March 9th, 2017 5:39 AM by Jackie A. Graves, President
it with rentals and roommates and think it's about time you took advantage of
low mortgage rates and became a first-time homebuyer? To make that happen, just
follow this simple step-by-step plan.
1. Check the selling prices of comparable homes in your area. Do a quick search of actual multiple listing
service, or MLS, listings in your area on a number of websites, including the
National Association of Realtors.
2. Use Bankrate's
mortgage calculator to get an
idea of what your monthly mortgage payments would be if you bought today.
3. Find out what your total monthly housing cost would be, including taxes and home insurance. In some
areas, what you'll pay for your taxes and insurance escrow can almost double
your mortgage payment.
get an idea of what insurance will cost you, pick a property in the area where
you want to live and make a call to an insurance agent for an estimate. You
won't be obligated to buy the policy, but you'll have a good idea of what
you'll pay if you decide to buy. To estimate what you'll pay in taxes, check
your property appraiser's website. Just remember that exemptions and the
intricacies of local tax law can create differences between what a homeowner is
currently paying and what you can expect to pay as a new homeowner.
4. Find out how much you'll likely pay in closing costs. The upfront cost of settling on your home
shouldn't be overlooked. Closing costs include origination fees charged by the
lender, title and settlement fees, taxes and prepaid items like homeowners
insurance or homeowners' association fees. Check out Bankrate.com's annual closing cost survey to see what closing costs average in
5. Look at your budget and determine how a house fits into it. Fannie Mae recommends that buyers spend no
more than 28 percent of their income on housing. Push past 30 percent and you
risk becoming house-poor.
6. Talk to reputable Realtors in your area about the real estate
climate. Do they
believe prices will continue falling or do they think your area has hit bottom
or will rise soon?
7. Look at the big picture. While buying a house is a great way to build
wealth, maintaining your investment can be labor-intensive and expensive. When
unexpected costs for new appliances, roof repairs and plumbing problems crop
up, there's no landlord to turn to, and these costs can quickly drain your bank
consider whether you're ready for the expense and effort of homeownership
before pulling the trigger.
the numbers make sense for you, making these additional moves at the very
beginning of the purchase process can save you time, money and aggravation.
8. Examine your credit. Blemished credit or the inability to make a
substantial down payment can put the kibosh on your homeownership plans. That's
why it pays to look at your creditworthiness early in the homebuying process.
Get your free annual credit report and examine it for errors and unresolved
issues. If you find mistakes, contact the credit reporting bureau to make sure
they are corrected. It's also a good idea to get your FICO credit score, which
will cost you a small fee.
9. Get your docs in a row. Collect pay stubs, bank account statements,
W-2s, tax returns for the past two years, statements from current loans and
credit lines, and names and addresses of your landlords for the past two years.
Have all of that paperwork ready for the lender. It may seem like a lot, but in
this age of tight credit, don't be surprised if your lender wants a lot of
10. Find lenders and get preapproved. Getting preapproved for a mortgage helps you
bargain from a position of strength when you are house hunting. The institution
where you bank and a local credit union are good places to start your search. Use
Bankrate's mortgage rates tool to find
lenders offering the best rates in your area. Applying to multiple lenders in
the same month helps increase your chances of getting a loan approved at the
best rate possible without dinging your credit score too much.
11. If at first you don't succeed, try, try ... the government? If you can't find a bank willing to lend to
you — and in the current tight credit market, it's possible you won't —
consider getting an FHA loan. The Federal Housing Administration has a program
that insures the mortgages of many first-time homebuyers. As a result of this
guarantee, lenders who might otherwise feel queasy about your qualifications
will be more inclined to lend to you. As a bonus, the FHA requires a down payment
of only 3.5 percent from first-time homebuyers.
Claes Bell, CFA - To view the original article click here