As the overall trend in interest rates starts to inch up, the pace of home purchases has the ability to accelerate as people try to get into the market before a substantive and sustained period of interest rate increases hit.
In this first Blog Post of 2017 Stephanie Kotrosits with Wiechert Realtors, shares her perspective on what new home buyers need to consider in a market and a process, that may not be a "straightaway" as one might think.
Buying your first home is one of the biggest financial decisions that you'll make. It's a process that can be both scary and difficult.
When Bob asked me to contribute this blog post, my goal was to give you some tips that are time tested and proven. I've seen them work over my years in the real estate business. I've seen them work for my Clients as well as those of my colleagues.
Here's some of the things that you can do to optimize your efforts and remove some of the stress from what's already an innately stressful process.
1. Keep Track of Your Credit
Good credit is an imperative in today's world and it's no less important when considering buying a home. The better your credit the better "deal" you'll get on your mortgage interest rate. A credit score of 700 or better is a plus for sure. Good credit means not just paying your bills on time, but also, involves the overall scope of your "available" vs. "used" credit. To be in the drivers seat with lenders, you'd want to have a fair amount of "available" but unused credit. Lenders typically want to see that you've used less than 30% of your available credit.
2. Find A Lender That Suits Your Needs
Managing home related debt impacts you in many ways. Not only is it a matter of household cash flow but it also indirectly impacts what you'll be able to save and invest over time.
You can begin looking at lenders online, no problem there. But you'll need to do your homework. Online services not only let you learn about a possible lender for your purchase but allows you to generally compare rates.
It's a good idea to focus in on a few local lenders and have them do a simple pre-qualification over the phone to see what kind of rates that they can actually offer you. Looking generally at rates from lenders is one thing, your specific rate is obviously the most important thing.
Getting the mortgage part of the transaction right can save you thousands of dollars over the life of your loan.
3. Know What Kind of Loan You're Looking For
A good lender is going to review all your options for you and you might be surprised at how many options that there really are. Let's take a look at some of the more popular and common types of loans.
The most common of loans is an FHA loan, which is insured by the Federal Housing Administration. Since this loan is insured by the FHA lenders are protected against possible borrower defaults. Because of that additional layer of "protection" loans from the FHA are offered with attractive rates and low down payment amounts.
Similar to FHA loans, USDA loans, offered by the United States Department of Agriculture are an attractive option as well for rural homebuyers. USDA loans can be for 100% of the market value of the property and with no money down and reduced premiums. In order to qualify, the area you're buying in must be considered "rural" by the Government. You can see if your loan might qualify by clicking this link.
There is another commonly used loan, this one instead guaranteed by the US Government is the VA loan.
Offered through the Department of Veteran Affairs, if you have been enlisted in the armed services, you might qualify for this loan. The VA offers no money down mortgages with no monthly PMI (Private Mortgage Insurance). PMI is a monthly insurance payment designed to offset ant costs to the lender if the homeowner were to default. PMI can be an added cost on any mortgage except VA loans. Rates for PMI are typically $55/month for every $100,000 that you finance.
And lastly, there's the Conventional Loan. Conventional loans are not guaranteed, backed or insured by the Federal Government. Conventional loans generally require at least a 10% downpayment.
There are two types of Conventional Loans, conforming and non-conforming.
Conforming loans meet the standards of Freddie Mac and Fannie Mae, two government agencies whose role is to make mortgages more widely available.
The best example of a non-conforming loan is a Jumbo Mortgage. Jumbo Mortgages would not meet the guidelines of either Freddie Mac or Fannie Mae. At high purchase prices, limits set by Freddie Mac and Fannie Mae are exceeded.
4. Find A Real Estate Professional You Can Trust
There's nothing more valuable to you as a potential homebuyer than finding a real estate professional who understands your needs and is willing to do everything that it takes, to make your dream of home ownership a reality. But where do you find this professional amongst a veritable sea of choices? Here's some tips.
- Talk to people you know who've recently gone through a real estate transaction. Ask them if there real estate professional made their transaction easy or were they hard to deal with. Would they recommend that person for you? Who else might they recommend? A referral from a happy homebuyer is the best place to start
- Start visiting Open Houses and using it as a chance to not only find some homes, get some ideas, and chart your course, but also to interview prospective real estate professionals in attendance that you might use.
It's easy to get swept up in the excitement of a new home and ignore the process. But from experience, I'd caution you to keep everything in perspective.
While we can all agree that finding the right house is important, getting the transaction "just right" is equally as important. Finding your new home is only valuable if you can put a team in place that makes your ownership dream an ownership reality. Surrounding yourself with a sound team of professionals is critical to your success.