Purchasing a Home? Here’s What You Need to Consider

Mortgages for Champions Will Help You Buy or Refinance Your Home

Are you considering purchasing a home? If you are, congratulations! Now is a great time to buy a house. All of us at Mortgages for Champions are here to help.

Home mortgage rates are at their lowest levels in history. That means the money you’ve saved will stretch the furthest it is ever going to stretch.

While buying a home is a fun, exciting time, some people see it as stressful and overwhelming. But the way the process goes for you all comes down to planning.

Many people view the process as simply finding a realtor, picking out a house, and going to closing. It would be nice if it were that easy! But there are a few things you need to consider when embarking on your home buying journey.

The good news is there’s no need to worry. We’re going to cover all of the steps of the home buying process in this article. We’ll get you familiar with all of the home buying costs you need to plan for and even help to educate you on home mortgage rates.

There’s a lot of information to cover, so stick around and read on. By the end of this article, you’ll be a home buying expert.

Are You Ready?

One of the first things real estate and mortgage professionals will tell you is to make sure you have your finances in order. All of your “ducks” need to be in a row before you start to look at buying a house.

What they don’t tell you, however, is that you need to make sure you’re ready emotionally as well.

Buying a house, whether it’s your first one or a new one, has some major implications. Once you buy a house, you’re not going anywhere for a while. It’s a statement that you’re deciding to put down roots wherever you buy.

You should think about your goals for the next few years before purchasing a house. Is there a chance you may need to relocate for work? Is starting a family in your near future?

These are all things that you need to consider. You definitely need to consider them if you’re buying your house with a partner. Making sure both of you are on the same page financially and emotionally is a necessity before buying a home.

Be honest with yourself and with your partner. Have conversations, come up with a plan, and you’ll have a solid foundation to start this journey on the right foot.

Crack Open the Books

We all know this topic needs to be covered: your finances. Taking a good, hard look at your finances and buying a house go hand-in-hand. You’re going to be dealing with creditors and applying for a mortgage.

It’s important that your “financial snapshot” makes the process go as smoothly as possible. Buying a house is a big decision, so make sure your finances are in tip-top shape.

Many websites offer calculators that tell you how much home you can afford. These calculators will factor in things like your income, the amount of debt you have, and your potential down payment. They’ll take all of that information and compare it to the local market where you’re buying to figure out how much house you can afford.

Using these calculators will allow you to see how much your monthly mortgage payments will be. It will also allow you to see how much you can expect to pay in total monthly expenses now that you’re a homeowner. It’s easy to focus so much on your mortgage that you forget about the other expenses like taxes, HOA fees, and home insurance.

This brings up an important point about budgeting. You shouldn’t be shopping for a house at the upper limit of your price range. For example, if a home calculator tells you that you can afford a $350,000 house, it’s not wise to shop for $350,000 houses.

You’re better off calculating what you can afford as a monthly payment and work backward from there. Depending on your market, you may still be able to find an amazing house for $280,000 to $300,000, and you won’t be stressing out to make the payment every month.

Don’t Forget Your Credit

Your credit score is also going to be an important part of this financial picture. Lenders are going to check your credit score when you start applying for a mortgage. But, it’s a good idea to know it for yourself, as well.

It’s true, mortgage rates are currently at all-time lows. The best way to secure the lowest rate possible is to have the best credit score possible.

If your credit isn’t perfect, that’s okay. You may want to put off purchasing a home for a little while and work with a credit professional on improving your credit. Working on paying down any other debt to reduce your debt-to-income ratio is a huge help in this process.

Stuff Your Piggy Bank

For most homeowners, especially first-time buyers, the biggest financial hurdle is the down payment.

As of January 2021, the median U.S. home price was $269,039. At a 20% down payment, a homebuyer would have to come up with roughly $52,000. That’s a lot of money for any one person or couple to have lying around.

It’s possible, but it takes planning. The good news is that certain government agencies, like the FHA, provide loan products with lower down payments. If you qualify for an FHA loan, your down payment can be as low as 3.5% of the purchase price.

However, if you choose a lower down payment, you’ll be responsible for a monthly mortgage insurance premium. Banks require you to pay this until you reach a level of 20% equity in your home. Having to pay mortgage insurance, or PMI, will make your monthly payment higher than you originally planned.

It’s important to review your budget and see how much you can set aside every month to cover the cost of your down payment. A 3.5% payment is more attainable than a 20% down payment. But, if you decide to go that route, you need to see if your budget can handle the extra monthly cost of PMI.

It also pays to contact local community organizations as you go through your home buying process. Some organizations will provide programs that offer down payment assistance. This is especially true if you’re a first-time homebuyer.

What Are Your “Must-Haves?”

You and your partner should be focusing on your “must-haves” for a potential house. Think of this as your “wish list.”

Most people already do this when it comes to things like a fireplace, a backyard, or an area for entertaining. But, there are some other things you need to consider as well.

Do you want a single-family house or an attached unit like a condo or townhome?

Where do you want to be located? You’ll want to look at where you spend most of your time. Does this location provide an easy commute to work?

You’ll want to focus on things like safety and amenities as well. Also, check to see if your favorite neighborhood has an HOA and look at the school district if children are in your immediate plan.

You may also want to consider: do you want to buy something move-in ready or a house that needs some TLC?

Get Your Mortgage

This is the most important step when purchasing a home. The mortgage you qualify for is going to dictate a lot of the other steps of the home-buying process. It’s also important to choose the right type of mortgage.

Your mortgage broker or lender can help you with this process. There are several different loan products. Going with the right one can save you thousands of dollars and a lot of headaches.

Conventional loans and FHA loans are the two most popular. Conventional is your standard loan from a bank with a 20% down payment. FHA can allow you to put down as little as 3.5%.

The interest rates for each type of loan are going to depend on your credit score and other underwriting factors.

VA loans are another possible option, but these are only available to military veterans. They offer very friendly interest rates and terms as a way to thank the U.S. Military members for their service.

Renovation loans are another popular option, especially with first-time homebuyers. They’re useful if you purchase a fixer-upper home.

Renovation loans allow you to roll renovation costs into your mortgage. FHA offers a product called the 203k loan, which is a very popular renovation loan. It’s important to look at the terms of these loans to see what type of renovation you can actually do.

For example, with the 203k loan, you’re allowed to roll the renovation cost into your loan as long as it doesn’t exceed 10% of the purchase price.

Purchasing A Home Made Simple

If you were nervous about purchasing a home before, we hope we put your mind at ease. Take the time to communicate with your partner, adjust your finances, come up with a savings plan, choose the right mortgage, and your home buying process should be smooth sailing.

If you’re looking to buy a home, let the team at Mortgages for Champions help you. We offer competitive loan products for our local champions: nurses, military, law enforcement, and first responders.

If you have any questions or would like more information, contact us at any time. We are thrilled to be a part of such an exciting time in your life. We’ll do whatever we can to help you along on this journey.