Here are some helpful tips to help you prepare for your home purchase.
1. Check Your Credit Scores and Report
The highest credit scores garner the lowest down payment requirements and lower house payments. Homebuyers with scores under 620 will find it a challenge to obtain financing and, if they do, they'll most likely pay a higher rate.
When you get your reports, study them carefully, looking for mistakes. It is not at all unusual to move your score up dramatically by disputing and having the agency remove even one negative entry from your credit report.
2. Pay Down Your Bills
Lenders determine how much they will loan by using what is known as a debt-to-income ratio (DTI). To determine where you are right now, add up all your monthly payments, including auto loans, credit card payments and any other debt. Don't forget to add in your current mortgage or rent payment.
Divide the sum of your monthly debt payments by your monthly gross (before tax) income and then multiply that result by 100. This is your DTI, expressed as a percent.
What is considered an acceptable DTI varies by lender, but they typically want to see it no higher than 36 percent.
3. Save Your Money, donâ€™t go on a spending spree
Loans from the Veterans Administration and USDA have no down payment requirements. FHA, on the other hand, requires 3.5 percent of the purchase price as a down payment, unless your credit score is between 500 and 579, in which case expect to put 10 percent down.
For a conventional loan, you'll need at least 20 percent of the purchase price as a down payment on the house. Again, more is better â€“ the more cash you put down, the better the interest rate. The amount of the down payment may also determine whether or not you'll have to pay for private mortgage insurance.
Don't forget about closing costs as you save â€“ those are all those fees that can pack quite a wallop at the closing table. Some of the fees are negotiable, and the total varies. Use 3 to 4 percent of the loan amount as a ballpark figure
If you need lender assistance, I can refer you to some lenders who can answer your questions and help you get started.
4. Get Your Financing
In many parts of the country investors are snatching up any house that's in decent condition and reasonably priced. Because they typically offer cash, their offers are the cream of the crop to home sellers looking for a clean transaction and a quick close.
Investor offers are mighty hard to compete against â€“ especially if you go into the process unprepared.
When you look over a standard purchase agreement you'll notice a section regarding financing. It will typically state that the buyer has so many days to obtain a mortgage at specified rates and terms. If the buyer hasn't been pre-approved by a lender for a mortgage, there is always a chance that he won't qualify for a loan.
A savvy home seller knows this. Faced with multiple offers on his home, he isn't about to go under contract with a buyer who is a gamble.
5. Figure out what you want and need
As you get closer to finalizing the first steps toward buying a home, it's time to determine just what it is you want. One story or two? Condo or single-family home? Urban or rural? Determine how many bedrooms and bathrooms you simply must have and any other features that you can't live without. Remember your wants and needs vs. availability of housing and your budget!
6. Select a Real Estate Agent
There is absolutely no reason to not hire an agent when purchasing a home. The commission is paid by the seller at the close of escrow, so the services cost you nothing. Not a bad price to pay for expert representation by someone who is legally required to protect your interests.
A good real estate agent is, overall, available to show you homes at your convenience. He or she is also familiar with the areas you've chosen for your house hunt. The right agent will follow your wish list to the letter, not wasting your time showing you homes that don't fit your criteria.
So, now that you are ready to buy a home, donâ€™t go at it alone, please call me â€œTODAYâ€ at 214-872-0400 so we can discuss your real estate needs, share your concerns with me and allow me to answer your important questions.