Advice For Home Buyers
Advice for home buyers, once you decided to take the leap and become a homeowner, it can be both an exciting time and stressful process at the same time. Advice for home buyers is that your home will most likely be your largest investment and all first time home buyers should take certain factors into consideration. The real estate market is not as simple as it once has been. There are so many factors that first time home buyers need to take into consideration. Besides the neighborhood you want to settle in, the type of home you want to purchase, and the size of the home you want to purchase, first time home buyers also need to consider other factors such as how much home they can afford. Here are some advice for home buyers in their journey of the home buying process.
Consider What Type Of Home You Need And How Much Home You Can Afford
The home buying process can be a long journey. It is not like buying any other high ticket item such as a car, boat, recreational vehicle, or motorcycle. Advice for home buyers is before you start the home buying process and go about consulting with a realtor or mortgage lender, you need to sit down and consider what you need in a home. Is a condominium or townhouse a better choice for the needs of your family or a single family home? How far is your workplace from the area you like to purchase a home? How large of a home do you need? Larger homes have more expenses and costs more for utilities. Do you have children and pets and if so, do you need a larger yard? Larger yards cost more in landscaping and maintenance. Location is one of the most important factors first time home buyers need to take into consideration. City versus suburbs versus rural areas. City living may be more convenient due to the many amenities such as dining, shopping centers, public transportation, and proximity to everything. City living may be a positive factor to home buyers with no children or pets. You can probably get more house for the money if you purchase a home that is located in a rural area but may spend more time and money in travel costs. All of these factors need to be taken into account for home buyers. Once you have narrowed down these factors, your next step should be to consult with a mortgage lender to see what type of mortgage loan you qualify for and the amount of loan you qualify for based on your credit and income profile.
The mortgage pre-approval process is the most important stage of the mortgage loan application and mortgage approval process. You need to choose a mortgage lender that is the right fit for you and who can meet your credit and income profile. Anyone with a 800 FICO credit score, solid documented income, low debt to income ratios, perfect credit payment history, no derogatory credit items can get a mortgage loan by any mortgage lender. However, this is not always the case. Each individual mortgage loan borrower have different credit and income profiles and these folks need to choose a mortgage lender who can help them. Most mortgage lenders have mortgage lender overlays, which are additional guidelines on top of the federal minimum mortgage lending guidelines. For example, minimum credit score requirements to qualify for a 3.5% down payment home purchase FHA Loan is 580 FICO. However, most mortgage lenders will not accept any mortgage loan borrower who has a credit score under 640 FICO and this is called a credit score mortgage lender overlay. Most mortgage lenders have debt to income ratio mortgage lender overlays. FHA requires up to a 56.9% debt to income ratio by FHA mortgage loan borrowers. However, most mortgage lenders will have a cap on debt to income ratios of 45%. This is called a debt to income ratio mortgage lender overlay. Home buyers should familiarize themselves with mortgage lending guidelines so in the event if they go to a mortgage lender and are told that they do not qualify for a mortgage loan, they can see whether the reason they do not qualify is because of not meeting the federal minimum lending guidelines or because of the particular mortgage lender overlays. Unfortunately, most mortgage lenders who have mortgage lender overlays will not refer you that you qualify for a mortgage loan and can go to a mortgage lender with no mortgage lender overlay and just tell you that you do not qualify for a mortgage loan. Over half of my borrowers are folks who were told they do not qualify for a mortgage loan by other mortgage lenders. I am a mortgage lender with no mortgage lender overlay so having a 580 FICO credit score is no issue and having higher debt to income ratios is also no problem.
Pre-Approval Versus How Much Home You Can Afford
Your mortgage loan originator will issue you a pre-approval letter after reviewing your income, tax returns, W-2s, credit, credit scores, and credit history. and submitting your mortgage loan application through Fannie Mae’s or Freddie Mac’s Automated Underwriting System for an automated approval. Your mortgage loan originator will give you a maximum amount of mortgage loan you will qualify for and a maximum housing allowance that you qualify for based on the property taxes and homeowners insurance of your subject property. Advice for home buyers is that home buyers should know that just because they qualify for a particular mortgage loan amount and is told that they qualify for a certain monthly principal, interest, taxes, and insurance ( PITI ) does not mean that this amount is how much they can afford. Mortgage lenders will not take into account the borrower’s other expenses such as utilities and personal expenses. Some folks may have ongoing medical expenses, education expenses, child care, and other personal expenses. Home buyers also need to consider the fact that as a homeowner, they will need to maintain their own home and have a budget in the event if they need home repairs and/or home improvement. Expenses such as water bills, scavenger service, landscaping services, and snow plowing services that were included as a renter are now part of the new homeowners responsibilities.
Find A Full Time Real Estate Agent
Once you have a solid pre-approval letter and know how much home you can afford and have the area you like to buy the home, your next step is to interview real estate agents or shop for homes online. Choosing the right real estate agent who you can work with is extremely important. Your real estate agent should be a full time agent, be local and familiar with the area you want to purchase your home, and most importantly be available 7 days a week and return phone calls promptly. If you need to leave multiple messages and the real estate agent does not return your phone calls for days, it is best that you find yourself a different real estate agent. A real estate agent should be knowledgeable, know the location and the amenities in the area you are purchasing your home, and be able to get along with your mortgage lender, attorneys, and others. You should take your time in your home search and not just put in an offer on the first home you see. I would recommend that you look at multiple homes, check the neighborhood, talk to the neighbors, and check the proximity to shopping centers, public transportation, parks, and schools. Once you have selected the home of your dreams, you can then enter into a real estate purchase contract.