Congratulations on starting the process of home ownership! We know that buying your first home can be both exciting and at times scary, which is why we have put together some tips on how to get started and what to look out for along the way. Finding a buyer’s agent that can truly guide you through each step in buying a home can make your life a lot less stressful!
Since this is your first house, look at your finances and decide if continuing to rent or if now is the right time to buy is an important first step. Here is a quick tool to compare renting vs owning in regards to costs.
When it comes to your mortgage you’re going to have options both with which lender you choose to work with and what product best fits your needs. Your buyer’s agent can recommend loan officers/banks but the choice is ultimately yours. Keep in mind you can switch lenders after you’ve been pre-approved. We always recommend shopping your loan once you’ve written a contract.
It is important to understand current market conditions and how interest rates affect your purchasing power or what a higher purchase price equates to in terms of a monthly payment.
If you’re feeling good about your preliminary numbers then a good next step is to get pre-approved. Not only will your pre-approval let you know what your total purchasing power is you can also work backwards and decide what monthly mortgage payment you’re comfortable with and ask the lender what loan amount would fit that payment.
Getting pre-approved is especially important for first time home buyers but it is really something that anyone who is embarking on a house hunt should do. (If you haven’t worked with a loan officer/mortgage professional before your buyer’s agent can give you a few referrals on who to contact) Pre-approval basically consists of contacting a mortgage professional and giving them both some financial and personal information. You will also discuss what kind of monthly payment you would like and how much you are thinking of putting down on your future home. They will then get you “pre-approved” with a lender for the maximum amount someone will be eligible for from that particular lender. Getting pre-approved is important so that you know what kind of price range you have to work with, and you will not waste time looking at homes you can not afford. When you finally find a house that you are ready to put an offer a pre-approval letter can show the seller that you are serious and in most cases can get the financing required to purchase the house they are selling.
One of the things that any lending institution will consider when getting a borrower pre-approved is there D.T.I. (Debt to Income Ratio). This ratio shows the lender how much of your income is available for a mortgage payment. Many conventional loans use the ratio 28/36. A typical FHA loan uses the ratio 29/41. The 28 is the percentage that a lending institution will allow you to allocate towards housing from your gross income. The total includes payments on the loan principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowner’s association dues, know as PITI (Principal, Interest, Taxes, Insurance). The 36 is the percentage that a lending institution allows for both your housing expenses and your requiring debt. Examples of requiring debt are: credit cards, car loans, alimony, child support, and any other longer-term financial responsibility. To figure this out your monthly income: Take your gross yearly income and divide by 12 Exp: 35,000/12=2916.66 Take your monthly income and multiply by .28 Exp: 2916.66 X .28 = 816.66 allowed for housing expenses Take your monthly income and multiply by .36 Exp. 2916.66 X .36 = 1049.99 allowed for housing expenses plus requiring debt
The difference between Pre-Qualified and Pre-Approved:
Pre-Qualified is where you give a mortgage professional a hypothetical set of credit scores, income, debt ext. and they tell you what an average borrower you have described would qualify for. Pre-approval is when the loan officer actually pulls your credit and reviews your income and assets and says what you personally should be approved for. The loan officer then puts this into a letter form for you to be able to submit to a lender. There should not be a charge for this service.
To help you organize your wants and needs and to help your agent find the area that fits these - here is a checklist to fill out:
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David Kent, President of The Real Buyer's Agent, Charleston 1st Exclusive Buyer's Agency, talks review the real estate market data for August 2020. His presentation compares 2018, 2019 and 2020 real estate market in Charleston, Berkeley and Dorchester Counties.
Amazingly, our real estate market here in Charleston went about business as usual. We were considered an essential business because people have to have shelter. Of course, we expected a huge slow down in demand. But we didn’t see it.
Buying your first home can seem overwhelming. Thankfully, there’s a lot of great information out there to help you feel more confident as you learn about the process.
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Buying a house is a big financial commitment, and for most people, the largest investment they will make in their lifetime. It seems like common sense, but many people jump into the process without really educating themselves first. In the excitement of house hunting they skip over the homework and planning, leaving them vulnerable in the long run. Reading t
Buying a house is a big financial commitment, and for most people, the largest investment they will make in their lifetime. It seems like common sense, but many people jump into the process without really educating themselves first. In the excitement of house hunting they skip over the homework and planning, leaving them vulnerable in the long run. Reading this book is an excellent step in making sure you are prepared.