BY JESS GARRISON · PURCHASING A HOME
Buying a home is a huge investment – perhaps the biggest you’ll ever make. With a purchase this large, you need to know exactly what to look for and how the purchase will go down. Follow this list closely and you’ll be in your dream home in no time!
Shop around and find a local lender that fits with your needs. Sellers like to know that the lender their buyer is using has a great reputation for closing deals in their local market. Shopping around allows you to get the lowest possible interest rate, and lowest fees possible. Let lenders know that you are talking to multiple lenders. Mention the other lenders you are talking to by name, as lenders often have some wiggle room on their interest rates and fees.
There are very few loans that you can get with no money down financing, but they can be obtained under certain qualifications. A VA loan (veterans loan) and an RD Loan (rural development loan) are two examples of zero down loans. You need to be veteran to qualify for a VA loan, and the home you are purchasing needs to be in a specific rural area for an RD loan. To see if the home you want qualifies for an RD loan, visit the USDA's website.
The majority of all loans will require a down payment. The minimum you can put down for an FHA loan is 3.5%, and 5% for a conventional loan. The additional closing costs of the appraisal fee, admin fee, title insurance, and the loan origination fee can rack up to around $5,000, so it’s incredibly important to save up before making a purchase. However, you can try to work your closing costs into the purchase price, and have the seller pay the additional costs for you.
The industry standard to qualify for a loan is a credit score is around 640 or higher. The higher your score is, the better the interest rate can be. Talk to a trusted lender or banker, and ask for their opinion on how to boost up your score.
The lender will be asking for all kinds of paperwork when you find a house and start the purchasing process. They will ask for your W2's in the last couple of years, pay stubs, proof of employment, bank statement showing your available funds, and your last two years of tax returns.
You need to know how much you are comfortable spending monthly on a home. Talk with your lender about this and they will be able to give you a price range you are comfortable with.
A wish list to give your future Realtor is a great way for them to know your wants and needs. Start thinking about what type of home you want, what areas you want to live in, how many bedrooms, how many bathrooms, and how much space you need.
Know when your lease is up, or when you will move out of the current house you own. Expressing all of the aspects of your moving situation will better allow your future Realtor to know how to plan your purchasing timeline.