan payoff: June 3, 2028
- Payment: $1,100.65/month
- Interest cost: $246,232.88
- Loan payoff: June 3, 2024
- Payment: $1,150.65/month
- You save: $44,150.28
- Loan payoff: June 3, 2021
- Payment: $1,200.65/month
- You save: $72,953.22
Question 3 What are some tips or general rules to prepare for first-time home buying?
A: Save, prepare and research. Bidding wars for homes are becoming more common as demand for houses continues to grow. According to a report in Ladies’ Home Journal, gone are the days of offering 20 percent under the asking price. In today’s market, it pays to go in with your highest offer — which requires some careful financial planning.
- Have enough savings. First-time buyers make an average down payment of 12.5 percent.
- Check your credit report for possible errors.
- Apply for a preapproved mortgage so you know your spending limit. Generally, you can afford a home that costs about 11/2 times your annual income.
- Research recent real estate transactions to find out how much buyers have paid for comparable homes in the area.
- For assistance in buying your first home, contact your local GMAC Real Estate sales professional.
Question 4 How can a student purchase a home without at least two years of job experience?
A: A lender may use your educational time and job performance during an internship or residency toward the two-year employment qualification. This is particularly true when the level of knowledge required on the profession is highly technical, substantial and can be documented as several years of on-the-job training.
The lender needs assurance that you are well educated and can earn a living in your chosen profession. Reviewing your scholastic standing as well as your performance evaluations and work habits can help prove your stability to the lender.
Question 5 Is it harder for people who work on commission to qualify for a home loan? If so, what will the lender expect?
A: One of the key numbers in qualifying for a home is the amount of income you earn. For people who receive a straight salary, it’s pretty easy for the lender to determine that number from a current pay stub. If you work on commission, because your income can fluctuate, the amount you earn isn’t as easy to determine.
The lender will most likely average the past several years’ commissions to arrive at a predictable amount of income. If your commissions have been steadily increasing, the lender could agree to put weight on your current income from commissions. You will need to provide the lender with information on why this income is likely to continue, including documenting a stable client base, and providing commission agreements and 1099s.
Question 6 What legalities are involved in using home plans?
A: If you are preparing to purchase plans to build a new home, you need to know how you can legally use those plans. Home plans are copyrighted. Just like books, movies and songs, federal copyright laws protect the intellectual property of architects and home designers.
Don’t copy designs or floor plans from any publication, electronic medium or existing home.
Don’t use plans to build more than one house — the original purchaser is licensed to build a single home from the plans.
Plans and blueprints cannot be redrawn without first obtaining the copyright owner’s permission. If you need to make changes in the design, you must purchase a reproducible set of plans. Even so, modified designs cannot be reused — the original designer still holds the copyright on the modified design.
Anyone who participates in copyright infringement may be responsible, and penalties can be severe. The responsible parties are required to pay actual damages caused by the infringement (which may be substantial) plus any profits made by the infringer.
Question 7 What are some of the most common tax mistakes made when filing?
A: Tax mistakes occur by the millions. As you carefully calculate your taxes in the next several months, keep in mind that it’s easy to make mistakes. According to the IRS, six million mistakes were caught by the agency in 1996 on forms 1040, 1040A and 1040EZ.
Even hiring a professional is no guarantee against goofs — there were 1.8 million mistakes by professional tax preparers, with more than 35,000 of them on Form 1040EZ, the simplest of the three tax forms.
The most frequent blunders:
- 429,613 taxpayers miscalculated their balance due or refund
- 335,592 taxpayers made mistakes when computing their tax from the tax table
- 155,733 taxpayers incorrectly entered their social security number
- 145,636 taxpayers inaccurately reported their total income
- 45,139 paid tax preparers wrote in the wrong ZIP code.
Source: IRS, reported in Family Money