Reach Your Homeownership Goals This Year with These TipsPosted on Apr 09, 2019
According to a 2018 report from the National Association of Home Builders, more millennials are becoming first-time homebuyers. The report also stated that millennials are interested in purchasing single-family homes so that they can start their families. Townhomes are also an increasingly affordable option for young families who cannot afford a single-family home. https://www.nahb.org/en/news-and-publications/press-releases/2018/04/millennials-leading-the-growth-of-new-home-buyers.aspx. This means that it is still possible for millennials to buy homes even in a tough economy. In this article, we will discuss the things you must consider on this journey.
Knock Off Existing Debt
Before you search for a new home, you want to knock off as much debt as possible. Most lenders look at your debt-to-income ratio during the loan application process. This means that you want to have more income and less debt. Lenders figure out your debt-to-income ratio by dividing your monthly debts by your income. If your debt is more than your income, it hurts your chances of getting a home loan.
Save Up for A Down Payment
Ideally, you want to save enough money so that you can put down 20% of the overall purchase of your new home. If your home decreases in value and you put down less than 20% of the price of the home, you could owe more than the house is worth. This might leave you in shambles financially. Another reason to have a sizeable down payment is that you won't need to borrow as much money for the house.
Obtain a Pre Approval from the Lender
This is an important first step because this gives you a realistic idea of how much home you can afford. The lender will review your income, your credit score and history, assets you have, and verification of employment. Once the review is complete, the lender will give you a statement that describes the price range you qualify for. Keep in mind that pre-approval is not the same as being approved for the mortgage itself.
Educate Yourself on Homeownership
You don't want to purchase a home without understanding the responsibilities that come with it. Talk with your realtor and other relatives who are homeowners. Many cities have nonprofit organizations that offer first-time homebuyers classes so this is also helpful when purchasing your new home. Read books and articles about common real estate terms so that you'll be well-informed. Learn about budgeting your income and the consequences of not paying off the mortgage.
Look Into Government Home Buying Programs
Even if you're not able to make a large down payment, it's possible to purchase a home. There are government home buying programs that assist first-time homebuyers. The Federal Housing Administration offers financial assistance with obtaining a mortgage and your down payment can be as low as 3.5%. The FHA doesn't give you the loan itself. You will need to find a lender that offers FHA-approved loans. The Department of Housing and Urban Department has a resource webpage on FHA loans, https://www.hud.gov/buying/loans.
Consider the Home Inspection and Repairs
Home inspections and repairs are not fun to discuss, but they are important in the home buying process. The American Society of Home Inspectors says that you can ask your realtor for recommendations or relatives and friends. You want to find a licensed inspector with at least five years of experience. The inspector should conduct a thorough inspection which should include the roof, electrical wiring, the home's foundation, and the plumbing. https://www.homeinspector.org/HomeInspectionNews/the-quick-home-inspection-checklist-what-to-look-for-when-buying-a-home.5-1-2017.1724/Details/Story.
After the inspection is complete, the inspector will give you a detailed report of potentially harmful problems with the new home. The seller must fix any issues that violate local safety requirements, and he will also need to fix water penetration problems in the home. Your lender might require certain repairs before you obtain the loan. Some reasonable repairs that can be negotiated with the seller include:
- Major roofing problems such as leaks or missing shingles
- Improper electrical wiring and electrocution hazards
- Window replacements
- Gas or water leaks
- Clogged drains
- Foundation issues
Although it is best to have enough savings to cover repairs for the new home, you can obtain grants or loans to help with the costs. The federal government and state government have a variety of programs that include financial assistance for repairs. Some local nonprofit organizations also offer grants for home repairs for first-time home buyers.
You should also be prepared for closing costs. These costs include lender's fees, inspection costs, and title policies. Some closing costs are paid every year after the purchase of the home. These costs could be fire insurance, flood insurance, property taxes, and homeowner's insurance.
In conclusion, homeownership is still an attainable goal if you practice financial self-discipline and get sound advice from others.
If you live in Colorado and need assistance with finding the right home for your needs, contact us. We offer a wide range of services that will make the home-buying process less stressful.