First-time Homebuyers
Your decision to buy a home is both a sound financial decision and a commendable achievement. Below we have listed 12 things you must do to prepare.
1. Check the selling prices of comparable homes in your area. Web sites like Zillow and Homegain can give you a general idea of what you should expect to pay. You can also do a quick search of actual MLS listings in your area on a number of Web sites, including the National Association of Realtors. Also consider:
- Where will you be in 5-10 years?
- Do you have kids or plan to have them?
- Does your job require you to move around a lot?
- Do you have time to maintain a home and yard?
- Do you want to live near work?
- Do you want to live near shops, restaurants and nightlife?
- How much living space do you need?
2. Use our mortgage calculators to get an idea of what your monthly mortgage payments would be if you bought today. You can also use my "Rent vs Buying" calculator to compare the costs of buying and renting. Just because a lender will give you the money doesn't mean you should take it. You know best what you can manage. Don't over-extend yourself. Also consider additional expenses that come with homeownership:
- Insurance
- Property Tax
- Private Mortgage Insurance
- Homeowner's assoociation fees
- Utilities (increase with square footage)
- Maintenance
3. Find out what your total monthly housing cost would be, including taxes and homeowners insurance. In some areas, what you'll pay for your taxes and insurance escrow can almost double your mortgage payment. According to the Insurance Information Institute, the average yearly premium can range from $477 a year in Utah to $1,372 a year for Texans.
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. We can not only help you determine likely closing costs, but also ensure you are getting fair terms for your profile, qualifications, and program.
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 costs.
6. Talk to a reputable Realtor 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? I can also assist you with some analysis to get a better feel of this in your specific market as well as recommend a Realtor.
7. Remember to 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 and can quickly drain your bank account. So consider whether you're ready for the expense and effort of homeownership before pulling the trigger.
Prepare for the hunt
If the numbers in 1 thorugh 7 make sense for you, taking a few steps at the beginning of the homebuying process can save you time, money and aggravation.
8. Examine your credit. Right now, blemished credit or the inability to make substantial down payment can put the kibosh on your homeownership plans. That's why it pays to look at your creditworthiness early in the home-buying process. Get your free annual credit report at annualcreditreport.com and comb through 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 score, which will cost you a small fee.
9. Get your documentss in a row. Collect pay stubs, bank account statements, W-2s, tax returns for the last two years, statements from current loans and credit lines, and names and addresses of your landlords for the past two years. Have them ready to show to the lender. This may seem like a lot, but in this age of tight credit, don't be surprised if your lender needs a lot in the way of documentation.
10. Find a lender and get preapproved. Getting preapproved for a mortgage helps you bargain from a position of strength when you are house hunting. Start by filling out a loan application so we can review your qualifications.
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 only requires a 3.5 percent down payment from first-time homebuyers.
12. Finally, don't forget about the first-time homebuyer tax credit. Get your hands on Form 5405 ahead of time and send it in with your tax return immediately after your home purchase to ensure you receive the $8,000 credit as soon as possible. Also, many states are now piggy-backing on top of the federal tax incentive with their own incentives and grants.
Please contact me with any questions.
Karl Peidl
Accredited Mortgage Advocate
Lincoln Mortgage Company
251 Bellevue Avenue, Suite 102
Hammonton, NJ 08037
609-878-7013
kpeidl@linc-mort.com
www.karlpeidl.com
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Pennsylvania: Licensed by the PA Department of Banking as a First Mortgage Banker and licensed pursuant to the PA Secondary Mortgage Loan Act. New Jersey: Licensed by the N. J. Department of Banking and Insurance Maryland: Authorized Mortgage Lender by the State of Maryland Commissioner of Financial Regulation. Florida: Licensed Mortgage Lender by the Florida Office of Financial Regulation. Delaware: Licensed Lender by the Delaware Office of the State Bank Commissioner.
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this update contains the pertinent changes to Appraiser and Lender Eligibility guides as outlined in Mortgage Letters 2009-28, 29, 30 and 31.
Stocks, bonds, and mortgage-backed securities compete for the same investment dollars on a daily basis. There is literally only so much money to be invested. When the Federal Reserve feels that interest rates need to be decreased in an effort to stimulate the economy, this reduction in rates can often cause a stock market rally. When the market becomes bullish, the money to invest in stocks comes from the selling off of other investments, including mortgage-backed securities.
