Spring is just around the corner (really, it is) and youíve been thinking it may be the time to start looking for a home. If you have been on the fence about buying, itís a good time to make that decision. There are many reasons why now is a good time to start your home search. Interest rates are still very low, home prices have not rebounded here yet as they have with some bigger cities and spring is typically when most sellers list their homes. Aside from the obvious tax advantages of home ownership ( mortgage interest and property tax deductions to name a few) in many cases it is actually less expensive to own a home than to rent. Instead of paying monthly rent to your landlord, you could be building equity in your own home with every mortgage payment you make.
Ok, so Iíve convinced you itís time to think about buying a home, but where do you start? This is the first in a four part series examining the steps to purchase a home. The very first step is to get pre-approved with a lender for your mortgage. Many people think they know what price range they are in and start looking for a house before talking to a lender. Big mistake! More often than not, you think you will qualify for more than you actually do and you find that the house you fell in love with is out of your price range. Rather than risk disappointment, make an appointment with your local loan officer and get pre-approved. You will need to bring some documentation with you to your appointment such as tax returns, recent pay stubs, and a list of outstanding credit balances ( car loans, student loans, credit cards, etc.). Your loan officer will tell you what documentation to bring with you when you make your appointment.
There are many different mortgage options available. I will briefly touch on a few here but your lender is the best resource to explain the various programs that are available for your specific needs. If you have some money saved for a down payment( or have a tax refund coming that can be used for a down payment) you may be interested in a conventional mortgage product. Conventional mortgages typically require 5% to 20% for a down payment, plus closing cost charges. If a large down payment is not an option for you, a FHA (Federal Housing Administration)loan is a popular alternative. This is a government insured loan with a smaller down payment requirement, usually 3.5%. VA( Veterans Administration) loans are available to honorably discharged veterans that meet the VA guidelines and allow for 100% financing for an owner occupied home purchase. Another very popular type of mortgage is the Rural Development loan program through the USDA( United States Department of Agriculture). This type of loan is available in rural areas that meet the USDAís population criteria( currently Freeport and most surrounding communities) and you and the property must meet certain guidelines. Rural Development loans offer 100% financing not including closing costs and the buyer must have at least $1000 of their own funds as a down payment.
Depending on the lender you choose, there may be other programs available to you. Some lenders offer ìin houseî loan products for buyers or properties that donít fit into traditional loan programs. There may also be potential for obtaining various grants to help with down payment or rehab costs on qualifying properties. Again, your lender is the best resource for information on mortgage options and grant availability.
Once you are pre-approved with your lender you will know exactly how much of a loan you can qualify for so you can look at homes in your price range. When you find that perfect home, you can make an offer with confidence and the seller will know you are a serious buyer. Next month I will address step two in the home buying process: the home search.