Home ownership rates are the lowest they have been in the last 50 years. Yet a large portion of Americans are still renting properties, instead of enjoying a home of their own. Consumer reports believe this is an issue because of a buyer's lack of trust in their ability to purchase. It is still a long standing notion that a buyer needs 20% towards the cost of the home in order to move forward, but this isn't true. With countless down payment assistant programs, and closing cost roll-ins, a home owner could move in with as little as a few hundred to a couple thousand dollars. Which is a huge difference in the time it takes to save up to make the move.
With interest rates at an all time low, home ownership in today's market is a great investment. The money saved over a mortgage's lifespan can result in tens of thousands of dollars, if not hundreds. That's more money in your pocket today. Don't wait to buy when interest rates soar again. With low interest rates, that means your monthly mortgage payments are at a significantly lower cost, as well. With such a heated housing marketing, rental prices are soaring, and statistics are constantly showing that home ownership can be equivalent to your rental rate each month, if not less. Why get stuck in a small 2 bedroom apartment, if you can move into a home a pay a monthly rate that is the same, and get a 3 bedroom house with a great backyard?
There is also a fear that a home can keep you "stuck" or "rooted" to one place, without an easy transition out if you decide to move. Although the future of the housing market isn't easily predictable from location to location, you can always discuss with your agent about buying a home in an area that has a strong turn-over rate when a home hits the market. The equity build up when it comes time to selling is going to be far more beneficial, than if you put money into a rental and decided to move. The money from selling the property can be used to purchase a new home. With renting, there would be no additional funds to transition into a new place.
Now imagine if you were renting a home for $2000/month. If your landlord is renting to make a profit, think how much less you'd be paying on a monthly basis towards your mortgage, if the home was yours. Then you wouldn't be paying a landlord to profit off of you, you'd be paying a reasonable rate, and get to call the property your own. Discuss with your agent and lender the steps you need to take towards home ownership, you might be happily surprised about the type of home you can afford to move into.
Finally ready to make the transition into home ownership? That's awesome, and in this exciting time you can be turning to friends and family for an insight into the process. However, there seems to be a circulation of misinformation spreading around, so we're here to clear up a few myths.
1. THE FIRST STEP IS SEARCHING FOR A HOME
You know the saying, "Don't put the cart before the horse," well that's important to remember when it comes to buying a home. You don't want to start looking for a house until you have gotten to sit down with a lender and discuss what the bank will qualify you for. If you fall in love with a house that's $250,000 and come to find out you're only qualified for $200,000 you can get your hopes crushed and waste a lot of time. Don't start the process on the wrong foot and make sure the numbers line up.
2. YOU DON'T NEED A REAL ESTATE AGENT
For starts, when buying a home, 99% of the time the buyer's agent gets paid by the sellers. That random 1% can be for odd circumstances. So you're getting to use the services of a real estate agent for free. Having a real estate agent on your side means you'll get to see homes that aren't as readily available on public searches, you avoid outdated listings and scammers (there are lots of them), and you have protection when it comes to navigating the legalities of contracts and buying a home. Why wouldn't you want an awesome negotiator working to ensure you get the best from the transaction? For FREE!
3. YOU CAN'T BUY A HOME WITH BAD CREDIT
Fortunately for some, this is a myth. Lenders and banks come by the hundreds of thousands and all though there are a few loan options, a lot of lenders can work with credit scores down to the low to mid 500's. Get in touch with an agent to help you connect with the right lender who can help you potentially approved. There is a lot of factors that go into approvals, but your credit doesn't have to be a sore thumb during the process. However, you will be doing yourself a favor if you connect with a credit repair specialist to at least get those numbers in the 600's. A better score will lower you interest rate.
4. YOUR DOWN PAYMENT HAS TO BE 20%
Think you have to sell an arm and a leg to buy a home? Not at all! An FHA loan only requires 3.5% while a conventional only requires 5%. There are a lot of programs that can potentially help you with down payment assistance or be 0% down mortgage. USDA and VA loans are the most popular 0% down programs. If you qualify, this can take a big chunk off the amount of cash you have to bring to the closing table.
5. DOWN PAYMENTS ARE THE ONLY UPFRONT COST
This is one of the biggest misconceptions. There is a lot of cost that goes into buying a home, and that includes upfront costs. One of the mandatory ones are a termite and appraisal. If you are getting a mortgage, the home will have to appraise and get a letter stating there are no termites in the home. Termite can range between $25-$75 dollars. An appraisal can range from $300-$700 dollars. Aside from your down payment, you then have to pay for closing costs. And NO, they are not the same thing. Closing costs can range anywhere between 3-6% of the purchase price. In certain markets, this can be negotiated for sellers to cover by rolling into the offer price, but whether that decision is smart to do or not when it comes to landing your dream home will need to be discussed with your agent.
Now that you have some knowledge to get the process started, get in touch with an agent who will help you get through the process as smoothly as possible.
Want to know more about a home loan? Here's some GREAT info from our partnered lender Cendera funding.
"This is not an intention to lend"
• Government insured mortgage
• Loan limits: 1 unit: $275,665, 2 units: $352,950, 3 units: $426,625, 4 units: $530,150
• 3.5% minimum down payment
• Seller can pay up to 6% of sales price towards closing/pre-paids for Borrower
• Appraisers could call for repairs for certain defects-(Rotten wood, peeling paint, missing fixtures, etc.)
• Do NOT have to be a first time buyer. Can own other property-(if another FHA loan it must be quite a distance from subject property- exception would be family increase, etc.)
• Minimum credit score: 600-(must have rental payment history, 3 mos. Reserves 600-619 score)
• Upfront mortgage insurance 1.75% financed back into the loan .85% monthly MI factor.
• Government insured mortgage-(loans up to $424,100)
• -0- down payment required
• Borrower must be active, reservist or Veteran from any branch of service with Honorable discharge
• Can use multiple times and on multiple properties with certain circumstances
• Seller can pay up to 6% of sales price towards closing costs/pre-paids for Borrower
• Can own other properties
• Only people allowed on title and loan are Veteran OR Veteran and a spouse. No other co-borrowers.
• Minimum credit score: 620
• VA funding fee for first time use is 2.2% and can go up to 3.3% depending on branch of service and how many times it’s been used. NO monthly mortgage insurance.
• Fannie Mae/Freddie Mac—Conforming loans up to $424,100 above that is JUMBO-(20% down)
• 5% down payment required-(owner occupied), 10%-(2nd home), 15%-(Investment property)
• Seller can pay up to 3% of sales price towards purchasers closing costs/pre-paids on owner occupied and 2% of sales price on 2nd home or investment property
• Appraisers are the least strict on this financing type and rarely call for repairs unless hazardous
• Minimum credit score: 620
• No up front mortgage insurance. Monthly PMI varies on loan to value and borrower credit profile. Estimated factor is .78% per month for 95% loans, .52% per month for 90-95% LTV, .25% per month for 80-90% .
• Government insured/guaranteed
• -0- down payment required
• Income limits apply-(1-4 family max household income: $74,500)
• Seller can pay up to 6% of the sales price towards purchasers closing costs/pre-paids
• Borrower can finance in closing/pre-paids up to the appraised value.
• Targeted areas-(all of St. Tammany now eligible)
• Minimum credit score 620—AND—at least one Borrower on loan must have at least 1 open trade lines of credit OVER 12 mos. old on credit report. Non-traditional credit can be used to make up a total of 3 trade lines of credit.
• New disclosure as of 12-1: Borrower must sign they plan on owner occupying the property for 30 years.
• Appraisers are MOST strict on these loan types. Home must be in very good condition.
• Cannot own any other homes at the time of closing –(can close back to back with the sale of a previous home)
• Up front mortgage insurance is 1% and monthly is .35% PMI factor.
Questions? Call or email Andrea! Cell: 985-788-8238 or EMAIL: Andrea@Cenderafunding.com