5 Important Questions for Homebuyers

Important QuestionsYou understand the benefits of homeownership. Now, where to start? How much will owning a home actually cost? How should you choose your first home? There are so many questions that go into the home-buying process.

Below you will find two of five important questions to ask to help you in your home search.

1. How much can I afford? A good rule of thumb is to have 28 percent of your net income go toward your home payment. Anything between 25 and 32 percent is considered manageable, but a higher ratio puts you at risk should your financial situation change. A rise in insurance costs or the loss of a job could make things difficult, but if you are spending a quarter of your earnings after taxes on your mortgage payment, you should be safe.

2. What are my other housing costs other than the loan? Be sure to have a thorough conversation with your lender about out-of-pocket expenses such as down payment and closing costs. Also, take into account any possible home improvements you plan to make, and have contractors give you estimates. Other expenses that need to be considered include taxes, homeowner’s association dues, utilities and home insurance.

3. What should I look for in a house and a neighborhood? Determine what kinds of activities are important to you. Do you want to be near a gym? A park? Good restaurants? Also take into account how you will get to work. Is there a bus stop nearby or will you drive to work? Try driving to and from a house during different times of the day before you make your decision.

4. Will this house fit my long-term goals? It’s a good idea to consider future plans when buying a home. Do you plan on having children? Could an elderly relative be moving in? Do you need a home office? Also consider schools if you plan to start a family. It can be cheaper in the long-run to pay more for a house in a better school district than to buy a less expensive home and pay for private school.

5. Am I truly prepared to be a homeowner? Be prepared to spend time and money on your home. Understand everything that is involved in owning a home, from maintenance repairs, and landscape to homeowner’s insurance and property taxes. Ask yourself if you have good spending habits, and possibly take a homebuyer class online or in person. Also, be aware of your credit score and how it affects your ability to purchase a home.

A licensed Realtor and Loan Officer can help guide you further. These questions can help you determine the right course to take when buying a home. Please don’t hesitate to contact us if you are in need of professional mortgage guidance.

Finding the Cash for Your Down Payment

Finding the CashMortgage programs typically require a 20 percent down payment, but few people have that much cash reserved. There are some home loan products that require less, such as FHA loans that require 3.5 percent down, but the larger the down payment, the lower the mortgage will be. Here are some great tips for your down payment.

1. Receive a larger tax refund.

If you have difficulty saving money, you can decrease the number of withholding exemptions you claim on your employer’s tax form. While your paycheck will be reduced due to your employer paying more to the I.R.S., this could ensure a large tax refund.

2. Make regular deposits into a savings account.

Many employers offer to pay employees through direct deposit with the option to deposit certain amounts into multiple accounts. If you were to contribute $200 from a biweekly paycheck, you would have saved $5,200, excluding interest, after a full year.

3. Ask the home seller to contribute.

If you pay the seller’s a

sking price, you could be surprised at what they will do for you. They may be willing to give you the down payment as a credit, pay your closing costs or do both. Consult with your lender before asking, as certain restrictions may apply.

Those who have served in the armed forces may qualify for a VA loan, and the government has several down payment assistance programs for first-time homebuyers. Some counties also offer special programs to increase homeownership in certain neighborhoods. Consult with your lender to learn what options are available to you.

Top 7 Credit Score Secrets, part 2

credit score secretsIn my last post, I shared the first of seven secrets to help protect or improve your credit score. A higher credit score leads to better interest rates on car loans, mortgages and large purchases, and I’m pleased to share with you the remaining secrets to help you achieve financial security.

 

4. Applying for too many credit cards at one time is extremely detrimental to your credit score since every time someone checks your current credit status, it leaves a ding that can last up to one year. When you suddenly start applying for a large amount of credit, it sends a red flag that you are either enduring some type of financial trouble or that you are accumulating too much debt. Either way, it negatively impacts your credit.

5. Although teenagers are not always the most responsible with money, getting your teen a credit card early in life can make a significant difference in their credit scores over the long run. There are a few excellent options for low-limit cards and prepaid cards, both of which will help your child start building a positive foundation for their future credit.

6. Avoid “free” online credit reports! Usually, they are not free and can be a complete scam. If you want to receive a free credit report, you can check with all three major reporting companies once every 12 months with no negative impact on your credit. You can access this information at the government-sponsored site:

www.annualcreditreport.com.

7. Never lie or falsify information about your credit score. Your credit score can easily be checked by anyone, and you may even face legal action for falsifying information on a loan application.

 

We hope this information will help you maintain or improve your credit score, as well as lead to favorable interest rates. Please feel free to contact me with any questions or for assistance with any financing needs.