I’m Ready to Purchase a Home

 
 Tips from:  BUY Felicia


1. Are you Ready?
Purchasing a home is a major commitment. Be 100% sure that you’re ready for homeownership before taking on a mortgage.

As yourself:

  • Am I ready to commit to this home and city for at least 3-5 years?
  • Do I have an emergency fund that can cover at least 2-3 months of expenses?
  • Do I have a stable income?

If the answer to any of these questions is “no,” you may want to hold off on a home purchase for now. 


2. Contact a lender to get Preapproved

It can be tempting to start with a realtor and jump right into the hunting phase for that perfect house, However, it’s a really good idea to get a mortgage preapproval letter.

A preapproval letter is an official document from a lender that tells you exactly how much money you can get based on the lender reviewing your documents such as:

* paystubs to cover a full 30 days
* W-2s most recent 2 year history
* Bank Statements to cover a full 2 months
* Credit score
* We are in a very volatile interest rate market and it is always a best practice to speak to your Lender concerning your Interest Rate that you will receive on your mortgage loan.  


3. Maintain Your Credit
When you apply for a mortgage preapproval, lenders will pull your credit report. They’ll do it again before you close on the house.If they find that you’ve taken out another loan, your credit balance has increased, or that you’ve started to make late payments, it could risk your final approval.Be sure to keep paying your bills on time. Lenders want to see that your behavior patterns are consistent and reliable for future payments.Lenders cannot use Credit Karma as a resource for obtaining a mortgage loan.Pay your accounts on time as late payments add up to 35% of your credit report  If you need help with starting to build credit or repair credit, go to www.Experianboost.com website and you will have the capability to sign up to have your Rent payment history, your utility payments, Car Insurance, Netflix, Hulu report to the 3 credit bureaus which are Experian, Transunion and Equifax.

4. Understand Your Loan Options
Type of loans you choose will determine your down payment amount, the type of home you can buy and more.

 Here are some of the more familiar types:

  • Conventional loans: Conventional loans are the most common type of home loans. You can purchase a home with as little as 3% down. A total of 20% down  will eliminate the PMI (Private Mortgage Insurance)
  • FHA loans: An FHA loan can allow you to buy a home with less strict financial and credit score requirements. You can get an FHA loan with a minimum 3.5% down payment and a credit score as low as 580.
  • USDA loans: USDA loans are for people who want to buy a home in a qualified rural area. You can get a USDA loan with 0% down, subject to household income restrictions.
  • VA loans: VA loans are exclusively for veterans and members of the armed forces and National Guard, and qualified spouses. You can buy a home with 0% down if you qualify for a VA loan.

If you qualify as a first-time home buyer, you can benefit from several assistance programs, including closing cost and down payment assistance loans and grants.A first-time home buyer is an individual who has had no ownership in a principal residence during the 3-year period.


5. Don’t Forget Closing Costs
Don’t assume that your down payment is all that you’ll need to close on your mortgage loan. You’ll also need to cover closing cost. Don’t assume these costs can be rolled into your loan. Please be sure to discuss with your Lender on what options you will have.Closing costs are upfront expenses that go to your lender in exchange for arranging certain loan services. Some common closing costs you might see are:

  • Attorney fees
  •  Pest inspection fees
  • Appraisal fees
  • Escrow fees
  • Title insurance expenses
  • Discount points
  • Property Taxes 
  • Credit Report Fee
  • Survey 
  • City and State Taxes 
  • Home Owner Insurance 

You will see your exact closing costs on a document called a Loan Estimate and or Closing Disclosure.

Generally, you can expect to pay 2 – 5% of your total loan amount in closing costs.
Additionally, it’s fairly common to ask the seller to help cover closing costs.
Seller concessions could be a flat percentage of the total closing costs, or they could cover specific fees, like appraisal or attorney fees, discount points, etc. 

6. Upfront Expenses 

In Addition to closing costs and down payment, once you have selected the home of your dreams, you will be responsible to pay the following upfront costs:

* Earnest Money Deposit – Generally 1% of the Sales Price held in escrow with a Title Company 
* Home Inspection Fee – Generally $450-$500 
* Appraisal fee – Generally $650-$700 
* Termite Inspection – Generally $125-$150

The Bottom Line: Plan Ahead When Buying A House. Be Prepared and Be Ready
Buying a home for the first or second tie time doesn’t have to be overwhelming. Maintain your financial health so that your quality of life increases with the purchase, rather than decreases. Talking to a Lender First, to find out where you stand, what things you may or may not have to work on will help eliminate any confusion, eliminate a lot of stress that can go along with this process. 

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