First-time home buyer guide and mortgages | HSBC
First-Time Home Buyer? Here's What You Should Know About Buying a Home
When trying to figure out which house to buy, the first step is to estimate how much mortgage you can afford. Another thing to be aware of is that purchasing your first home will require a cash outlay for your down payment and closing costs. Down payment requirements differ depending on the mortgage product you choose.
You will need to have saved money for other aspects of the home purchase as well, such as closing costs. You will also need money for other closing costs. Your closing costs will vary depending on the geographic location of the property and various legal and filing fees.
You may receive a gift to be applied toward your down payment and closing costs from an immediate relative (parent or sibling). These funds must be a gift that you do not have to repay. Even if you receive a gift, part of the down payment must come from your own savings.
First Home Club
HSBC Bank USA, N.A. is pleased to introduce the First Home Club matched savings program, available for prospective home buyers in New Jersey and Downstate New York State. Financed by the Federal Home Loan Bank of New York, this program can provide grant funds of up to $7,500 towards the down payment and closing costs for qualified first-time home buyers. Participants in this special savings program earn $4 in matching funds for every $1 saved, (up to $1875), which is a big help towards achieving the dream of home ownership.
If you're planning on purchasing a home in New Jersey and Downstate New York State and want to learn more about HSBCs First Home Club, click here for a complete application and more detailed information.1
Highlights of the home buyers program:
First-time homebuyer - A first-time buyer is defined as anyone who has not owned a home for three (3) years. Single parents and displaced homemakers who owned or resided in a home with a spouse during the last three years are also first-time home buyers.
Maximum Grant - The maximum grant allowed is $7,500. This means that the $4 matching funds will be provided for the first $1,875 saved.
Length of the plan - The length of the savings plan runs from 10 to 24 months.
Income limits* - To qualify, your annual household income must be at or below the Mortgage Revenue Bond income limit in the New York State County where the you currently reside.
Mortgage application - As a participating First Home Club lender, HSBC Bank USA N.A. will help you open your savings account and provide assistance in the mortgage application process.
Home Buyer Education - You must complete a homebuyer education course from an HSBC-approved counseling provider before the mortgage commitment expires. This program assists first-time home buyers in the areas of financial planning, monthly budgeting, the home buying process and other related topics.
Apply for the First Home Club:
By Phone - 888.731.4722
By E-mail - Via secure online form
In Person - Visit one of our locations
Once you have chosen your new house, the next step to buying a home is to find a qualified inspector. While this is not required to obtain a mortgage, it may provide you with some beneficial information about the home you are purchasing.
The American Society of Home Inspectors is an organization that has a set of standards which its members must follow. The Society can provide you with a list of qualified inspectors in your area. Ask for references and contact those references before hiring an inspector. Agree on a fee before the inspection, and require a full written report. Be aware that most reports have clauses which seek to protect the inspector from liability if he or she overlooks a problem in the home.
The purpose of the inspection is to give you an evaluation of the mechanical and structural condition of the home. The inspection should include an evaluation of the following:
- Major systems (heating, air conditioning, plumbing and electrical)
- Windows and doors
- Floors, walls and ceilings, etc.
If the report shows there are substantial problems with the home and you are still interested in buying it, you may be able to either negotiate a lower price with the seller or have the seller fix the problems.
There are three main steps during the mortgage loan process: application, evaluation (or underwriting) and closing:
Application Process for Home Loans
You complete the loan application and pay a loan fee, if it is required. Some of the commonly requested documents to make a loan application are:
- Two years of W2s and paystubs from the current month
- Employment addresses (two-year history)
- Residence address – last two years landlord name and address (if applicable)
- Mortgage history for the last 12 months (if applicable)
- Bank statements for the previous two months
- Open loans – addresses, account numbers, balances and monthly payment or most recent statement (if applicable)
- Real estate owned, including loan number, addresses, balance and monthly payment or most recent statement (if applicable)
- Separation, divorce or bankruptcy information at application (if applicable)
- Contract of sale and legal description
- Check for fees due at the time of application
The HSBC mortgage team consists of specialists who make sure your application is complete, determine if you qualify for the mortgage, perform quality control checks and prepare your loan for closing.
The decision to grant a mortgage is based on your expense-to-income ratios, work history, credit history, assets and the appraisal of the home. Underwriters are flexible, so don't be discouraged if your application does not meet all of the standards. Underwriters are trained in weighing compensating factors. For instance, stable employment and/or good credit may compensate for high ratios.
Lenders have a method of determining if you qualify for a mortgage. A certain percentage of your total gross monthly income (your income before taxes) is allowed to pay for your total housing debt. These percentages are often referred to as ratios.
Your housing debt consists of the cost of principal and interest to repay the mortgage loan, the real estate taxes, mortgage insurance (MI), flood insurance if required, and homeowner's insurance. This is also known as PITI – Principal, Interest, Taxes and Insurance.
The bank allows you to apply a certain percentage of your total gross monthly income for total debts. There is a limit to the amount of gross income that you can apply to these total debts, which are also known as recurring debts. A recurring debt is any payment you make on an ongoing basis and includes all loans (even student loans), credit card payments, alimony, etc. Generally, your total monthly recurring debt plus total monthly housing debt can be no more than 36-40% of your total gross monthly household income for most mortgage loans. This percentage is known as your debt-to-income ratio.
The lender evaluates your application and supporting documentation and makes a decision on the loan. If your loan is approved, the lender issues a Commitment Letter. This letter provides the details of the transaction, including the mortgage amount, interest rate, points, etc.
If the loan is not approved, the lender provides a written explanation for not approving the loan, and you can begin corrective steps.
The closing, or settlement, is the final step in legally transferring home ownership from the seller to the buyer.
This step includes the lender sending funds to the attorney or closing agent and you signing the closing documents. The seller is then paid and you receive the title to the home.
The process usually occurs at a meeting, but sometimes an escrow agent processes the paperwork and collects and disburses the funds. Closings are handled differently in different geographic locations, so you will need to find out how they are conducted in your area. Regardless of the local customs of the closing process, it will probably be in your best interest to consult an attorney who practices real estate law for your closing.
The following identifies some of the common closing costs you might need to pay:
1. Mortgage lender's Fees
- Loan origination fee
- Commitment fee
- Loan discount points (if applicable)
- Appraisal fee
- Credit report fee
- Interest from the date of the closing to the first monthly payment
- Mortgage Insurance Premium (if applicable)
- Flood Insurance Premium (if applicable)
- Hazard Insurance Premium (or receipt of payment)
- Property Taxes
3. Additional Fees
- Title charges
- Recording and transfer fees
- Attorney fees
- Termite inspection, professional home inspection and survey fees (if applicable)
Attorney and Closing agent Responsibilities
Aside from the certified checks and proof of insurance, the closing agent or attorney handles most everything else and is typically responsible for:
- Conducting the title search
- Arranging for title insurance
- Obtaining the loan package from the lender
- Verifying the completeness of all contingencies
- Ensuring all required documents are included
- Reviewing all documents
- Ordering the survey
- Filing signed documents with the proper agencies
- Disbursing the funds
Mortgage and home equity products offered in the U.S. by HSBC Bank USA, N.A..Subject to credit approval. Borrowers must meet program qualifications. Programs are subject to change. Geographic and other restrictions may apply. Discounts can be cancelled or are subject to change at anytime and cannot be combined with any other offer or discount.
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