By Aleta Boudreaux, Broker/REALTOR
If you are considering purchasing a home there are several important questions you should ask yourself and be honest with the answers.
Are you ready to buy a home? With interest rates still low, less than 4%, monthly payments are often less that rent. You will be building equity in a home that will be your biggest asset. However making the payment is only part of home ownership, there is maintenance and insurance, and land taxes among other things. When you rent you agree to obey the landlord’s rules and pay the rent. When you get a home loan you agree to pay the notes, which typically include property taxes and insurance, and keep the property in good condition. Another plus is that you can deduct the cost of your mortgage loan interest from your federal income taxes, and usually from your state taxes. And you will have something to show for all your hard work, a home.
How much you can afford? If you’re using FHA, typically your home payment can’t exceed 31 percent of your monthly income. But sometimes they will let you go higher. With conventional loans, the percentage is closer to 28 percent of your monthly income. Debt-to-income ratios are 29/41 for USDA Loans. These ratios may be exceeded with compensation factors. Knowing how much you can afford and having a pre-approval letter from your lender will help you and your agent negotiate a better price. Statistics show that sellers are more willing to accept a lower offer from someone who has already gotten pre approval from a lender.
How is your credit? FICO Credit scores for USDA should be at least 620. For most other loans, with scores below 640 or 680 you’re going to have to pay sizable fees or make a higher down payment. On the other end of the score 700 to 720 will get you a good deal. Above 750 will get the best rates. You can get your free credit score at mycreditscore.com or my.bankrate.com
Don’t give up if your credit isn’t good or you don’t have any credit. Contact a lender and ask them to help you get your credit fixed so you can work with them on a loan. Most types of loans require at least two credit lines to establish a pattern of payment. These are payment you have made over a year’s time. Examples are credit cards, car payments and sometimes rent can be considered as a credit line. But you need at least two lines of credit for at least for a year.
How long do you plan to live in the house? If you plan to keep the property for at least five years it should appreciate in value. If you plan to move or upgrade to a larger home in less than 5 years it might be wiser to save your money for a larger down payment or a bigger home.
Do you have funds to make a down payment? Unless you are able to get a USDA 100% loan, or the sellers are willing to help you with your closing costs and prepaid items, you will need between 3 – 10% of the homes price for the down payment. You will also need funds for the closing costs and prepaids. You can often finance some of your closing costs, or a seller might pay for some of the costs on your behalf. You can’t borrow the down payment, but someone can give it to you. However, both you and the giver will have to show proof of where the down payment originated by showing bank statements.
Do you have a real estate agent to help you? A local agent will know the market and can advise you about properties in your price range. An agent can also give you a list of mortgage lenders.
At Azalea Real Estate in Grand Bay we can help you from first showing to closing. We can answer your questions and Why not take advantage of our years of experience. Visit www.mygrandbayhome to preview homes or contact Aleta Boudreaux, REALTOR© at 251-656-4576
©Aleta Boudreaux, 2016