First time home buyers are having an increasingly tough time acquiring their first dream home. Prices continue to slowly increase along with mortgage interest rates, and lenders are pickier about qualification requirements. However, those young first-timers seem to be more determined than ever to find a way to purchase a home - perhaps even more determined than their parents a generation earlier.
Freddie Mac, a major government-sponsored buyer of existing home mortgages, has some timely suggestions to help first-timers. Here are a few of their tips:
While preparing for your home purchase, take steps to improve your credit rating and score. This will have a major impact on your ability to obtain a mortgage at the best rate and terms. It will even affect the pricing of your homeowners' insurance. Establish a home buying budget.
Pre-qualify yourself for a home mortgage. Before looking at homes, contact one or more lenders and become pre-qualified for a loan. Lenders will consider your 4 Cs - capacity, credit, capital and collateral - in determining your qualification capabilities. Capacity is your ability to repay a loan based on your income and work history. Credit means your history of repaying loans and paying your bills and other obligations. Capital is your wealth in terms of the property or money you have now. Collateral is any property you own that is acceptable as security on a loan. I would note with the continued changes to loan programs available having capital/cash to serve as your reserves available to you after the purchase is more important than ever and can make the difference in what program you may qualify for and what rate you are offered.
After you make an offer on a home, and it's accepted, you will need to make a formal mortgage application. There are many types of mortgage plans available to home buyers in today's market. Be sure you understand all the terms of your selected loan before signing any documents.
In North Carolina the contract to purchase has been updated to reflect that the binding agreement is also one that is time is of the essence. It is more important than ever that you apply for your mortgage and provide your complete documentation before if possible or same day as the day you write your offer to purchase. Waiting to apply may put your purchase in jeopardy as there are other events in the process to purchase..such as the appraisal, home inspection, pest inspection that must be completed within a specific period of time.
Have a great week! Look for my weekly article in the Sandhills Real Estate Section of the Pilot.
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