With home prices increasing, it's a little more difficult for first-time homeowner simply based on price. However, with so many options available, that doesn't mean you can't qualify for a mortgage loan. You just need to know what to plan for and what questions to ask.
Studies show that many potential homeowners believe they can't buy a house when, in fact, a strong possibility exists that they can. Close to 15% of people living in the United States state they would like to buy a home within the next few years but believe that it’s impossible from a financial perspective. Another 10% state they can afford a home but for other reasons, probably won't buy for a while.
Here are some myths:
In order to qualify for a house, you need 20% down
Lenders are required by law to provide you with the best possible rate for your loan
You can't qualify for a house if you've been with your current employer less than five years
Your credit must be perfect
Mortgage interest is not tax deductible These are just myths. Now for the truth:
More and more innovative mortgage packages are being created, offering the borrowers options between 3% and 5% down. Some lenders offer zero down, if you have excellent credit. For first-time buyers, it's in your best interest to do some serious comparison-shopping.
Every lender works with its own rates, based on their standards as well as the type of loan being considered. Rates change every day, so once you've made the decision to buy a house, check rates with more than one lender, and check on a daily basis.
Job stability is important, but the five-year rule is merely a myth. For example, if you have worked in public relations or some other industry for 10 years but have had three jobs in that time, because you've stayed within the same business, lenders will often consider this as continuous employment, especially if you've made advancements. In addition, solid credit and a larger down payment can compensate for work history in some instances.
It's true that credit is very important when qualifying for any loan. However, if you have been out of a bankruptcy for two years and can provide a good letter of explanation to the lender, it will usually be accepted. If your credit is in bad shape, consider a credit counseling service to help you get back on track. Generally, this can be done in as little as 12 to 18 months.
As you make financial comparisons between renting versus owning, be sure to consider tax deductions. When you buy a home, the closing costs, mortgage interest, and points are all tax deductible. The wisest moves a first-time homebuyer can make are conduct research and ask questions. Purchasing a house is never easy for anyone. However, interest rates are currently lower than they've been since the 1960's, so if you can buy a house, this is probably a great time. As a first-time homeowner, there are many questions you'll want to ask. It's easy to focus on the size of the rooms, the structure, and the lot, but there are other factors to consider - things you need every day to live.
Here are some examples:
Public transportation - If you depend on public transportation, check available options.
Aging parents - More and more families are taking care of elderly parents; therefore, you should think about special needs your parents might have as you look at houses.
Public safety - What is the crime rate in the area? How close are public services such as police, fire, and hospital?
Parking - Will there be any issues with parking? If the house you're interested in doesn't have a garage, does ample off-street parking exist?
Utilities - This is an important finance to review. Usually the seller can provide copies of the past few months, providing an idea of budget costs.
New communities - If the area you want is in an entirely new community, what recreational amenities are offered? Is there a clubhouse? Pool? Playground? Exercise facilities?
Property taxes - Some tax rules provide special benefits for veterans, elderly citizens, and even long- time residents. You should inquire what these benefits are and whom they cover. When you get to the point of being serious about buying a house, follow these steps to make the qualifying and purchase process as easy as possible:
Establish good credit habits and clean up any unfavorable reports
Start saving for down payment, closing costs, and any hidden expenses. Don't forget about utilities, moving expenses, and items needed for the home.
Research and read. Go to your local library and educate yourself about financial management and home buying.
Start looking at various areas where you might be interested in living. Visit some open houses and do some comparison-shopping.
Meet with a reputable real estate agent and start the preliminary process. Remember, there is no reason to be afraid or intimidated when it comes to buying a house. The main concern expressed by young couples is that they aren't sure where to begin. There is also the fear of rejection, when in reality: their credit situation isn’t as bad as they believe.
Home buying has become increasingly easier thanks to the Internet. Years ago, people hated the one-on-one approach of determining if they qualified for a loan. The Internet has made it much easier where people to check out various lenders, obtain information, and be notified online as to whether or not they qualify.
In addition, mortgage advice is readily available. Whatever questions you have can easily be asked from the privacy of your own home. Responses are accurate, thorough, and always confidential.
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