8 STEPS TO BUYING YOUR FIRST HOME
1.Get Pre-approved: Unless you're paying cash a pre-approval letter from a lender will give you an edge when competing with other buyers. It will also provide a hardline budget-wise which will help you to look at houses you can actually afford. Note also that during this process and until you close on a loan it is crucial to keep your finances as steady as possible and don't go on a shopping spree for a new car, furniture &, etc. also, don't quit or switch jobs.
2. Decide what you want: The next step is to put together a wish list of features you desire or love. Be aware though that finding a home with everything on your wish list may be outside your budget. You need to be willing to look at your wish list and whittle it down to must-haves. If you are unwilling to compromise you might consider searching in less expensive areas. The key is to be realistic and be sure you can live with the compromises you make.
3. Choose a Real Estate Agent: You can find homes on your own, but a good agent can help you make sound decisions and guide you through the home buying process. They can also help you get access as soon as homes hit the market, before they may be listed online.
4. Be Patient: Today's market is challenging but you need to remember that buying a home may be the biggest financial decision you will ever make. Try to take enough time to view several homes so you can have a wide range of options and can then make a wise decision. Even in today's market, there will always be another home you like just as much.
5. Submit your best offer first: In the current market with multiple offers on every home, you need to come in with your best offer. By submitting your best offer first, be it offering at or above the asking price, waiving inspections (we don't recommend this), or being flexible with the closing date, it might be the most appealing to the seller.
6. Get a home inspection: If you are buying new construction or vintage bungalow GET AN INSPECTION! The last thing you want to find out is you have a foundation or roof issue after closing.
7. Get an appraisal: Your lender will need to know that there is enough value in the home to cover the mortgage. If you are paying cash it will tell you if you are overpaying too much or making a good buy.
8. Close the deal: This is the final step and is called "Settlement or Closing". This is where you get to sign a lot of official documents, swap checks, and are handed the keys to your new home. It's time to break out the wine it's all done.
We hope this info is helpful to you. If you would like to speak to one of our realtors about the local market or about taking the next step to purchasing a home, please don't hesitate to reach out to us.
HOW PAYING YOUR MORTGAGE BI-WEEKLY CAN SAVE YOU MONEY!
When you purchase a home and secure a mortgage, you may find that your payments are due monthly. This is the default setup, although there is another way that you can opt to make your mortgage payment: bi-weekly payments.
With a traditional mortgage, you make 12 payments a year. By enrolling in a bi-weekly payment plan, you're paying half of your mortgage payment amount once every two weeks instead. Since there are 52 weeks in a year, it works out to you making 26 bi-weekly payments or 13 months of payments. You end up making an extra month's payment, and even though this might not seem like much, over the course of the loan, it has huge effects.
For instance, say you have a 30-year mortgage for $100,000 with an interest rate of 6.5%. During the lifetime of the loan, you will pay $127,544 in interest. Adding that to $100,000 principal means that you will make a total payment of $227,544. If you pay half of the regular monthly mortgage bi-weekly, the interest drops to $97,215, which saves you $30,329.
One aspect to keep in mind is that some lenders will let you convert your traditional mortgage payment plan to a bi-weekly one for a fee. Make sure you read the fine print in the contract to determine if your lender charges a one-time fee or a recurring one.
If you have further questions on how to make bi-weekly payments work for your mortgage, reach out directly to a financial planner or advisor. They can help you figure out how to set up the payment plan if this option works for your current situation.
Sources: Nerdwallet.com, Mortgagecalculator.org, Magnifymoney.com, Goldstarmortgage.com
GUIDELINES LENDERS USE TO DETERMINE A STRONG BUYER
When It comes to evaluating the creditworthiness of buyers, the following are a few questions a lender will ask to determine if you are a strong buyer.
- Do you have a credit score above 600?
- Have you had a bankruptcy or foreclosure? Has it been discharged two years or more?
- How long have you been at your current job? Need two years to qualify for overtime and commission.
- Do you get paid hourly or commission?
- How long have you been self-employed? You will need two years of business existence or more.
- What is your debt-to-income ratio? (what are your current monthly payments for debt)?
- If you plan to use USDA financing, 41%
- Conventional Financing 45%
- FHA/VA up to 57.99%
How large of a downpayment are you planning on?
- Conventional- If you have owned a home in the past 3 years, 5%
- First time home buyers 3% down
- Regular 20% down
- FHA- 3.5% down
- USDA/VA- 0% down
- These rates are based on certain eligibility requirements that might change from time to time.
These are just guidelines to give you an idea of what will be asked, and we recommend you talk directly to your lender to better understand buyer qualifications and how it helps you. If you do not have a lender, we will be happy to recommend a couple.