Common Homeowner Questions

What are the advantages of Homeownership?
• A home is a place you can call your own. You have the advantage of making your living space to suit your individual taste and needs, not that of a landlord.
• Owning your own home can be a first-rate investment. Homeowners also get significant tax breaks that are not available to renters. Interest paid on a home mortgage is usually deductible.

Can I afford to buy a house?
In some cases the cost of a mortgage, insurance, and taxes, is actually less than what you pay in rent.

I've had bad credit, and I don't have much for a down payment, can I become a homebuyer?
You may be a good candidate for one of the federal mortgage programs that are available. Neighborhood Housing Services of the Black Hills can help you sort through the options and see if there are any local homeownership programs that might work for you.

How expensive of a home can I buy?
The rule of thumb states that you can afford a house that costs up to two and one-half times your annual gross income (the amount you make before taxes are deducted). It also depends on a number of factors, including the cost of the house and the type of mortgage you get. In general you need to come up with enough money to cover three costs: the deposit you make on the home when you submit an offer, to prove to the seller that you are serious about wanting the house; the down payment, a percentage of the cost of the house that you must pay when you go to settlement; and closing cost, which are the cost associated with processing the paperwork to buy the home.
• Qualifying attendees of Neighborhood Housing Services of the Black Hills Homebuyer Education classes can apply for down payment and closing cost assistance.

How can I increase my borrowing power?
• Reduce existing long-term debt.
• Wait to apply for a mortgage until your income increases
• Find a financing option that results in a lower down payment and lower monthly mortgage payments.

I'm a single mother. How would I go about buying a home?
Although you won't have the benefit of two incomes in which to qualify for a loan, there's no reason that you can't become a homeowner. Neighborhood Housing Services of the Black Hills partners with USDA Rural Development and South Dakota Housing Development Authority, which have great home buying opportunities for low-income families.

Should I use a real estate broker?
Using a real estate broker is a very good idea. A good real estate professional can guide you through the entire process and make the experience much easier and will be well-acquainted with all the important things you'll want to know about a neighborhood you might be considering... the quality of schools, the number of children in the area, the safety of the neighborhood, traffic volume, and help you figure the price range you can afford. A broker can help save you hours of wasted driving time and has access to homes as they come on the market.

What will my mortgage cover?
Most loans have 4 parts: principal: the repayment amount you actually borrowed; interest: payment to the lender for the money you've borrowed; homeowners insurance: a monthly amount to insure the property against loss from fire, smoke, and other hazards required by most lenders; and property taxes: annual city/county taxes assessed on your property, divided by the number of mortgage payments you make in a year.

Most loans are made for 30 years, although 15 year loans are also available. During the life of the loan, you'll pay far more in interest than you will in principal, sometimes two and three times more! Because of the way loans are structured, in the first years you'll be paying mostly interest on your monthly payments. In the final years, you'll be paying mostly principal.

So what will happen at closing?
Basically, you'll sit at a table with your broker, the broker for the seller, probably the seller, and a closing agent. The closing agent will have a stack of papers for you and the seller to sign and he or she will give you a basic explanation of each paper, you will want to take the time to read each one and/or consult with your agent to make sure you know exactly what your are signing. Before you go to closing, your lender is required to provide a booklet explaining the closing costs, a "good faith estimate" on how much cash you'll have to supply at closing, and a list of documents you'll need at closing. If you don't get those items, be sure you go to your lender BEFORE you go to the closing.

Information Source: www.hug.gov; and National Foundation for Credit Counseling Keys to Home Ownership.