by Phillip B. Burum, DR Horton,
President, Building Industry Association (BIA) Baldy View Chapter
Happy New Year! If you are considering purchasing a home in 2019, here are some of the most important first steps you should consider.
Start by calculating out what you can afford to pay on a monthly basis. Remember that, in addition to the monthly principal and interest, you will also pay into escrows for property taxes, hazard insurance and possibly a home owners' (HOA) or condominium association assessment. Once you have determined how much you can afford, hold firm with that number and don’t be tempted to agree to an amount higher than what you are comfortable spending.
Purchasing a home is a major financial investment, so visit www.nahb.org/en/consumers/home-buying/homebuying-dictionary.aspx for an in-depth glossary of all the legal and financial terms you will encounter. This site is provided by the National Association of Home Builders (NAHB) which also offers a wide range of useful easy-to-understand information for homebuyers and homeowners on their www.nahb.org site.
People put a lot of extra pressure on their credit cards during the holidays, so start by paying down your debts, because debt limits how much you qualify for from a lender. Lenders want to see a total debt service ratio that is less than 40 percent of your monthly income.
Attend a first-time home buying seminar or talk to a credit counselor who does not work for a lender. This allows you to research your options without being influenced by someone who has a financial interest in the home or loan you choose. The U.S. Department of Housing and Urban Development (HUD) offers free housing counseling and seminars. Visit their website at www.hud.gov on the web including Common Questions from First-time Homebuyers, which provides additional resources for first-time buyers, including special financing options and HUD programs.
Likewise, make sure you understand the Settlement or ‘closing’ process. Settlement is a meeting to sign documents which transfers property from a seller to a buyer. Closing costs are charges paid at settlement for obtaining a mortgage loan and transferring real estate title. This process can be complex, so there are many sources that can help you get prepared well before you step foot into a sales office, model home or open house such as the www.nahb.org/forconsumers website.
Decide which type of mortgage will work best for you - whether a fixed-rate (FRM) or adjustable rate mortgage (ARM). Remember that many homebuyers begin with an ARM and then move to an FRM. Visit your bank and some candidate lenders to better understand the loan choices that are available to you. Mortgage calculators are a great way to figure out what your monthly payments would be based on interest rates and down payment amounts. Calculators can be found on many real estate-focused websites such as www.bankrate.com.
Once you’ve determined the most suitable lenders and loan opportunities, then get pre-approved for that loan. Once you know how much money you can borrow, you will know what price range you should look at and can move quickly if you are bidding on a house that has several interested buyers. A lender’s pre-approval is subject to a final verification of your credit and a satisfactory appraisal, but it’s a big step toward becoming a home owner.
The BIA Baldy View Chapter seeks to advance the opportunity to attain the American Dream of home ownership. For additional information on homebuying, home improvements, the benefits of homeownership or home safety or maintenance, visit our www.BIABUILD.com website and have a Happy 2019.