Plan Now for a Spring Home Purchase

tulips-in-clear-vase-beside-window-2705740If you are a first-time home buyer, finding a home can be an exciting — yet, daunting — experience. Before deciding on a location, finding a realtor, or making an offer, you must line up your finances and become more familiar with the various loan options. To help you understand the home buying process, here are a few initial steps to get you started.

  1. Learn about the Home Buying Process

If you’re not familiar with home buying lingo, types of transactions, or how to begin the process, consider attending a first-time home buyer seminar. The U.S. Department of Housing and Urban Development (HUD) maintains a list of home buying resources by state, and it includes these home buying seminars. Another option is to talk to a credit counselor. You want to make sure the counselor does not work with a lender to avoid being influenced by someone who has financial interest in the loan you choose.

  1. Set up a Savings Goal

The conventional route for buyers is to save 20 percent for a mortgage down payment. But there are many other options you can consider that require less down. The amount needed for a down payment can depend on the type of loan and a lender’s requirements. Federal agencies such as the Federal Housing Administration and the Veterans Administration require smaller down payments. You will need to research the loan options and lenders to determine loan options, qualification requirements, fees and payment options. Be sure to meet with at least three lenders since programs and fees can vary greatly. Visit www.cvhomebuilders.com for a list of local lenders. You don’t have to select a lender today, but you need to understand your options and how much of a down payment you’ll need.

  1. Evaluate Your Budget

Take time to learn where you’re currently spending your money and if you can save more. Establishing a timeline can be helpful in determining your savings plan. Do you want to purchase a home in six months, a year or more? Reducing your spending, increasing your income, or both can help you reach your down payment goal faster.

  1. Pay Down Your Debts

Lenders look at how much of your monthly income is devoted to debt payments, also known as your debt-to-income ratio. In short, lenders want to know if you can pay back a loan and prefer to offer mortgages to individuals with a low debt-to-income ratio. Credit card debt will directly impact the size of the loan for which you qualify.

  1. Calculate Your Monthly Payment

The monthly payment you make on your home is more than principal and interest. Additional costs can include escrow for property taxes, insurance, or a homeowners’ or condominium fee. Especially when trying to purchase your first home, you want to make sure the total monthly payment is feasible and you can still live comfortably. Most real estate websites offer a mortgage calculator to help you figure out the complete picture of your monthly payment amounts.

  1. Select a Lender and Get Pre-Approved

Select the lender you are comfortable communicating with and has loan programs that are right for you. Then get pre-approved for a mortgage; this will give you an edge over other prospective buyers when you’re ready to place a bid on a home. This step will signal to sellers that you are a serious buyer and your financial profile has already been thoroughly vetted. With the current housing market, most sellers will require the pre-approval letter before accepting an offer.

Christina Thrun is the Executive Officer for the Chippewa Valley Home Builders Association. Blog articles are often submitted by members of the Chippewa Valley Home Builders Association. For more information please call 715-835-2526 or email jen@cvhomebuilders.com

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