So you’ve made the decision to purchase a home! Although some people start looking at houses without knowing what they can afford, the first step if you are serious about buying a home is getting prequalified. You don’t want to waste your own time looking at houses you can’t afford, so here are some steps in your home buying procedure:
1. Find a buyer’s agent that fits you well. Agents are all different, specializing in different areas or different expertise. It all depends what type of house you are buying, and where. You don’t want an agent who specializes in short sale / foreclosed houses in the urban core to help you find a house in Johnson County, they just don’t know the inventory of houses.
2. Ask your agent which lender they use to get their clients prequalified. (If they don’t have one, find another agent.) I have two lenders which I refer my clients to, depending on my their condition. All lenders have different loan programs, and some offer credit repair if they need it. Knowing which lender to use for each client will help the process move much quicker.
3. Work with the lender to find your credit score and your debt – to – income ratio. These two factors determine how much you can afford.
4. Determine how much down payment you can afford. Conventional loans have a lower interest rate, but have a higher down payment, typically 10-20%. An FHA loan has a higher interest rate, but much lower down payment, about 3.5%. Also ask your lender and agent if there are any special programs that help with down payment assistance, and if they qualify for it. In Missouri, there is the MHDC down payment assistant program that helps pay for your down payment, and puts it into your loan, making you only pay for closing costs.
5. Thats it! Getting prequalified takes about an hour. Once you are prequalified, your agent can quickly narrow down your search with the price and other criteria you are looking for such as number of bedrooms and bathrooms, area, school district, square footage…etc.
If you are looking for a home and would like to get prequalified, please contact me, and I can refer you to one of the quickest and prudent lenders in the Kansas City area!
A common myth about buying a home is that you need 20% down to buy a home. This scares some people away from ever buying a home. The simple answer is NO, you don’t need a 20% down payment in order to get a home loan. In this post, I will clarify the 3 different types of loans and how little ‘cash to close’ you actually need.
1. Conventional Loan – A conventional loan is usually 80% of the price, meaning you have to put down 20%, but it’s not the only way. Conventional loans range from 80% – 90% of the sales price of the home. That percentage is also known as the LTV, or the ‘loan to value’ ratio. If your loan is a 80% loan, then you have a 80% LTV.
2. Federal Housing Administration (FHA) loan - The federally insured FHA loan has a range of 95% – 97.5% LTV, which means your down payment ranges from 3.5% – 5%! A FHA loan is very popular choice. Besides the obvious lower down payment, even people with bad credit or lower-income qualify. Check out there site and learn how good this deal really is!
3. Veterans Loan – If you’re a United States Veteran, Then you qualify for a VA loan. The Department of Veteran Affairs has a 100% LTV ratio, which means there is no down payment. Yes you read that correctly, this is one of the greatest perks of fighting for our country, come home safely and you’re qualified for a home loan with no down payment!
Check this link out. It has various mortgage calculators, amortization charts, and a ‘rent vs. buy’ calculator. It’s a great resource, and is easy to plug in the numbers before you jump into your big purchase!