Your dream of homeownership is probably closer than you think. Over the past twelve months there have been numerous changes to mortgage guidelines and underwriting. Some lenders have gone as low as a 1% down payment requirement. With seller and even lender credits for closing costs and property taxes you may be much closer to homeownership than you may think. However, if you want to own a home you need to start putting your ducks in a row. Even with reduced down payment options you will still need some savings, strong credit scores and low debt. By getting everything organized today it is not unrealistic to be a homeowner as quickly as 90 days. As you consider owning a home, here are four items you should start getting in place today.
Down Payment/Savings.In addition to the 1% down payment program numerous lenders have dropped their minimum down payment requirement to 3% of the purchase price. This money can be received from savings, an advance on a retirement account or even a gift from an eligible family member. The amount of available funds for your down payment dictate everything else in the transaction. It is important to note that in addition to the down payment you will also need funds for tax escrows as well as closing costs. A general rule of thumb is to add 5% of the purchase price for these items. If you are short on savings you may need to make a savings push over the next few months. You can also seek outside options that work with your budget. You don’t need nearly as much down payment as you did in the past but you still need some down payment funds.
Know your Score. Your down payment and credit score go hand in hand for any purchase. Your score dictates your down payment as well as your interest rate and even your approval. If you are even considering buying a house you should get a copy of your credit report. Not only will your report tell you your score but it will give you an idea of how much debt you are carrying. You can also find an item that is not yours and needs to be removed. It can take weeks to remove an item from a credit report. The quicker you get working on it the higher your score will be when you are ready to start the process.
Talk to a Lender.There are many would be buyers who are intimidated by the buying process. As we mentioned many of the guidelines have changed from just a few years ago. If you haven’t tried to get approved in some time you may be surprised at just what you can do. Reach out to a lender or mortgage broker and ask to explain your situation. They will tell you where you stand, what you need and what items you need to improve. You may also find that you have enough down payment and income to start searching today without having to wait.
Start Looking.Even if you are months away from buying it is never too early to start looking. Some of the best buyers are the ones who know exactly what they want and where they want it. Take some time to look at property listings in the newspaper or online. The more properties you look at the more you can learn about what you like and don’t like. Simply by looking at your social media accounts you will most likely come across a listing. Take a few minutes to evaluate what appeals to you and what doesn’t.
It may take a few months to add to your savings, clear up an issue on your credit report and accumulate items for preapproval. However, the quicker you start the quicker you can realize your dream of homeownership.