Are you a first time homebuyer?
Are you a first-time homebuyer eager to get into the market? Here are steps to decide whether you’re ready to take the plunge.
Gather information …
1. Check the selling prices of comparable homes in your area. Do a quick search online or contact Virginia Rogan at Village (615) 618-9966 to find MLS listings in your area.
2. Contact a lender or look online to get an idea of what your monthly mortgage payments would be if you bought today. Numerous websites offer mortgage calculators that will help you figure this but you can also call Virginia Rogan at Village (615) 618-9966 who can walk you through different purchase price scenarios to find your monthly payment including taxes and homeowners insurance.
3. 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 charged by the closing attorney, taxes and prepaid items like homeowners insurance or homeowners’ association fees.
4. Look at your budget and determine how a house fits into it. Fannie Mae recommends that buyers spend no more than 28% of their income on housing costs. Go much past 30% and you risk becoming house-poor.
5. Find out as much as you can about the real estate climate. Will prices continue to rise in the Nashville area? Is there sufficient inventory for today’s buyers?
6. While a 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 can quickly drain your bank account. So consider whether you’re ready for the expense and effort of homeownership before pulling the trigger.
Think you’re ready??? Prepare for the hunt
If the numbers make sense for you, taking a few steps at the beginning of the homebuying process can save you time, money and aggravation.
1. 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 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.
2. Get your docs in a row. Collect pay stubs, bank account statements, W-2s, tax returns for the past 2 years, statements from current loans and credit lines, and names and addresses of your landlords for the past 2 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.
3. Find lenders and get preapproved. Getting preapproved for a mortgage helps you bargain from a position of strength when you are house hunting. The institution where you bank and a local credit union are good places to start your search. Applying to multiple lenders in the same month helps increase your chances of getting a loan approved at the best rate possible without dinging your credit score too much.
4. Having a hard time coming up with that downpayment? Consider the THDA Great Choice loan program. For qualified buyers, the Great Choice loan program provides qualified Tennesseans up to 4% downpayment assistance to be used with FHA, VA, USDA-Rural Development and uninsured conventional loans.
5. 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 or a THDA. 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 requires a down payment of only 3.5% from first-time homebuyers.
And finally, begin the hunt …
Nashville has a very healthy real estate market. This will persuade many potential sellers to enter the market, but with strong buyer demand, there is often buying competition for the limited inventory. Be prepared by getting pre-approved for a mortgage and be ready to act quickly with a Realtor on your side. Affordability can also be a challenge for first time homebuyers. Consider a long-term view and realize that your first home may look different than what you thought was your “dream home”. The advantages and pride of homeownership are a boost to all first time homebuyers who are prepared for the responsibility and the market. Homeownership can be a great way to build wealth while providing a place you that you call “home”.