So you are thinking about purchasing a home?

By
Real Estate Agent with REALTY PROS
Thinking about purchasing a home...Don't be NERVOUS! If you have been watching the news or reading newspapers, you are constantly bombarded by a variety of perspectives on the status of the Washington DC real estate market. Keep in mind, that the real estate market fluctuates on a monthly basis depending on many variables such as interest rates, loan applications, foreclosures, short sales, etc. Just like Politics...ALL REAL ESTATE IS LOCAL!



What should a homebuyer expect in this market? High down payment requirements, stringent credit score, and financial qualification requirements are the biggest woes for homebuyers in today's real estate market. Along with the usual stories about the obstacles of finding the "Perfect" home, purchasers must be informed about aware of their loan options and how it affects both their short-term and long-term goals.



First-time homebuyers must be familiar with the two most common types of available loans: 1) FHA and 2) Conventional.



What is an FHA loan? A FHA loan is a government-backed loan consisting of mortgage insurance which provides homebuyers with the ability to purchase a home with a low downpayment (ie. currently 3.5% of the salesprice).



What is a Conventional loan? A conventional loan is not guaranteed or insured by the federal government which does not require mortgage insurance but has a higher downpayment of 20% of the salesprice.



What are the most recent mortgage requirements? These guidelines are constantly changing on a monthly basis, so it is important to be informed about your qualification needs.



  • The majority of banks are requiring a credit score of 640 for approval of FHA and Conventional loans.




  • Debt-to-income ratio must be within 45% for FHA. This is based on your Gross Income.




  • Condo Delinquency Ratio under 15% for FHA & Conventional for building approval.




  • Investor Ratio is under 50% for FHA for building approval.




  • Investor Ratio is under 30% for Conventional for building approval.




  • What does a homebuyer need for a preapproval? Many people will go to their local banks and ask to get preapproved and of course, your bank will ONLY run your credit score and you an arbitrary amount. The best response from loan officers after giving you a preapproval is "Come back to me when you find a home and I will give you a monthly payment!"



    I hope I'm not the only one who thinks that is ABSURD, especially after the economic troubles from the mortgage markets and lack of disclosures to homebuyers.



    I encourage all potential homebuyers to add the following items on a checklist to give to their lender to determine an accurate estimate of their homebuying potential at the outset.



    1. 2 most recent W-2s

    2. 2 most recent monthly statements

    3. 2 most recent paystubs

    4. Additional information about investment accounts






    take the homebuying plunge



    Hopefully you found this post useful! If you need help finding or selling your Washington DC home, please contact Jason Trotman at 301-452-4767. If you’re new to DC, I’d especially like to extend a warm welcome. I value the opportunity to help my clients find the home that meets their needs and provide them with professional, reliable service.
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