You’ve always dreamt of owning your own home. You’ve thought about it, imagined it, and now you’re seriously considering it. At this point, you may have started to research homebuying and there’s a good chance once or twice, you’ve felt like the goal of buying the home of your dreams is out of reach.
That’s where Homebridge comes in! We’re on a mission to make the homebuying process easy and transparent, ultimately making the dream of homeownership a reality for every customer, every day. So let’s get back on track with your dream and answer some of the questions that might have come up during your research.
Don’t Let These Homebuying Myths Stop You
With a combination of steadily rising home prices, large amounts of student loan debt, and various other factors – a lot of people immediately write off homeownership. While these factors can be intimidating, they don’t have to stop you from getting the home you want.
We’ve created the video below to bust some of the more common homebuying myths, including needing to put 20% down or having an excellent credit score to purchase a home.
Hopefully, that video helped ease some of your concerns, but the biggest takeaway should be that there are tons of options available to make homebuying more accessible for the everyday American.
Your Options for Financing a Home
Our clients come from all backgrounds and all walks of life, which is why we understand there isn’t a one size fits all mortgage option. We pride ourselves on our ability to understand your specific needs and craft a mortgage that works best for you and your family. That said, there a ton of financing options to get you into your first home!
One of our most popular loan programs is a Federal Housing Administration (FHA) Loan. This is a loan that is reinsured by the FHA requiring little down payment to purchase the home and tends to be a good option for people with less cash on hand to close. In 2018 alone, we had over 7,000 Homebridge customers use an FHA loan to help them meet their homebuying dreams.
If you live in a rural area or are looking to move to one, Homebridge offers United States Department of Agriculture (USDA) Loans. These loans require zero down payment and have lower interest rates than most loans. In 2018, over 340 Homebridge customers used a USDA loan to purchase their home.
Throughout the years of owning a home, you may find that you’ll want to “spruce up” the place a bit. Maybe the kitchen needs to be redone, the roof needs replacing, or the exterior needs a new coat of paint. This calls for home renovation, sometimes with a loan. As the nation’s leader in helping people get financing to improve their homes, we helped 834 people secure a renovation loan in 2018.
These are just a few of the hundreds of loan possibilities we have at Homebridge. While we’re confident in guiding your home financing process in a positive light, the big question you should be asking yourself is How much home CAN I afford?
“How Much House Can I Afford?”
When applying for a mortgage loan, your unique composition of qualifying factors will affect the price ranges of homes you can afford. Here are some questions to ask yourself prior to starting the homebuying process:
- How much money can I pay per month towards a mortgage?
- How much money do I have towards a down payment?
- What are my current debts? How easily can I pay them off or get rid of them?
- How will a mortgage affect my current lifestyle?
These questions will spark a great conversation with your Mortgage Loan Originator and help them paint a picture as to how much home you can afford.
Factors That Will Affect Your Home Affordability
When you connect with your MLO, they will have an initial conversation with you around your goals and dreams for homeownership. Ultimately, looking to give you a better idea of your mortgage eligibility. They’re taking into consideration your:
- Ultimate goal and potential plans for this next chapter in your life
- Credit score
- Current income
- Down payment funds
While this pre-qualifying conversation will give you a price range to shop in, to feel more confident we highly recommend getting Pre-Approved. Click here to learn more about the differences between getting Pre-qualified and Pre-approved!
Factors That Will Affect Your Monthly Mortgage Payment
In understanding how attainable homeownership can be, it’s important to understand what factors impact your monthly mortgage payment.
- Your Credit Score
As working adults, we all know why a credit score is important. When it comes to your mortgage payment, however, it might just be the most important factor.
Your credit score is a numerical rating with 300 being the lowest and 850 being the highest. It’s based on certain factors (not limited to):
- Your ability to pay bills on time
- Number of open accounts
- The credit you carry from month to month
Your credit score impacts your monthly mortgage payment as it has a direct impact on the interest rate you qualify for.
- Your Current Income
It’s our job to ensure we’re thinking about your financial wellbeing. Which is why your current income is a big factor that plays into your monthly mortgage payment. Not only do we want to ensure your mortgage will set you up for long term financial wellness, your income can determine loan programs that are better suited for your needs.
For instance, if you’re a contractor, freelancer, or other self-employed professional, your income may fluctuate from month to month, and while does not disqualify you from a mortgage (we actually have some great options for self-employed customers), it may affect your options.
- Your Current Amount of Debts
Financing a new car or purchasing a big-ticket item with your credit card is not doing you any favors when it comes time to afford a new home. We actually advise against taking on any new debt as you begin your homebuying journey. The more debt you have relative to your income, the lower your credit score will be. With a lower credit score, lenders will charge you a higher interest rate, bumping up your monthly mortgage payment.
- Your Money for Down Payment
The money you have available as a down payment directly impacts your monthly mortgage payment as it can lessen your overall loan amount. While the days of needing to put 20% down for a home are behind us, it’s still a vital part of the home financing process.
As a first-time homebuyer it’s essential to understand that the down payment of your home can come from savings, liquefying assets, and gifts from your family! There are many mortgage programs available today where you can purchase your home with as little as 3% down.
Discussing your down payment with your MLO is essential as they will be able to provide specific programs based on your unique situation.
How Do I Know How Much I am Comfortable Paying Monthly?
We encourage you to use our handy Homebridge Mortgage Assessment Calculator to determine how a mortgage payment will fit into your budget.
Again, every circumstance will be different and your MLO will help you assess a monthly mortgage payment that works for you so you can find a home within your reach.
We believe every buyer has the right to be well-prepared to buy their first home. Beyond that, there some other factors that may factor into your costs for a home.
Hidden Costs in Buying a Home
Beyond the hard, fixed costs of buying a mortgage, there are other costs that some homeowners overlook.
The bigger your house is, the more it will cost in utilities. Some states pay higher premium for utilities. To get an idea of what you might pay, check out: Which States Pay the Most Cost in Utilities?
When you own a home, if something is broken, it’s up to you to fix it. To be on the safe side, you should factor in more maintenance costs over the lifetime of your home.
- Homeowners Association Fees
Homeowners Association (HOA) is an organization that enforces rules in planned communities or condominiums. There is usually a fee paid to this organization to ensure that general processes (trash collection, lawn care, pest control, general regulatory guidelines) are enforced.
- Closing Costs
Closing costs will often be between 2-5% of the home purchase price. Here’s what’s bundled up in these costs:
- Lender fee (the processing fee on your loan)
- Appraisal fee (the cost of a professional to evaluate the home)
- Title/attorney fee (the costs related to the sale of the property)
- Escrow fee (the cost to hold the money we lend for the sale of the property in a neutral trust)
- Prorated interest (the interest that builds between the closing date and the first mortgage payment)
- Lifestyle Costs
Probably the most intangible and overlooked cost is the general impact on your lifestyle when you purchase a home. Your entire lifestyle will most likely change.
Whether your new home is further or closer to your place of work, or your family is growing, these lifestyles costs will be part of your transition to your new home. Not to mention, the furniture and décor you may be envisioning for your new space!
Despite the hurdles and obstacles that can get in the way, buying a home is an achievable goal for most Americans.
If you’re ready to start your homebuying process, don’t hesitate to reach out to your MLO to discuss your next steps! ! If you’re not currently working with a Homebridge MLO please fill out this form and we’ll have one contact you shortly!