the ultimate buyers guide

Transcription

1 the ultimate buyers guide

2 Your Helping Hand Through the home buying process Buying a home will be one of the most significant purchases made in your entire life. It is a process that you must begin with ALL of the steps to get to the end in mind. As with any other investment, there are steps that you must work through to make sure that your home buying process goes This guide will help you make sure that you are READY to take the next FINANCIAL steps to homeownership.

3 BE FINANCIALLY READY part 1 Address your Credit HEAD ON Millions of people across the US are impacted every day by their credit score. What is this exactly? Your Credit Score is a number generated by any of the 3 Credit Reporting Agencies (TransUnion, Equifax, Experian) to represent you through all of your past credit based actions. These agencies use the data to generate a number, that help lenders determine your creditworthiness. When it comes to buying a home, that the number can dramatically impact not only your ability to get that loan, but also the interest rate you can expect to see. A low credit score can even lead to extra down payment requirements, or even fees paid at closing. If you know that there are items on your credit affecting your total score, the best time to start working on it is RIGHT NOW. How do you do that? The next page headlines our best tips to facing your credit head on.

4 BE FINANCIALLY READY part 2 Pull a comprehensive credit report.-- You are allowed 1 free report per year from each of the 3 reporting agencies every 12 months. Use for your free report. Ensure that your report is up to date and accurate, then compare across all 3 reports for accuracy as well. --check for old accounts, misreported information & closed accounts. If you find items on any of our reports that you would like to dispute, you can send letters to the credit report agencies individually to dispute your report. Find a sample credit report dispute letter here: Stop any requests for new credit (Credit cards, loans, refinancing etc) 1 year before you plan to buy. Do not be tempted to constantly pull credit reports, as each request can actually HARM your score. 2 reports a year MAX. Be patient, but be diligent. It can take some time to repair your credit, but your hard work will pay off when you move in to your new home!

5 how much house can i afford? part 1 When looking at buying a home, sometimes you should work backwards to move forward. You should approach a new home budget by starting with your income, and deciding what you can afford monthly. From there, you can start to get an idea of the total budget you can afford (and qualify for!!) There are 3 general rules that all lenders follow in helping you get into a home that you can afford every month. Here is a very basic explanation of those 3 rules, and a link to a handy Mortgage Calculator! Remember-- better to estimate with a higher APR, not a lower one!

6 how much house can i afford? part 2 Maximum mortgage payment/ Rule of 28 This GOLDEN RULE says that your monthly mortgage payment should not exceed 28% of your gross income (before taxes). So, Bob and Linda should not exceed $1,866 a month in mortgage payment. Maximum total housing payment/ Rule of 32 This rule builds from the last. It says that your TOTAL housing payments (Mortgage Homeowners Insurance + Private Mortgage Insurance + Association Fees + Taxes) should not exceed 32% of your monthly gross income. Bob and Linda s TOTAL housing payment cannot be more than $2,133 per month. Maximum Monthly Debt Payments/ Rule of 40 This last rule sates that the TOTAL of all of your payments on debts owed in one month (house + Car + Credit Cards + Student Loans) cannot exceed 40% of your monthly gross income. This rule means that if you have a lot of other debts, you will not be able to afford as much in mortgage payments as you could otherwise. Bob and Linda s total debts paid per month cannot exceed $2,667. So, if Bob and Linda have $500 a month in other debts that they pay, their monthly mortgage would be capped at $2.167.

7 how much house can i afford? part 3 We hope that you can use these rules to give you an idea of the budget that you should keep in mind when looking for your dream home! There is a LOT of other math involved in figuring the total amount that you can borrow, factoring in your down payment, mortgage term, home location, and your interest rate. There are many mortgage calculators available for you to use when you are playing with these numbers. Try this one:

8 building up your down payment 10 Strategies for developing savings quickly! You can implement some (or ALL) of these strategies TODAY, and find more money to put towards your new home every month! Transfer your credit card balances to a 0% interest card (700 credit or better has best success qualifying for these cards) Create a No-Spend Day, where you mindfully choose to NOT spend where you normally would through the course of your typical day. Adjust your W-4 withholdings and see an immediate increase in your monthly income. Cash in some of the free rewards you may have earned through your credit card companies, insurance company, wholesale club etc. Use these in place of things you would normally spend big on. Increase your insurance deductibles, resulting in a lower monthly payment. Tighten up your monthly budget, looking for places where you can choose to spend less. Fewer trips to your favorite restaurant or coffee shop now will result in you enjoying dinner and coffee in your NEW HOME, faster. Operate on a cash-only system, forcing you to pay attention to your spending Increase your income with side jobs, freelancing, second jobs etc to really maximize your savings potential in a short period of time. Save your family s change in ONE central location to encourage everyone to participate! Change adds up FAST! 10. Move your savings from your big bank to a High- Earning Savings Account with an online bank like Ally Bank, Discover Bank or Marcus by Goldman Sachs. THIS IS THE SECRET. Implement some (or all) of these strategies, and place the extra money you now have in THIS account, watch your money start to work for you FASTER!

9 discover your dream house. buy the home you love! The decision to purchase a new home is HUGE. There are TONS of things that you need to have in your mind when taking tours of prospective homes. How can you make sure that you are REALLY ready? How can you make sure that you are focusing your time and resources looking only at homes that suit your needs and lifestyle? It all starts with making sure that YOU know what you want before you start booking showings and attending open houses. Use the checklist on the following page as a starting point to nail down exactly what you need in your new home and neighborhood!

10 homebuying checklist Life Factors: Are you planning on any family changes while living in your new home? House? Cabin? Condo? What suits your lifestyle? Does your lifestyle mesh in a community with a HOA? Can you commit to 5 years in this property? What is your budget range? Are you willing to stick to it? Do you want it to generate income for you? How much property do you desire? How large/ small of a lot? Other Considerations: Home Basics: #beds/ # bath Square footage layout/ floor plan Multi story? Basement? Move-in ready? How old/ new of a home do you want? Do you want to build? Willing to make cosmetic repairs/ updates? Do you want a porch? Deck? Sunroom? Do you want a garage? How many stalls? Shed? Outbuilding? Do you want an existing pool or hot tub? What Zip code/ neighborhood do you want to live in? Is noise a factor in selecting property? Is it in a good location? (busy street? Large intersection nearby? Close to Shopping and Schools?) What School considerations are you taking into consideration? How far of a commute are you willing to make (if that is a factor)?

11 Where is Buying is cheaper than Renting? According to the most recent Rent vs Buy Report from Trulia, homeownership is still substantially cheaper than renting. This was based on 30 year fixed mortgages in the 100 largest metro areas across the country. When you look at renting vs. owning at the state level, it was concluded that in 39 states, it is a lot cheaper. Why is this? Well, interest rates have remained at or near record lows, staying right around 4%, according to Freddie Mac. In fact, if the trend were to somehow reverse, mortgage rates would need to increase to 9.1% What is the bottom line here? Well, Buying just makes sense. If you are a renter who is ready to take action and evaluate your buying ability, I want to meet you and help you find that perfect home!

12 perks of ownership it makes sense in more ways than one Owning a home that is gaining equity is a built in savings plan for you and your family. You will be able to use this equity down the road for home repairs, college, even business capital. Renters are earning this equity on behalf of their landlord, making them more money over the long term. Qualify for new Tax Savings by owning a home. Your taxes, mortgage and an profits from sale of the home may be deductible on your taxes. Lock in your monthly housing costs for the next 5, 15 or 30 years using a fixed rate mortgage. Your home value will rise over time with inflation, your monthly costs will not. Buying is cheaper than renting. Trulia says that it is now 37.4% less expensive to buy than it is to rent, varying from location to location. You literally live inside of your investment. Any other type of investment still leaves you needing a place to live and raise your family. Your home will allow you the peace of mind knowing that it is gaining value while you live your life within it!

13 Surprising Trend in First Time Home Ownership Finally, it is becoming more and more apparent that Home Ownership IS DEFINITELY part of the Millennial American Dream. Let s look at some statistics from the National Association of Realtors that can help YOU see YOURSELF as the next potential Homeowner in your new neighborhood! % of Buyers Median Age All First time Home Buyers Married Couples Single Females Unmarried Couples Single Males Other 100% 57% 18% 16% 7% 2%

14 the ultimate buyers guide