Fulfilling Your Home Ownership Dream
A Guide for First Time Homebuyers
Table of Contents
Realizing The Advantages Of Owning Vs. Renting………………………………….3 - 4
Knowing Your Credit Report And FICO Score………………………………………..4 - 5
Determining How Much Home You Can Afford……………………………………….5
Pre-qualification And Pre-approval—Is There Really A Difference?.....................6
The Down-payment………………………………………………………………………...6 - 7
Fixed-rate Vs Variable-rate Mortgages………………………………………………….7
Is It Better To Buy A New Home Or Used Home?....................................................7 - 8
What You Can Expect At Closing………………………………………………………..8
Why Choose Dunhill Homes As Your New Home Builder?....................................8
2 Here at Dunhill Homes, we have an interest in first-time homebuyers, and have made it a priority to provide
them with high quality homes, affordable financing options, and a comfortable, no-stress home purchase
process. After years of working with first-time homebuyers like you, we know that you’re sure to have a number
of questions about this very important and life-changing decision. That’s why we’ve compiled this First-Time
Homebuyer Guide, and filled it with the answers you’re looking for, as well as tips on how to make the move
into homeownership easier.
Buying a home can be a momentous decision, and the process can be very confusing for first-time
homebuyers who don’t know what to expect. We hope that this guide has made the entire process of buying a
home seem a little less daunting, and a little less scary.
The employees of Dunhill Homes are anxious to serve you, and help answer any questions that you may still
have regarding buying a home. With the beautiful, quality and affordable new homes we have to offer, we
sincerely hope that you’ll consider coming by to visit one of our new developments, and that you’ll make the
move from homebuyer to homeowner with Dunhill Homes on your side.
Realizing The Advantages Of Owning Vs. Renting
There are a number of undeniable advantages of owning a home as opposed to renting. Here are a few.
1: Pride of Ownership
It’s true—actually owning a beautiful home that is valued emotionally and financially creates elevated selfesteem as well as inner contentment and immense gratification. This is the essence of pride of ownership
where one’s private sanctuary can reflect the home owner’s personality and lifestyle. Homeownership is,
indeed, a very personal experience.
Also, home ownership reminds the homeowner that his or her hard work has produced the visible fruits of their
labors—the feelings of success and homeownership are intertwined and are tightly woven into the fabric of the
American Dream.
2: Consistent Monthly Payments
Renters can, unfortunately, be subjected to increases in rental costs. In the case of periodic rental
agreements, such as month-to-month situations, a landlord can increase the rent as often as he or she desires,
within certain parameters. On the other hand, when one owns a home and has a fixed-rate mortgage, the
homeowner can be assured the monthly mortgage payments will remain the same during the life of the loan. It
is very reassuring to know one’s mortgage payments will not change even if the circumstances in one’s life
might.
3: Building Equity
Whether you are paying for a rental property or a home of your own, every time you make a monthly payment,
one of two things takes place: 1) As a renter, you are helping someone else pay off their mortgage against
their property. 2) If you are a homeowner, your monthly payments go directly against your home’s mortgage.
Every loan payment you make chips away at the initial amount of the loan. Obviously, as the loan amount
decreases, the equity in your home increases.
Equity, in a nutshell, is the financial portion of a home that has already been paid off. A home’s equity is a
coveted outcome of homeownership since it can, in time, be used to pay off credit cards, finance a child’s
education, purchase recreational vehicles, contribute towards a retirement fund and so much more. The
3 monthly payments that renters make each month will never contribute to any type of investment and financial
growth. Rent money pays for a roof over one’s head and nothing more.
4: Appreciation
The term ‘appreciation’ is similar to the term ‘equity’ in that both terms deal with an increase in the value of
one’s home over time. Appreciation, as it applies to homes, refers mainly to the land a home sets on. As
populations expand, land becomes more and more scarce and, therefore, becomes increasingly more
expensive as each year passes. Since your home’s land becomes more valued, your home will, by default,
become a vital part of the valuation growth.
According to the National Association of Realtors, new home values increased, on average, 5.4% annually
from 1963 to 2008. Over time, the amount that a home will appreciate, or automatically gain in value, depends
on location, location, location. Where a home is located impacts how desired the home, itself, will be for most
buyers—part of the ‘supply and demand’ concept. Zillow states home values can appreciate between 5% and
10% per year, again, depending on where any given home is situated. When a home appreciates, more
monetary value becomes attached to that home which means the homeowner has more money he or she will,
likely, receive if the home is ever sold. Appreciation in a home occurs passively and gradually without the
homeowner, necessarily, taking any action.
Knowing Your Credit Report And FICO Score
When you apply for a home loan, your history of repaying debt will be under the microscope, and
understandably so. Lenders take a risk every time they approve a mortgage loan and they want to insure
themselves against any possibility of a loan going sour. Lenders are experts at assessing one’s credit risk and
will weigh, heavily, on one’s credit history, payment history, income and a person’s overall financial situation.
By knowing, ahead of time, what lenders will be looking for, you can equip yourself with relevant information
before you ever step foot past the lender’s door. Before you speak with a lender, be aware of the following
information to avoid any unexpected surprises:
1: Your Credit History
How you have managed your credit and have made payments over the long term will be summarized in a
credit report. The credit report will be detailed and include any lenders you have used in the past and will
include your payment history with credit cards, car loans, personal loans, etc. It should be noted that your
credit report is, actually, a combination of at least three different national credit bureaus: TransUnion, Experian
and Equifax. You can gain easy access to these three bureaus; and you are legally entitled to a free copy of
your standing with each, once every 12 months. You can review your credit report by visiting this site:
AnnualCreditReport.com. Here, you can effortlessly view all three of your credit reports. To obtain your FICO
score, explained below, you can go to myFICO.com
Carefully scrutinize your three credit reports to make sure the information is entirely accurate, since errors can
occur. If any information seems inaccurate, you can contact one or all three of the credit bureaus or contact
the original creditor to rectify any oversights.
In addition to your credit report, lenders will analyze your credit score, also known as a FICO score—which will
be based on your credit report. Your FICO score will be a numeric value—typically between 300 and 850. The
higher the number, the more advantageous it is for the borrower. Here is how a lender interprets a credit
score: the higher the credit score, the lower the risk—plain and simple! The credit score will serve as a
4 snapshot of your current ‘risk level’. Even though lenders will rely, heavily, on a person’s credit score, lenders
will vary in their opinions as to what scores are deemed risky or not risky.
Your credit score is very important and plays a major role in how much money you can save when you
purchase a home. The better your credit score, the better your chance of securing a lower interest rate on the
loan. This can, realistically, translate into saving not only hundreds of dollars each month on your mortgage
payment but tens of thousands of dollars over the duration of a fixed, 30-year mortgage!
2: Your Ability to Repay
Even if you possess an excellent credit rating, lenders also think in terms of the ‘here and now’ as well as the
future and will want to know how comfortably you will be able to manage future loan payments based on your
current income. Aside from current income, lenders will determine your ability to repay a loan by looking at
your employment history since employment stability will reveal your previous ability to repay outstanding debt,
without interruption.
One more consideration regarding your ability to repay a home loan will be your debt-to-income ratio. This,
simply, refers to your debts—current and new—compared to any before-tax income. One can make a
substantial amount of money, but if there is too much debt, lenders can shy away from approving a loan. So,
in other words, the less outstanding debt you have, the better your chances of being approved for a home loan.
It’s important to note that, in most cases, 43% is the highest debt-to-income ratio one can have and still be
approved for a qualified mortgage. There are exceptions to the 43% figure; and in some cases it can be
higher; but many lenders prefer the number to be under 43%.
Here is how one would figure one’s debt-to-income percentage: add up all your recurring monthly debt
payments and divide that figure by your gross monthly income. Your gross monthly income includes your
monthly pay before any taxes and deductions are removed. A low debt-to-income percentage indicates you
have a healthy balance between debt and monthly income. Ideally, borrowers should strive for 36% or less—
the lower the number, the more lenders you will have at your disposal; and this is important since some
lenders will offer lower interest rates than others.
Determining How Much Home You Can Afford
Attempting to determine how much home you can comfortably afford requires some figuring and calculating;
and you will need to take into account a site’s property taxes and a home’s monthly insurance premiums. You
can expedite the process and have all your questions addressed by contacting Dunhill Homes. A Dunhill
Homes representative will be happy to connect you with one of their preferred lenders who can help determine
what type of loan would dovetail your particular financial profile. Through a Dunhill Home’s preferred lender,
the loan approval and closing process can be seamlessly managed. The lenders we work with are thoroughly
familiar with the logistics associated with new-home construction—not all lenders are. Being acutely aware of
home-construction deadlines, they possess a distinct advantage by having more insight regarding the steps
involved with the home-building process.
When a prospective homebuyer provides the necessary documentation to a lender not affiliated with a
particular builder, it is, entirely, possible the lender will call back, days later, stating that more documentation is
required. Dunhill Homes wants to help homeowners bypass that kind of frustration. Dunhill Homes and its
preferred lenders communicate, continuously, which produces an in-sync partnership that works as one to help
new homeowners get more easily approved and move more quickly towards that all-important closing.
5 Pre-qualification And Pre-approval—Is There Really A Difference?
For many, the terms ‘pre-qualify’ and ‘pre-approve’ are synonymous, but there is a distinct difference between
the two.
Pre-qualification means the prospective home-buyer has contacted a lender either over the phone, on-line or
in person and has provided some basic information: current income, debt and assets. The lender will look
over those figures but will not require one’s credit report. Pre-qualification is, merely, a superficial analysis of a
potential home-buyer’s ability to purchase a home. The lender will offer various mortgage options and suggest
the type of mortgage that would best tailor-fit one’s current financial situation. Pre-qualification does not
include a loan offer.
Pre-approval means significantly more detailed financial information must be provided to the lender, face to
face. An exhaustive mortgage application will be completed and the borrower’s financial background will be
minutely scrutinized. It is, here, where an applicant’s credit rating will be examined; and it will play a major role
in the borrower actually becoming approved for a mortgage loan. Assuming all the required information allows
the go-ahead for a loan, a specific mortgage amount and an established interest rate will be determined.
Potential home-buyers who have been pre-approved are taken very seriously by those involved with the sale of
a home since all home-buying prerequisites are officially in place.
The Down-payment
Depending on a borrower’s particular circumstances, he or she may or may not be required to supply a down
payment when purchasing a home. For many, the down payment represents the most challenging obstacle for
homeownership, especially for first-time homebuyers who may have less cash to work with. The good news is,
lenders have become more lenient with underwriting mortgages with smaller down payments.
Down payment amounts, if required, can vary from 5% to 20% of the sale price of the home; zero-down
mortgage programs do exist as well, in some situations, such as with VA loans. For those who are able to
provide a down payment of 25% or 30%, certain blemishes on one’s credit report could be overlooked by
lenders. By putting more money down, a borrower can expect to lower his or her monthly mortgage payments.
With all that being said, there are a handful of mortgage types that are becoming increasingly more common
and require little or no money down!
A VA Loan guarantees a no-down option for mortgage purchases for veterans who qualify; and the good news
continues since there is no mortgage insurance. The borrower will pay a funding fee but that can be rolled
right into the amount of the loan.
A Department of Agriculture Loan is available through the Department of Agriculture’s Rural Development
Mortgage Guarantee Program. This financial option is extremely popular and is not confined, as some might
think, to just rural areas. Additionally, the USDA program caters to first-time homebuyers. This loan type is
another zero-down option and geographical limits apply as well as restrictions on household income. Because
there is no mortgage insurance associated with a USDA loan, a 2% fee will be charged but it can be rolled into
the loan amount.
An FHA Loan requires a mere 3.5% down payment of the purchase price of the home via the Federal Housing
Administration. To qualify for the 3.5% down payment, however, one has to have a credit score of 580 or
higher, though exceptions apply. For borrowers with scores of between 500 and 579, a down payment of at
least 10% is required. Interestingly, about 15% of all home loans are FHA-insured loans! Those who qualify
6 for and choose FHA loans will pay for mortgage insurance which protects the lender from loss if the borrower
cannot continue to pay the loan.
A Conventional Loan refers to any mortgage loan not insured or guaranteed by the federal government.
Because there is no government insurance for the lender, conventional loans usually have more stringent
credit and income requirements compared to FHA or VA loans. Additionally, if a borrower pays less than a
20% down payment, private mortgage insurance (PMI) is usually required to be paid, by the borrower, until at
least 20% of the home’s original value is paid down – at which time PMI payments cease.
For more information on the types of loans you may qualify for, please contact a Dunhill Homes representative.
Fixed-rate Vs Variable-rate Mortgages
Homebuyers will find that there are two primary types of mortgages: fixed-rate mortgages and adjustable-rate
mortgages. There is much that can be said concerning each category, but for first-time home buyers the main
goal should be deciding which of the two loan types best meets one’s needs.
The Fixed-Rate Mortgage is also known as a Fixed-Interest Mortgage. This type of mortgage allows the
interest rate and the monthly payments to remain the same, or ‘fixed’, over the course of the entire loan.
Fixed-Rate mortgages can be 10, 15, 20 or 30-year loans; and out of the four choices, the 30-year option is the
most popular since monthly payments are lower due to the longer life of the loan. This, of course, means the
homeowner will end up paying more once the loan is paid off. The shorter-term options offer lower interest
rates and a greater portion of the principal will be repaid with each payment, resulting in dramatic savings.
The Adjustable-Rate Mortgage can go by the acronym ‘ARM’ and includes an adjustable, or changeable,
interest rate. If one is on a strict budget, a higher interest rate could prove to be a real financial issue. If the
interest rate falls, the borrower benefits; but if the converse is true, the borrower is obligated to pay more.
ARMs have a fixed rate where the initial interest rate remains constant; and the fixed-rate period can vary from
1 month to 10 years.
ARMs can be a tempting choice since borrowers can qualify for a larger loan; and when interest rates fall, the
borrower can reap the benefits of lower mortgage payments. However, it’s always wise to realize that some
ARMs are structured where interest rates can almost double in only a few years.
There are a number of considerations that a homebuyer would want to think through when deciding what type
of mortgage option is best. Dunhill Homes’ experts will answer any questions and provide clarity regarding the
various loan options so each and every homebuyer can make an informed decision.
Is It Better To Buy A New Home Or Used Home?
There are a number of reasons people choose to build a new home versus a used home. Many homebuyers
relish the idea of building their homes to allow tailored touches to reflect their personalities. Home
maintenance is a big consideration for those who choose new homes because homeowners enjoy peace of
mind knowing they can rely on the builder’s home warranties. Those are all good reasons for homebuyers
opting for new homes over used homes; but there are some other reasons that many homebuyers may not be
aware of.
1: The building envelope refers to the enclosed portion of a home that is sealed to prevent air from entering
or escaping. Since the 1970’s, much more sophisticated and demanding, energy-efficiency standards have
been put in place due to more progressive building codes and green-building programs. Newly-constructed
7 homes will have a much tighter building envelope resulting in noticeable energy savings. Partnering with the
building envelope, are high-efficiency windows that contribute to even more energy savings. Low-E windows,
for example, are designed with protective coatings so heated air or cooled air remains within the home, where
it belongs.
Dunhill Homes constructs each of its gorgeous homes with improved thermal systems that integrate enhanced
insulation techniques—the result is air-tight construction.
2: The green systems that are incorporated into new homes help to save money and are good for our planet!
New homes will include state-of-the-art energy-efficient appliances that impressively reduce utility bills while
many used homes will not have this option. Energy Star appliances, included in Dunhill Homes, not only
significantly reduce energy consumption, but they minimize the emission of greenhouse gases and air
pollutants. Other green systems in new homes include advanced HVAC systems with sealed air-ducts and
programmable thermostats that allow for even more energy savings!
What You Can Expect At Closing
The Closing is the last step homebuyers take to finalize the purchase of their new home. This is the day
homebuyers eagerly anticipate since it is at Closing where the official transfer of the property takes place.
Closing involves a host of details, but the following information will provide an overview of what to expect.
A Closing can last about an hour or it can last longer. Homeowners will need to schedule a portion of their
workday to attend this meeting where all parties involved in the sale of the home will be present. Homeowners
will need to bring certain items to closing such as a state-issued photo ID, necessary funds, a homeowner’s
insurance certificate as well as other documentation.
The homebuyers will sign a Deed of Trust which guarantees the property as security for the loan. This assures
the lender that if the loan were not paid, the lender would have the right to obtain the home. The homebuyers
will, also, sign a Warranty Deed which, legally, transfers the title of the property from the seller to the buyer.
Another document that will be signed is called the Truth in Lending Disclosure or TIL. This information
stipulates all the terms and conditions of the home loan. Once all pertinent papers are officially signed, closing
costs will be paid and the lender will give the check to the seller of the home.
The closing costs can be significant and can average 2-3% of the purchase price of the home. Some of the
closing costs will include an appraisal fee which is required by the lender to make sure the loan does not
exceed the value of the home. Loan fees will include the processing of the loan and other services; inspection
fees have to do with the home’s inspection; and title and recording fees will cover the recording of the deed as
well as a title search and other services.
The end of Closing is the most fun of all since it is, then, that the homeowners receive the title to their new
home as well as the keys to their home’s front door!
Why Choose Dunhill Homes As Your New Home Builder?
Love how you live is much more than our tagline but a way of life at Dunhill Homes. Family owned and operated, we
take great pride in all the homes we build. We take the time to find out what is truly important to you and focus on
designing your ideal home. Our homes are designed not only with beauty in mind but your happiness. To learn
more about the homes we build, please visit us at www.dunhillhomes.com.
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