Planning for Homeownership
Greeting from the Treasurer:
Becoming a homeowner is a big part of the American dream. However, it is a very serious investment that we want to help Kansans plan for appropriately.
Kansans value perseverance and believe that if you are willing to work hard and save, you deserve the opportunity to advance yourself and your family. The Homeownership program is just one step to bring Kansas families closer to reaching their goals.
Kansas State Treasurer
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Before you Buy | The Process | Mortgage Information | Additional Resources | Contact Us
Purchasing a home is a life changing decision not to be taken lightly. Below are questions every person should ask themselves before beginning the process of buying a home.
- Do you have a reliable source of income?
Lenders will want to be sure that the borrower has a reliable source of income that will ensure their ability to repay their loan amount.
- Do you pay your bills on time each month?
This is a big factor in determining a credit score which will play a large part in factoring if you will be able to get a home loan.
- Do you have a checking and savings account?
It's important to the lender to see that the borrower can manage and save money so they will be sure that the potential home buyer has both a checking and savings account.
- Is your total debt manageable?
It's essential to evaluate the debt that a person currently has before determining if they can add the burden of a mortgage.
- Have you saved up enough money for a down payment?
Many mortgages require the buyer to place a down payment of 20%. In order to receive the best possible interest rates it is a wise decision to have a significant down payment.
- Have you saved enough money to cover the closing costs?
It's important as a buyer to remember that there are significant costs associated with closing on a house so it is important to prepare for those beforehand. If you plan on paying out of pocket be sure that you have budgeted for this expense. If you plan to roll these costs into your loan be sure that you qualify for the total amount that includes the closing costs.
- Can you afford a mortgage along with your other monthly bills?
It is essential for the homebuyer to look at their budget. It's a good idea to start saving the amount that you would be spending on a new home (mortgage, utilities, taxes, and insurance) now to see if your budget can handle these new expenses.
- Are you committed to taking care of a house?
Owning a home is a lot of work so it's crucial that people ask themselves if they have the time and energy to put into owning a home before they make that big purchase. It's also important that buyers understand that they are responsible if something goes wrong with the home that they own. Budgeting for home repairs is a part of taking care of a house.
The process of purchasing a home can be long and difficult below are some steps designed to help you to make the progression of buying a home easier on the purchaser.
It's important to know that shopping for a mortgage is the most important thing that the buyer can do. Mortgages vary from week to week and from lender to lender so it's key for consumers to research, compare prices, rates and terms. Below is some mortgage information that will help you to get started.
Mortgage Calculator: http://www.myfico.com/crediteducation/calculators
Find a KS Lender:
- Fixed Mortgage Loan: The Fixed Rate Mortgage Loan offers that the interest rate and monthly payments remain fixed for the period of the loan and do not fluctuate. Fixed-rate mortgages are available for 40, 30, 25, 20, 15 and 10 years. Typically, the shorter the term of the loan, the lower the interest rate.
- Adjustable Rate Mortgages: With an Adjustable loan the interest rate and monthly payment fluctuate over the period of the loan. The adjustments of the interest rate and payments are based on changes in a defined index.
- Convertible Adjustable Rate Mortgages: A combination of the Fixed Mortgage Loan and the Adjustable Rate Mortgages when a consumer begins the loan as an Adjustable Rate Mortgage but can convert them to a fixed-rate mortgage at designated times.
- Graduated Payment Mortgages: This loan offers monthly payments that start lower and gradually increase at predetermined times.
- FHA Loan: A loan given by lenders who lend to low or moderate income families to help them purchase a home.
VA loan - These loans are guaranteed by the United State Department of Veterans Affairs. These loan allow veterans and those serving in the military to obtain affordable home loans.
- Annual Percentage Rate (APR)
A measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders, by federal law, follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans, including mortgage plans. APR is a higher rate than the simple interest of the mortgage.
- Collateral: Security in the form of money or property pledged for the payment of a loan. For example, on a home loan, the home is the collateral and can be taken away from the borrower if mortgage payments are not made.
- Down Payment: The portion of a home's purchase price that is paid in cash and is not part of the mortgage loan. This amount varies based on the loan type, but is determined by taking the difference of the sale price and the actual mortgage loan amount. Mortgage insurance is required when a down payment less than 20 percent is made.
- Escrow: Funds held in an account to be used by the lender to pay for home insurance and property taxes. The funds may also be held by a third party until contractual conditions are met and then paid out.
- Interest Rate: The amount of interest charged on a monthly loan payment, expressed as a percentage.
- Lender: A term referring to an person or company that makes loans for real estate purchases. Sometimes referred to as a loan officer or lender.
- Loan Origination Fee: A charge by the lender to cover the administrative costs of making the mortgage. This charge is paid at the closing and varies with the lender and type of loan. A loan origination fee of 1 to 2 percent of the mortgage amount is common.
- Mortgage: A lien on the property that secures the Promise to repay a loan. A security agreement between the lender and the buyer in which the property is collateral for the loan. The mortgage gives the lender the right to collect payment on the loan and to foreclose if the loan obligations are not met.
- Points: A fee paid to reduce or buy down the interest rate of the loan. Is sometimes used to reference an origination fee.
- Pre-Approval: A lender commits to lend to a potential borrower a fixed loan amount based on a completed loan application, credit reports, debt, savings and has been reviewed by an underwriter. The commitment remains as long as the borrower still meets the qualification requirements at the time of purchase. This does not guaranty a loan until the property has passed inspections underwriting guidelines.
- REALTOR®: A real estate agent or broker who is a member of the NATIONAL ASSOCIATION OF REALTORS, and its local and state associations.
If you are looking at purchasing a new home please be sure to check the below links for additional resources to help you in your purchasing process.
RURAL: Cities with Populations under 20,000
For more information on Financial Education please e-mail Jake LaTurner at Jake@treasurer.ks.gov or call:
Financial Education Coordinator
Kansas State Treasurer's Office