First in a series on BUYING 2014
As easy as it is to search for homes and real estate information online, the process of actually buying a home is still hard work. Whether you are one of the 40% of Minnesota first-time homebuyers, a down-sizing Baby Boomer or a move-up buyer, the place to start when you get serious about buying is preparing your finances.
You can typically buy a home with a down payment as little as 3.5% of the purchase price with an FHA mortgage or 5% down for a conventional mortgage. To avoid paying mortgage insurance, however, you will need a down payment of 20% of the purchase price. Don't forget to also factor in savings for problems and repairs that will come up, it's only a question of when… one of the privileges of home ownership!
- Steps to owning your first home… can you afford to buy?
- Budget for homeownership costs beyond principal, interest, taxes and insurance (PITI)
2. STRENGTHEN YOUR CREDIT SCORE
The higher your credit score, the lower your interest rate and monthly payments will be… it could also affect the amount required for down payment. Don't apply for new credit or close any accounts… and don't apply for new credit until after you close on your house.
3. GET PRE-APPROVED
Before you start seriously looking you should get pre-approved for your mortgage. In Minnesota, sellers won't even look at offers of buyers who aren't pre-approved. Your lender will check your credit score and ask for verification of income and funds you will be using for closing. Don't be surprised if they also seem to ask you to jump through a million hoops and provide documentation of things you never even thought of before during the underwriting process after you find your dream home… lenders have become pickier than ever!
- Back to the basics…..getting a preapproval
- How to get from your preapproval to closing on your house…….
4. START LOOKING SERIOUSLY, AND BE READY TO ACT QUICKLY
With a shortage of homes available for sale, you have to be ready to act quickly and have your funds and financing ready when you find the right home for you. Don't be surprised if you are involved in multiple offers… it has become very common in this seller's market! Did you know the supply of homes is even lower than it was when people were buying like crazy and complaining about multiple offers about 10 years ago?!
- Tips on searching for the right home… and signs you have found it
- Buying? When you start doing the happy dance it's time to make an offer… now!
Sharlene Hensrud, RE/MAX Results – Twin Cities Buyer's Agent – Email