What First-Timers Should Know
Make Your First Stop Your Loan Officer By Therese A. Hartmann
I’m meeting with a couple at noon today to run through my version of Homebuying 101 and to answer questions and alleviate concerns. In most cases, the client(s) have no idea of what they can afford and whether they will qualify for a loan. Mostly, clients seem to underestimate their buying power. In the midst of higher interest rates, they are typically happily surprised that they can become a homeowner. Just as true, there are times where I advise a client to wait a while and, in those cases, I give them a plan to follow. This usually will require them to pay off debt and save for a larger down payment and/or clear up some issues on a credit report. While there are many “creative” ways of putting a client into position to buy a home, it’s more important to have them understand what it will take to do so without having them incur financial stress in their lives. In that instance, owning a home would be a burden and likely would cause chaos. Patience and a clear objective are the best panacea and give the potential homeowner an opportunity to educate themselves while getting in financial fitness to move ahead. First-time home buyers usually have questions that revolve on how much they can afford, what the down payment should be and if there are any perks for buying their first home. So let me quickly cover some of these issues: n Affordability — how much you can afford is based on your usable income, less liabilities and then what the new debt to include principal and interest, property taxes and insurance. Calculations are based on a percentage and total debt typically should be between 36-49% of income. 28
Therese A. Hartmann has more than 20 years’ lending experience. She is a Licensed Broker, California Dept. of Real Estate #01048403, NMLS # 298291, affiliated with C2 Financial Corporation. For a free consultation, call Therese today at (805) 798-2158. n Down Payment — With an FHA loan, you would only need to come in with 3.5 percent but then you will have an up-front mortgage insurance fee charged and monthly mortgage insurance as well. On conventional loan, anything less than 20 percent down will require a mortgage insurance premium tagged on to your payment. This is why we generally push clients to come in with this amount and many times, a family member is willing to invest in their future and gift them the difference between what has been saved and the 20% down n Credit Score – I can’t tell you how many times someone will tout their high credit score as the reason they should be approved for a loan. Of course, it’s only one aspect of qualifying but is very important. The lender will look at all
OM — February 2023
three bureaus and the middle score is the one that defines your standing. Anything over 720 is considered the best and while you can qualify for an FHA with less, it’s always good to have options. There are ways to pop your score up and generally it doesn’t take much time to get into a better position. You can pull your own credit report but generally it’s a good policy to have a loan consultant run it for you and explain the remarks and, as needed, help you raise your score. n Buying The Right Home — real estate agents are a great resource for helping you find a started home that you can grow into without it being a total fixer. A loan consultant can also help you by providing a property profile. I often do this for my clients and we find out many things about a home, good and bad. I can’t tell you how often this has made the difference in someone feeling confident enough to move forward. The better educated the buyer, the better it is for everyone. n First-time Homebuyer Advantages — there are, with many lenders, some exclusive offers that will benefit a first-time buyer. These have to do with relaxed fees, special programs and incentives like free appraisals in some cases. With over 45 percent of the homebuyers being first-timers, it’s important to make sure that the financing part is clear before heading out to shop. You don’t have to do it alone, that’s why loan consultants are available at no charge. We work on your behalf, not the sellers, to make sure your best interest is at the forefront as you purchase a home. We are always only a phone call away!