By Katie Remwolt, Realtor with Verrado Realty
Would you like to be a first time home buyer, grab part of the American dream and build wealth over time by doing so?
More home loan options and opportunities are available for new homeowners and boomerang buyers (those who had foreclosure or short sell homes three or more years ago) than ever before. These loans range from zero down payment options to flexible qualifying programs that require less-than-perfect credit. Some programs even accommodate recent grads without an extensive job history.
With that being said, buying your first home can be challenging. What features are must-haves, and which are someday dreams? What do you need to do to qualify for a loan? Here are some great tips:
1. Make sure your credit is in good shape. The better your credit score, the better your chance is of getting a lower-rate mortgage. Check your credit report for mistakes and for any credit problems you can correct. You can get a free report from each of the three credit bureaus once a year at annualcreditreport.com.
2. Work with a REALTOR® who’s a buyer’s agent. A buyer’s agent will advocate and negotiate for you.
3. Learn about the neighborhoods you’re interested in. How do the schools rate? A REALTOR® can help you with these things and help you target your buying interests. For instance, what tops your priority list? Short commute to work? Lots of land? Three bedrooms? A community governed by a homeowners association?
4. Estimate your budget. Besides the down payment, which could range from 0% to 20% depending on your circumstances, you’ll want to plan for costs such as:
• The appraisal (about $300 to $600). It estimates the property’s value at a point in time. It lets you and the lender know how the sales price compares with the appraised value.
• Loan origination fees. The cost of making the loan, including an origination charge, processing fee, underwriting fee, and even points on the loan. These fees are usually .05% to 1% of the loan.
• Title insurance. Protects a buyer or lender against loss from title defects, liens, or other issues. Fees are generally 1% of the loan amount.
• The inspection. A thorough inspection (roughly $300 to $500, depending on the property type) can reveal hidden defects, reducing your risk of incurring surprise expenses later. It offers the opportunity to negotiate for a price reduction or for the sellers to make repairs, depending on the findings.
Get prequalified. Meet with a lender to get a prequalification letter that states what you’re qualified to borrow. This lets sellers know you’re serious.
To get prequalified, you’ll need to gather some paperwork for your lender. Most want to see W-2 forms verifying your employment and income, copies of pay stubs, and two to four months of banking statements. If you’re self-employed, you’ll need your current profit-and-loss statement, a current balance sheet, and personal and business income tax returns for the previous two years.
Please let us know if we can help assist you during this exciting time!