Home Buying 101

I recently hosted a class in my community for first time homebuyers, or seasoned buyers who need a refresher in this fast changing market. Saopon Cha, owner of Cha Mortgage and one of my favorite local mortgage brokers co-hosted, and everyone in the class walked away with some great information! 

For those who couldn't attend I still want to share the information from the class. I focused on a market update, some do's and don'ts of home-buying and a timeline of a typical real estate transaction. Saopon spoke about the different types of mortgage companies, the application for pre-approval, credit and loan eligibility. She also shared handouts to help attendees calculate their debt-to-income ratio.

Below is the information from the slides, but please reach out for a complimentary one-on-one session. This information is just a starting point to review before we meet.

Market Update 

  • Inventory is 1.3 months
  • Average sales price is $395,000
  • Average sales price up 11.4% from 2015
  • 97229 had the most sold homes in 2016
  • One of the hottest rental markets in the country
  • We aren’t in a bubble!

Home Buying Do's & Don'ts 

  • DO get pre-approved before you start looking
  • DON’T expect to know what you want when you start looking
  • DO keep an open mind- this might not be your forever home
  • DON’T let cosmetic features deter you
  • DO act fast when you find a home you like
  • DON’T expect to have your offer countered- go in with your best foot forward
  • DO stay in great communication with your Realtor & Mortgage Broker

Home Buying Process

  • Get a pre-approval from your lender
  • View homes (as many as it takes!)
  • Make offers
  • Get offer accepted
  • Work with your lender
  • Have home inspection
  • Negotiate Repairs
  • Appraisal
  • Move in!!


Types of Mortgage Companies

Mortgage Broker

  • Approved to do business with several lenders/banks.
  • Processing/Underwriting/Closing done by the Lender.
  • Wider array of loan programs and rates. 

Mortgage Banker

  • Loan closes in their name.
  • Wider array of loan programs and rates. 
  • In-house processing, underwriting and funding and closing.
  • After loan closing, the loan is sold to a bank or lender.
  • Typically higher overhead than Broker.

Bank & Credit Unions

  • In-house processing, underwriting and funding and closing.
  • After loan closing, the loan is sold to Fannie Mae or Freddie Mac.
  • Retail interest rates.

Application for Pre-Approval

Personal Information

  • Name
  • Social 
  • Phone Number
  • Date of Birth
  • Marital Status
  • Address for Most Recent Two Years

Employment Information For Past Two Years

  • Employer Name
  • Employer Address
  • Years on Job
  • Your Position or Job Title
  • Work Phone


  • Bank Accounts
  • Stock
  • Retirement/401k
  • Cars Owned
  • Life Insurance Cash Value
  • Gifts 


  • Credit Cards
  • Car Loans
  • Student Loans
  • Medical Bills/Collections
  • Judgements/Child Support


  • When you apply for a loan, the mortgage company will pull your credit and scores to determine eligibility. This is typically free of charge to you.
  • The higher your credit score, the better your interest rate.
  • Your credit score will also determine what programs you’re eligible for.
  • Minimum credit score is 620 for most programs but several factors will determine if you need a higher credit score or if you can get away with a lower score. You might not even need a score.
  • If you want to see your credit scores before applying for a loan, you’ll have to pay for them because the credit bureaus are not required to provide you with free score reports.
  • Visit www.annualcreditreport.com to get a free copy of your credit report once a year from Transunion, Equifax and Experian. 

Loan Eligibility

  • Based on your credit, debt-to-income ratio and how much money you want to put down, I will determine what program is best for you.
  • You will often qualify for more than what you want to spend in a monthly payment.
  • When calculating the monthly mortgage payment, remember to consider: Principal & Interest, Mortgage Insurance, Property Taxes, Homeowner's Insurance, HOA Dues

Calculating Debt-to-Income Ratio

  1. Calculate your monthly gross income.
  2. Multiply gross income by 45%.
    1. For example, if your gross income is $5,000, multiply that by .45 and you’ll get $2250.
  3. Write down all the monthly payments for all your credit cards, 1% of the balance of student loans, car loans, etc. Do NOT include cell phone bill or utilities or rents currently being paid.
    1. Example: Lets say $25 minimum credit card payment. I have a $20,000 student loan so the payment is 1% of that or $200. Total debt is $225 a month.
  4. $2,250 - $225 = $2,025 Maximum debt allowed - Current monthly debt=Eligible Total Monthly Housing Payment
  5. $2,025 must include principal & interest, property taxes, homeowner’s insurance, mortgage insurance and any homeowner’s association dues (HOA).
  6. Remember, debt-to-ratio could be higher or lower depending on your overall credit profile and the loan type or program chosen.