Is it unrealistic to be able to buy a home in this market and afford the payments? For some, yes. The uncertain job market is a major factor in considering buying a house. Another is the tough environment of the mortgage lenders. Commitments for loans can be hard to come by. Though, everyone’s situation is unique. Comfortable employment, good credit, a ready down payment and this might actually be an ideal time to buy your first home. A glut of homes in the current inventory and historically low interest rates combine to make a powerful incentive to buy now.
You need to do you’re research before diving in. A buyer without a pre-approval or commitment letter is just a window shopper. In the very beginning though, window shopping is research…fun research, but still useful information can be gathered early enough to guide you the rest of the way. What do you want in a home…a neighborhood? Do you even really want a house? Maybe a condo would be better. Open neighborhood or gated community? Would an over 55 community fit you best? Even in the current real estate market, taking a few simple steps can put you on the path to successfully buying and keeping your first home.
First, and most importantly, is to find out how much you can afford. Talk to a licensed and experienced Realtor in your area to get a feel for the market, and find a mortgage broker to help you through the ever changing mortgage market. In fact, I’d recommend interviewing several of each. Find ones that you like and can work with, and obviously hunt down the best deal. Having these two pros on your team before you shop is always a great idea. It gives you the aspect of a serious, capable buyer and helps insure you get the best deal possible. A good Realtor who is familiar with your local market will help you find the best homes, that fit your needs and wants in your price range and the mortgage broker will help you set up the program that works best for you and guide you through the complex obstacles along the current loan application path.
You also need to know what your credit score is. Your credit score along with your available down payment will play a role in determining what interest rate your will have for your loan. Start looking for cash too. The more that you’re able to put down on your new home, the lower the loan balance will be. That means lower monthly loan payments and typically and easier path through the loan application process.
No and low down payments are out there. They require little if any cash, from the buyer. Today, buyers are able to purchase a home with as little as four percent down. 20 years ago, the average down payment was twenty percent . Many factors go into how much you need to put down. In today’s market, finding a no down payment mortgage can be painfully difficult. Remember, circumstances will determine what you qualify for. If you are a veteran you can probably qualify for a VA Loan but low down payments in the form of FHA loans are also available.
You can buy a home with only 3.5% down if you can qualify for an FHA loan. FHA loans used have fairly low maximum amounts, so buyers in expensive metropolitan areas were just out of luck. Recent increases to more than $700,000 in some geographic areas have become available to alleviate that problem. For first time home buyers this is perfect, considering they may not have the 20% down payment. Mortgage insurance is often required if the borrower puts less than 20% down, depending on the loan program. Make sure to consider the cost of this mortgage insurance in your monthly payment.
Borrowers can usually cancel PMI once they reach a certain level of equity in their home. This depends on your loan program but is usually between 20 and 22 percent. Lenders are required by law to cancel PMI when the equity you have reaches 22% however you can contact the lender and request the PMI be cancelled after you hit 20%.
Even if you could come up with a 20% down payment, you may choose to apply for a loan with a lower down payment. Then you could use the extra money for other things, like refurbishing your new home, debt consolidation or future mortgage payments.
In short, do your research. Use the resources available and you can have your own home, even in this market…Especially in this market.
Many homes on the market today are short sales, which take a long time to buy. You can buy new construction too. Another factor in the first time buyer’s favor is the current housing market. There’s a large selection of stock, both new and existing homes, on the market, driving home prices down and creating fierce competition between home sellers.
This is the time to buy. Getting the best deal on a low interest mortgage and a generous selection of great value homes creates the perfect buying environment.
Take advantage while it lasts…and have fun!
Focused on Home Buyers and Sellers in Brockton, Abington, Whitman, Hanson, Halifax and East Bridgewater