The First Time Home Buyer
Planning to buy your first home? It can seem overwhelming, with many questions to consider. The first question is ‘where do I begin?’
The place to begin is to make an appointment with a reputable mortgage counselor to help determine if you qualify for a mortgage. The counselor may ask you several questions over the phone to prequalify you before you come into the office and to get permission to pull your credit score to have ready when you meet. Your counselor will ask you many questions about your past credit history, your employment history, your income, your debts and your savings. This will help to determine how much money you can afford to spend on a house. Other factors to be considered are how long you plan to stay in the house, how much money do you have for a down payment, are you likely to be receiving a generous some of money in the near future from a settlement, inheritance, tax refund or trust fund, for example, as this may help decide what type of loan program is best for you. There are many, many types of loans available and this information will help the counselor determine what is the right fit for your needs and qualifications.
Getting information on your credit score before shopping for a home is important as your credit score determines the interest rate you will pay for a mortgage. The higher your credit score, the lower your interest rates will be. The lower your interest rate, the larger the mortgage you can afford. Your mortgage counselor can advise you about ways to improve your score and will review your report with you. Some errors may appear on the report that may make your score lower than it should be. It takes time to get these corrections made but it can save you money in the long run and help you buy a better loan.
Meanwhile you will want to work on increasing your savings so that you have money to cover closing costs. Even though you may qualify for ‘a no-money down loan’ there are generally costs that you have to pay out of pocket before or after closing. For example, you will want to have a home inspection done during the first ten days of the contract. Inspectors expect to be paid by you at the time of the inspection because their findings may change your mind about buying the house and there would be no closing for them to collect their pay. Other closing costs involve title insurance, prorated homeowners association fees and property taxes, lenders fees, property insurance, to name the most common ones. Rule of thumb used to estimate these costs, they typically run about 3-4% of the price of the home. Some lenders will finance part of the closing costs based on your personal qualifications and needs. But the more you have financed, the less you will have to spend on the purchase price of your home!
Once you know that you have been qualified for a mortgage and how much you can spend for a home, you will be ready to shop for a home in that price range. This is not a good time to buy a new car or other large items that you plan to pay for over time, or open a new line of credit, as the loan underwriters do a last minute credit check just before they issue funding for your do not want to see any new debt charged to your credit score that may change the ratio of debt to income or they may change the terms of the loan or require some debt to be paid off before they will fund your loan.
Once
you know how much you can spend, call me at 520-400-5978 or the REALTOR
of you choice about starting to look for the home of your dreams. Have this article emailed to you here .
