The American Dream is becoming a reality for more families than ever before. According to the U.S. Department of Housing and Urban Development (www.hud.gov) over 67.7 percent of Americans are now homeowners. This is the highest level of homeownership ever.
Buying your first home can be very scary; however, like with most things in life, with good preparation you will have a good experience and good results. Whether you are ready to make that decision now, or if you are considering a home, there are certain things you can do to prepare yourself.
Ask Yourself If You Are Ready.
You need to decide if you are truly ready to take on the responsibility of owning your own home. Here are some questions you can ask yourself.
Do you have a steady job and steady income?
Do you plan on staying in the area for more than a few years?Are you currently able to handle your debts, including your rent?Do you have an emergency fund?
Owning a home is not like renting. Generally, when you purchase a home you have decided to stay there for more than a few years. You need to feel comfortable that you will be able to make the mortgage payment, and that your job and your income will remain constant. Most likely, if you are able to pay your current bills, including your rent, you will be able to also make your mortgage payments.
Know Your Credit
When it comes time to purchase your first home, lenders will make their decision to lend based, in part, on your credit report. This is a report of your past and current obligations and how well you pay them. Under the Fair and Accurate Credit Transactions Act you are entitled to your credit report from each of the three nationwide consumer credit companies. You can access this information at one central location at Annual Credit Report.com (www.annualcreditreport.com). You can also access the information separately from TransUnion (www.transunion.com) 800-916-8800, Experian (www.experian.com) 888-524-3666 and Equifax (www.equifax.com) 800-685-1111.
Once you have reviewed the information, you will have a better understanding of what a lender will be looking at as they decide on your ability to repay a mortgage loan. If you find that you have had credit problems in your past, now would be the time to contact your creditors and try to resolve the items. If you find your credit report has some inaccurate information, now would be the time to take the steps to correct it.
Since you do not currently own a home, lenders often have to examine how you pay other major obligations. A major one, of course, would be your rent. If you are not currently paying your rent by check or money order, you need to start doing so. Most lenders will want to see that you pay your rent in a timely manner. If you pay your rent on time, there is a good chance you will also pay your mortgage payment. Due to mortgage fraud, lenders are less likely to accept rent receipts than they would cancelled checks or money order receipts. Paying your rent on time, and being able to prove it may be the difference of owning a home in your future or being a renter.
Be Prepared Financially
It is said that knowledge opens doors. Knowing your own financial situation certainly can open the door for you when it comes to buying a home. Before you even worry about talking with a realtor or mortgage company, you need to know what you can afford. You should start with a budget. Take the time to list all your expenses and come up with a plan on how you can make your mortgage payment.
If you do not currently have a bank account you need to open one. It really does not matter whether it be a checking or savings account. Lenders like to see that you have established an “emergency fund?also known as “reserves? If you need to, start small, but start a bank account. Once you are approved for a mortgage loan, many lenders offer electronic withdrawal of your house payment. This is a nice way to make certain your credit always remains good by having the mortgage company take the money right from your account.
Find Out What You Can Afford
Once you know your budget and what you feel you can afford, now would be the time to consult a mortgage company that can pre-qualify you. What this means is that someone will review your credit report and information such as your income and give you a price range and down payment needs. This is not an approval, but gives you an idea of what you can afford.
There are many mortgage loan programs available today. Some have options where you would need no down payment. There are many first time buyer programs where you would need to put as little as 5 percent of the purchase price as your down payment. According to the U.S. Department of Housing and Urban Development more than 81 percent of FHA-insured loans were for first time homebuyers.
With this information, you can now begin to save the money you will need to purchase your home, or in some cases, know what credit items you need to address in order for you to qualify in the future.
Work With The Right Professional
As a first time homebuyer you have certain needs. It makes sense to find a mortgage company, whether it is a bank, mortgage banker or mortgage broker, who understands your needs. The same holds true for your real estate agent and attorney. Finding the right team of professionals increases your ability to structure your purchase to your advantage. Lenders who work with first-time home buyers know of programs that best fit your needs. Attorneys can provide you guidance through all the legal documents and a real estate agent can work with you to find the right home for you.Working with professionals who are not prepared to meet your needs as a first-time home buyer could place you in a loan that really doesn’t fit your needs or a home that wasn’t exactly what you were seeking. Once you find the right team of professionals to help you, home ownership can become more than a dream ?it can become your reality.
Jim Campanella is the Operations Manager of Fresh Start Financial Services, a mortgage broker in Rolling Meadows, IL.
Since 1989, Jim has been active in State and National professional associations/trade organizations in the mortgage industry. in 2004, Jim Campanella was recognised by the Illinois Association of Mortgage Brokers as the Mortgage Broker Operations Manager of the Year. He has spoken on a range of mortgage related topics from coast to coast.
Fresh Start Financial Services is a licensed mortgage broker in the States of IA, IL and WI and originates loans also in CO, IN and MO. In 2003, the Illinois Association of Mortgage Brokers recognised the mortgage broker as the Subprime Mortgage Broker of the Year.
Jim and his family makes their home in Rockton, IL.