While reasonable housing prices, sufficient inventories and significantly low interest rates sign “buyer’s market” for investors or move-up buyers in many U.S. markets, raw first-time buyers may not be aware if the time is right to create a move into real estate.
To assist first-time buyers know if they’re ready to look for the home of their dreams as we lead into this year’s home buying season, the professionals at Move have generated a “reality checklist” intended to aid them choose if the time is right.
Obtain your financial house in order
Before thinking of buying a home, it is beneficial to make sure your credit is in good condition and repair any damage previously done. Understand your credit score: about 35% of successful buyers newly reported they did not know their credit score when they go home shopping. The key component in making sure you are ready to purchase a home is having enough money set for down payment.
Don’t fall in love with a property that you can’t afford
Determine how much you can afford: institute your purchase power upfront, that includes how much money will be needed for a down payment and closing costs, it is a must for first-time buyers.
Study the lingo
It is significant to get familiar with the processes and terminology related with home-buying. Below are words to add to your vocabulary:
1. Bait Rate: Misleading mortgages with low rate promises and no contingencies generally for those with extraordinary credit. Rates are based on: debt-to-income and loan-to-value ratios, the type and size of loan, location of property, day you lock your rate and alike.
2. Basis Point: A term applied in the mortgage industry which simply denotes 1/100th of 1%.
3. Closing costs: The fees needed to process and close your loan. They’re a cash compulsion running from 3-5% of the purchase price.
4. FHA: Federal Housing Administration, the Federal Government Agency that manages the U.S Housing Market. FHA Loans are loans insured by the Departent of Housing and Urban Development.
5. FRM & ARM: A Fixed-Rate Mortgage Loan FRM is a loan where your interest rate remains the same for the life of the loan. ARMs are Adjustable-Rate Mortgages with variable interest rates that vary based on an agreed-upon index.
6. GFE: The Good Faith Estimate (GFE) is a document that explains all costs engaged in getting a loan.
7. TIL: The Federal Truth-in-Lending Form is a document that makes clear the costs and fees of the loan.
8. Lis pendens: this is an official notice that there is a pending proceeding over real estate.
9. Per Diem interest: Interest you pay everyday.
10. Underwriting/underwriting fees: Underwriting is a process the lender executes to qualify a borrower for a loan and the fee is what you pay the lender at closing to cover evaluating the risk engrossed with loaning you money.
11. Warranty deed: A legal document assuring the seller has a right to sell a property, which is very crucial if you are bearing in mind a distressed or discounted property.
Mortgage Knowledge
Buyers who prepare themselves fiscally before they begin looking for a home will have a better chance of succeeding according to Sue Steward, senior vive president for Move, Inc.” if you want the best mortgage that fits your needs, begin early, educate yourself on your financial status.
If today is not the right time, organize for your future purchase
If this is not the right time, plan ahead with a target date when you expect to be ready. Improving your credit, paying down debt, stabilizing your work history and calculating exactly how much you can afford, the best ways to plan for your future home purchase. It is also beneficial to refrain from creating any new large purchases and applying for new credit.
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