Are you thinking about buying your first home, but don’t know where to start? This process can be overwhelming for someone who has never experienced it. Whether you plan to buy a home in the next couple of months, or if it’s in your 5-year plan, there are steps you can take now to prepare yourself and your family for purchasing a house.

However, if you’ve already started the process as a first-time home-buyer, we hope these tips will encourage you to hit your goal and have a smooth transaction.

1. Save Money
You should already be setting money aside for your down payment and other expenses which arise that you didn’t know about or plan for at the beginning. Don’t forget about closing costs, HOA fees, purchasing a survey, etc. Every real estate transaction is different, but it’s best to be cautious and save as much money as possible to cover your expenses.

2. Work on your Credit Score
Whether you plan to buy soon or in 5 years, start building up your credit score now. Pay your bills on time, especially your big purchases like car payments, and then focus on your credit cards. Keep your credit cards at 10 percent or lower. It’s important to have a good credit score so that you may be approved to buy your home!

3. Keep a Steady and Reliable Job
Two-year employment is ideal, but at least a 2-year history of your job is required. If you have over a 6-month gap in employment, it can start to get tricky to get you approved through a lender.

4. The Truth Behind Your Down Payment
You don’t actually need 20% down to buy a house. There are several grant and down payment assistance programs that can help with up to 7% of your closing costs and down payment. Those programs aside, the FHA minimum down payment is still only 3.5%. Every lender or bank is different, so be sure to talk to your loan originator about your options.

5. Don’t Feel Obligated to Buy at Your Highest Approved Amount.
Even if you are approved for a higher-priced house, that may not always be the smartest choice depending on your needs and the needs of your family. Look at your budget and see how much house you can afford to live in and still be comfortable with your finances. You never want to be ‘house-poor’.

Voila! These are our top 5 tips for first-time home-buyers. If this is you, we are very excited to help you and would love to give you more information. Please reach out to us today if you have any questions and happy buying.

 

 

Questions? Comments? Reach out to your First International Title rep today!

Many first time homebuyers feel excited to purchase their first home, but do not know where to start. They ask questions like ‘What is the first step? Who do I talk to first? How much money do I need to have?’ Well, dear renter, we are here to answer your questions. For those looking in the near future to buy for the first time, here are three simple steps to get start on the home buying process.

Jon Lucas is a mortgage adviser at Ikon Mortgage in Dallas, Tex. He is passionate about educating people – especially first-time buyers – on what to expect and how to be prepared in the home buying process. The key is to be ahead of the game and there are many ways you can be on top of the process.

“Organization, Promptness, and Communication are critical,” Lucas said. “That’s on all levels – the loan officer, the borrower, the real estate agent, the title company. If we’re all coming into with this mindset, then we’ll really get things done.”

1. Saving Money

Not only should you be doing this on a regular basis anyways, if you’re looking to a buy a house in the near future, you need to have money set aside for the down payment. The way you move and handle your money will also be inspected when you’re trying to buy a home, Lucas said. He added that you want to create a good history of income, be a good record keeper, and have your tax returns, W2s, bank statements, and paystubs handy.

“These are all things that you will have to provide upfront,” Lucas said. “So keep them accessible. With the finances, don’t move your money around. We need the money that’s in your bank account. Keep the same bank. Keep it consistent and don’t move it from account to account. This will also help with the speed of the process.”

He also mentioned that it’s important to keep a good record of anything you sell. That sofa you sold on Craigslist for $500, keep a record. The old vehicle you sold to your friend for $2,000, keep a record of it. The lender will need proof of where that money came from. Be honest with your money, Lucas said.

2. Work on Your Credit

The first way to improve your credit score is by paying your bills on time. Lucas said even if you cannot pay the full amount of your bill upfront, always pay something and call to the creditor to work out a payment schedule. Don’t ever let any of your payments become delinquent!

“There is a somewhat of a hierarchy of how underwriters view types of credit,” Lucas added. “First on top, is mortgage. If you’re not making mortgage payments and you’re trying to get another mortgage or if you have missed payments within the previous 12 months, you are most likely not going to be able to get another mortgage right now.”

Second most important, he said, is car payments or other installment loans.

“If you have fallen into an economic hardship and absolutely must choose between paying your credit card or your car payment, pay your car payment and contact your credit card company, they are more willing to work with you than most people expect” Lucas said. “Car or Installment loans have more weight on your credit score and greatly affect approval odds for a home loan.”

Finally, your revolving credit cards are in third place because they hold the least amount weight. However, they still show how financially responsible you are and should be paid on time monthly. Even though they are ranked third, expect your credit card history to be critically examined during the qualification process.

“Don’t ever close credit cards!” he said. “Leave them open because that’s going to leave you more available credit, which lowers your overall debt ratio.”

Of course, the best way to handle credit cards is to keep the balances low, ideally under 10 percent. You want to keep as many lines of credit open as possible, Lucas added, while being responsible. It does not hurt your credit score to have multiple cards. The more that you can prove you’re a responsible money-manager, the more it’s going to help improve your score. However, once you start hitting the 40-50 percent bracket for expenses on your credit card, you will see a dramatic decrease in your score.

Finally, be sure to not make any big purchases and don’t run your credit a bunch of times in search of new lines of credit. You will have to explain each inquiry on your credit report. Lucas suggests using a consumer report source, such as Credit Karma to monitor your credit. However, he advised that Credit Karma is not a substitute or as accurate as a financial institution credit report. It’s best used to keep an eye on score to see if it is moving up or down, as well as, monitor your accounts.

3. Employment

“Steady employment is huge,” Lucas said. “Don’t quit your job or move to a new one… we like to see consistency. This is what it’s all about. If we’re basing it off a 30-year loan, we need to ask ‘Is this person consistent?’”

Of course, every person and every situation is different and Lucas understands this.

“If you work in the same line of business, but move to a different company in the same industry to make more money, who wouldn’t do that?” He said. “If you change industries, become self-employed or start commission-based salary, you’ll have to wait 2 years until we can use that work history.  First job out of college is different, though. if you’ve been to your first job for a year or a year and half, that’s fine. We can use your college as previous work history, or Military service.”

If there are dramatic increases in pay between your two jobs – for example, jumping from $30,000/year to $150,000/year – Lucas said that may or may not be used in the home-buying process. When you have those kind of big increases, they need to see that it’s permanent. Additionally, if you are self-employed, the Underwriter needs to see a consistent two years of income.

“The biggest issue we see with self-employed borrowers is when they say, ‘I make $100,000’ but they write off $80,000. I have to use the remaining $20,000 as their income,” Lucas said. “If your business isn’t profitable or you are too generous with write-offs it will be difficult to qualify for a home, so keep that in mind when doing your taxes. This is where honesty and transparency comes into play. Your money has to be in the system to get a house.”

And finally, Lucas added that if you have good employment and good credit, but coming up with a down payment is difficult to buy your house, you can use money gifted to you by a relative (not a best friend). They’ll just have to take a look at the gifter’s bank account as well.

“We use gift funds a lot, especially for first time homebuyers,” Lucas said.

Final Thoughts

All of these basic steps are intertwined on many different levels and one step is not more important than the other.

“You could be in the same job for 20 years but if you don’t have money for down payment and closing costs, then you’re not going to get a loan,” Lucas mentioned.

He recommends using the Three C’s of Credit as a guide for preparing and sustaining home ownership.

  1. Character – Willingness to repay
  2. Capacity – Ability to repay
  3. Capital – Collateral used to repay if primary source of income is lost

Also, be sure to have realistic expectations of what you’ll find for a home. Many people, Lucas said, try for too much and push their limit, when they should really take a step back and get something that’s comfortable, affordable, and will not put them in a potential financial burden. It is crucial to get pre-qualified before you start looking at houses.

The bottom line is this: save money, work on your credit score, keep a consistent job, stay in communication with your lender, be realistic, and have fun!

 

Questions? Comments? Reach out to your First International Title rep today!

New Year, New House
Are you a home-owner looking for a good deal on a new house? Are you a real estate agent looking to help your client find the best overall package? Now is the time to buy. According to the experts, January is the best time of year to buy a house in terms of price, mortgage and interest rates, and the number of buyers on the market compared to the number of houses for sale.

Stray Away from the Pack
Typically, spring and summer are the most popular times to buy a home. The weather is warm, the days are longer, and the kids are out of school. However, you may pay a pretty penny for buying during the more pleasant months of the year. Those who don’t mind facing the cold weather in January have the potential of buying for less, according to a study done by a September 2016 NerdWallet study.

“While winter homebuyers generally encounter a lower inventory … [the] study found that they have the advantage of less competition,” writers Daniel Tonkovich and Emily Starbuck Crone wrote in the article. “Additionally, the study showed that home prices in January are typically the lowest they’ll be all year.”

The study stated that residential listing prices were on average 8.45 percent lower during the first part of the year than in June through August.

Let’s Make A Deal
Chris Harden, owner and broker of RE/MAX Four Corners in McKinney, TX and RE/MAX Prestige in Celina, TX, said that the best time to buy a house is going to be in the early part of the year between January and April. He said the interest rates are still low during this time of year but will continue to increase as buyers get closer to the summer time. Mortgage rates will also rise as the year goes on.

Harden noted that the number of buyers on the market is also down.

“That means that once a seller gets an offer, they’re more likely to negotiate because they don’t have as many buyers putting in offers,” Harden added. He said that now is the time for buyers to save money and get a better deal!

What Does This Mean for Brokers?
Real estate agents are always busy, even during the slower months. If you’re not showing houses, you’re business planning and focusing on other administrative or marketing tactics. Harden suggests planning your business for the year ahead.

“Right now is always a great time to start planting seeds for future leads,” Harden said.

He said agents should start contacting clients now and ask, “Are you still interested in buying a house?” in order to draw in responses you may not get otherwise. Harden added that it’s better to call, text, or leave a video message to potential clients looking to buy. He said to avoid email messages.

So, whatever you find yourself focusing on this New Year, all of us at First Western/International Title truly hope you find new business and meet your goals for 2018.

 

Questions or Comments? Email shannonw@firstwesterntitle.com