Buying a home is a huge goal for most Americans. It has it ups and downs. This week I go over what to ask yourself before you buy and what you can expect at application time.
1.) If you’re thinking of buying, understand that this most often comes from an emotional need. A home loan lasts for 30 years and obligates you personally and legally. Your future is directly tied to this decision.
2.) When you go to sell, your home is what you really need to know. A Realtor can charge up to 6%, closing cost for you can be 1% and the buyer may want help or offer lower then the asking price. This is about 10% in costs. History tells us homes appreciate and will offset these expenses. If the market is slow, you will pay in cash, rent it, or wait.
3.) If you feel you may be moving in 2 – 5 years, you may want to just keep renting. If you feel confident you can rent your home then understand what it means to be a landlord. It is not easy or for the faint of heart.
4.) Down payment: FHA is a popular choice because it is only 3.5% down and the down payment can come as a gift from someone.
5.) Credit: FHA requires a 620 fico score. The remainder of loan programs will begin at 620 and go up from there.
6.) Income: you will need to document your income and show a 2 year history of stable employment in the same line of work. This is usually documented by providing pay stubs, W-2’S, Tax returns and often a letter explaining the nature of your occupation.
7.) Ratios: your lender will use your gross income and typically half of that can go to all your bills and housing payment. So if you gross $3,000 a month, $1,500 can towards car, credit cards, student loans, child support and what’s left goes to your new mortgage.
8.) Foreclosure and short sale: FHA requires you to be 3 years from the time of your foreclosure or short sale. If you have a VA loan you can buy in 2 years after your foreclosure.
9.) Bankruptcy, on FHA: you will have to be 2 years from the discharge date of your bankruptcy.
10.) Property type: Single Family homes will need to be habitable, meaning all windows doors, running water. Functioning bathrooms and kitchen, Condo’s are more difficult to finance as the Home Owners Associations will need to be audited and found to be in healthy financial condition.
