Many people ask me what they have to do to buy a home, so I put together a short list of items to consider when you decide it’s the right time for you to make a purchase.
Check your credit score: This is super important and can be the difference between buying now or taking 6 to 12 months to get your score up. Your credit score will be a factor in the loan you qualify for, as well as the interest rate and cost of mortgage insurance. It’s also good to check for errors that can be fixed quickly because a Federal Trade Commission study found that one in four people identified errors on their report. The first thing I do with clients is pay for a credit report and go over it with a qualified lender.
How much can I afford? This is where you will need to talk to a qualified lender. They will usually look for a total debt load of no more than 43-50 percent of your gross monthly income, depending on whether it is a Conventional, FHA or VA loan. This is the debt-to-income ratio and it includes the mortgage and other debts like a car loan, student loan and credit cards. I offer all my clients a free consultation with my lender to find out how much they can afford and what the interest rate will be.
Down payment: The standard down payment for most mortgages is 20 percent of the cost of the home. If you can do this, your loan costs and mortgage will be lower, you get a better interest rate and you avoid the cost of mortgage insurance, which can save hundreds more a month. It is hard to save that much, but if your credit score is good you can also qualify for 3 percent down on a Conventional loan and 3.5 percent down on an FHA loan. Military vets that qualify can put 0 down and have no mortgage insurance costs. Also, remember that any deposited funds will have to be seasoned in your account for 60 to 90 days. The good news is that you can also receive the funds as a gift from a family member.
Finding a home: Now that you have good credit and have a deposit ready, based on what you can qualify for, it is time to locate a home. I truly believe in finding a local real estate agent who is an expert in the neighborhood you choose. Most agents get compensated from the selling side and there should be no agent fees when you purchase. Just beware of any agency compliance fees and ask your agent to waive them if they come up. And since using an agent is FREE to you, there should be no excuse in not using one to help you find the perfect home.
Benefits of an agent: Finding the right agent to help you in the home buying process will be very beneficial. I specialize in that process and all of my services are FREE – I offer a loan consultation and credit report, as well as up to $5,000 towards your closing costs and a FREE local MOVE when I help with your home purchase.
REALTY ONE GROUP