PLAN NOW FOR A SPRING HOME PURCHASE
Chilly weather has finally arrived in the Chattanooga area, so you might not be thinking about springtime just yet. But now the perfect time to make plans for a home purchase in spring. If you are a firsttime home buyer, finding a home can be an exciting — yet, daunting — experience. Before deciding on a location, finding a realtor or making an offer, you must line up your finances and become more familiar with the various loan options. To help you understand the home buying process, here are a few initial steps to take.
Learn about the Home Buying Process
If you’re not familiar with home buying terminology, types of transactions or how to begin the process, consider attending a first-time home buyer seminar. The U.S. Department of Housing and Urban Development (HUD) maintains a list of home buying resources by state, and it includes these home buying seminars. Another option is to talk to a credit counselor. You want to make sure the counselor does not work directly with a lender in order to avoid being influenced by someone who has financial interest in the loan you choose.
Set up a Savings Goal
The conventional route for buyers is to save 20 percent for a mortgage down payment. But there are many other options you can consider as well. The amount needed for a down payment can depend on the type of loan and a lender’s requirements. Federal agencies such as the Federal Housing Administration and the Veterans Administration require smaller down payments. You will need to research the agencies to determine qualification requirements and payment options.
Evaluate Your Budget
Take time to learn where you’re currently spending your money
and if you can save more. Establishing a timeline can be helpful in determining your savings plan. Do you want to purchase a home in six months, a year or more? Reducing your spending, increasing your income or both can help you reach your down payment goal faster.
Pay Down Your Debts
Lenders look at how much of your monthly income is devoted to debt payments, also known as your debt-to-income ratio. In short, lenders want to know if you can pay back a loan and prefer to offer mortgages to individuals with a low debt-to-income ratio. Credit card debt will directly impact the size of the loan for which you qualify.
Calculate Your Monthly Payment
The monthly payment your make on your home is more than principal and interest. Additional costs can include escrow for property taxes, insurance or a homeowners’ or condominium fee. Especially when trying to purchase your first home, you want to make sure the total monthly payment is feasible and that you can still live comfortably. Most real estate websites offer a mortgage calculator to help you figure out the complete picture of your monthly payment amounts.
Select a Lender and Get Pre-Approved
If you are pre-approved for a mortgage, you may have an edge over other prospective buyers when you’re ready to place a bid on a home. This step will signal to sellers that you are a serious buyer and your financial profile has already been thoroughly vetted. Visit and research several lenders to understand what loan options are available for you.
To find a realtor or a qualified contractor to help you build a new home that is right for you, visit the Home Builders Association of Greater Chattanooga at www.HBAGC.net.