Homeownership

The American Dream

Purchasing a home is one of the biggest and most rewarding decisions we’ll make in our life. “Home is where the heart is”, and the majority of our best memories with our family occurs within our home. From playing basketball in the driveway, football in the backyard, game night in the family room, Sunday dinners in the kitchen, and parties for the holidays; all are timeless memories made at home.

As you can see above, owning your home goes well beyond the financial benefits. However, EQUITY is at the top of the list of reasons to own your home. Let’s explore:

1. Lower payments

a. Owning your home with result in lower monthly payments than renting

2. Equity

a. Monthly payments are investments to reduce your current balance and builds equity in your home. Equity is the difference between what your home is worth (-) your outstanding balance.

3. Tax benefits

a. Mortgage interest is deductible, as is interest on home equity loans, property taxes and some closing costs when buying a home

4. Long term investment

a. Typically houses appreciate in value over time (if well kept). Key factors are neighborhood, school rating and local taxes. Homes generally appreciate overtime.

5. Forced Savings

a. A portion of your payment each month will go to the principal of the loan. This shouldn’t be considered a cost but a savings plan. You’re just paying yourself by building equity. This will be extremely useful when you’re ready to retire.

The homebuying process can be daunting and there’s a lot of bad information being shared throughout the web. We’re here to help demystify the process.

Things to consider prior to looking for a home

1. Credit

2. Savings

3. Budget (what can you afford)

4. Realtor

5. Bank

6. Neighborhood

7. Schools

8. Lifestyle

9. Home type

10. Buying process

The Process

Credit should be your top priority during this process. FHA requires a minimum score of 580 to qualify for a loan with 3.5% down. Scores below 580 can be approved with a minimum down payment of 10%. We strongly encourage higher “middle” scores to ensure the lowest rate & payment. A 760 FICO will yield the lowest available rate. During the home buying process, the mortgage company will take the middle FICO score. Your highest and lowest scores will not be considered. There are several tips and guidelines to follow prior to searching. A customized plan based on your goals and timeline will be created and shared upon enrolling in our program.

“What can I afford???” is the next step in “the process” to purchasing your home. Your DTI (debt to income) comes into play during this step and will be heavily considered by your lender. Generally, 40% and below is acceptable for approval. Determine what you’re comfortable investing monthly (mortgages are an investment) and discuss your financial plans with your lender of choice. Once you find a loan that fits your needs, get a “pre-approval” from your lender and start the search for your new home.

Where and how to search??? We strongly recommend hiring a real estate agent to assist in finding your home. Although rewarding, home buying is a stressful process and having the right agent can alleviate stress by navigating you around common mistakes. Agents also provide value by:

A. Finding homes prior to hitting the market

B. Knowing what to look for that’s easily missed by buyers

C. Understanding local markets

D. Coordinating showings

E. Negotiating purchasing price

F. Drafting purchasing contracts

G. Coordinating inspections, real estate attorneys, and other professions needed

H. Assisting you during the entire process

The mortgage process??? The rollercoaster of getting pre-approved and receiving a clear to close is daunting. You typically have 45 to 60 days to fulfill your purchase contract, so time is of the essence. Within three days of submitting your application, your lender sends you a loan estimate, including your approximate interest rate, monthly payment and closing costs. Please prepare bank statements, pay stubs, and all other financial documents you’ve listed as income.

Time to close!!! Bring a pen and a relaxed hand. You’re going to sign a lot of documents! After your mortgage is approved you’re going to receive a closing disclosure from the bank. It’ll list fees you must pay (closing cost) prior to taking the keys. Read these documents carefully as it’s your responsibility to note any errors. Bring all documents, ID and anything noted from the title company. Once the all documents are signed and monies disbursed, congrats you’re officially a homeowner.