With a month under our belt in 2022 we are seeing a shift in mortgage rates a little. In my opinion – still great rates but up from where they were at. We are still seeing a shortage of homes listed and more buyers than sellers. What does this mean for a seller – good news . . . if your home is in good shape, it will sell quick. What does this mean for buyers – you need to act quickly. Make sure you are pre-qualified before you start to look. If you have any questions, please call, text or email me. I would be happy to help.
First Time Home Buyer Questions
1. Am I ready to own a home? Do you know what your credit score is? Do you have good credit? This is very important when purchasing a home. If you score is not decent, you may not qualify or you may have a higher interest rate. Do you have money saved for a down payment and closing costs? The down payment depends on the mortgage loan product that fits you best. It is best to consult with your mortgage lender on this. You can get into a home with as little as 3.5%. Veterans can purchase with zero down. Closing costs are about 3% of the purchase price. Do you have a little extra money saved for the what-if’s? Those what-if’s always happen at the most inconvenient time so be prepared. This will save on your stress level. Owning a home will build equity for yourself and also provides tax benefits that renting does not.
2. Can I afford a home? A general rule of thumb in the mortgage lending world is you can afford a home if your total debt – including your monthly mortgage payment – makes up 43% or less of your before tax income. This is called the DTI – Debt-to-Income ratio. For example, if you earn $5000/mo, your total monthly debt, including your new house payment, should not exceed $2150/mo ($5000 x 43% = $2150)
This may work for the lender to get you qualified but it may not match your monthly budget needs. Things not considered by a lender are:
– What is the electric bill going to be
– Car insurance
– Grocery bill
– Soccer camp, dance lessons, fun family nights out, date nights
– Savings plan for retirement
– Future medical bills
3. How long do I plan to live in this home? This is a good question to ask yourself. If you get into a loan program with zero down payment and you have a sudden job loss, you may have to sell quickly. You may not have enough equity built up yet to even cover the cost to sell your home. The other reason to ask yourself this question is in a market like today prices are on the high side. Even going over list price sometimes. If you plan to sell in a couple of years, you may not get the money out that you purchased for.
4. What is the best first-time homebuyer mortgage for me? This is different for everyone. It depends on your financial situation. There are several types of loans – Conventional, FHA, VA, USDA if your purchasing in a rural area. It is best to talk with your lender to find out what works best for you. I can give you several contacts for lenders if you are unsure where to start with this.
5. Are there any financial programs to help first-time homebuyers? The answer is YES. It depends where you are purchasing. Different areas may offer different programs. Ask your agent or call me to tell you of some that I know of.
6. What should I expect during the first-time home buying process? There are several steps during the process.
a. Get pre-approved by a mortgage lender.
b. Find a Real Estate Agent.
c. Find a home you love.
d. Your agent will draft the Purchase Agreement.
e. Get an inspection.
f. Prepare for closing.
g. Close and move in.
Now there are many other things that happen but this gives you a bit of an idea.
How to know you are getting a good price for your home?
If you are selling your home and it has been a bit since you have sold, how do you know you are getting a fair price for your home? You agent should be able to show you comparable sales within your area to support the price that she/he thinks it will sell for. Many things come into play when looking at comps and your agent will try to make that comp as similar as your home as she/he can. Make sure to ask questions. If your agent is unsure of the answer, that is ok as long as they have resources to get back to you quickly with the answer. Your agent wants to get the most for your home as possible but also keeping in mind that the home needs to appraise for the purchase price or higher.
Qualifying for a home loan
The first thing to do when qualifying for a loan is to find a trusted lender. Your agent may have some referrals for you. A friend may have a referral for you. You can go to your local bank. You want to feel comfortable with whom you are working with as they will have all of your financial information. There are many good lenders. Each of them may have slightly different programs so looking around is not a bad idea.
Things to ask a Real Estate Agent
1. What are your hours?
2. Do you work Sunday – Saturday?
3. Do you take any days off consistently each week?
4. Are you flexible with getting into properties?
5. What is the market you work in?
6. Do you have references that I could contact?
7. After I close on my house, will you still be available in case any questions come up?
8. How long have you been an agent?
9. How many home do you close each year? Average?
10. Are you full time or part time?
11. Do you work with buyers and seller?
12. Do you have an assistant or do you work with the client from start to close?
13. How do you help buyers compete in this market?
14. What is the best way to contact you?
15. Can you recommend . . . . mortgage lender, inspector, general contractor, movers, etc.