Articles Tagged "Financing"

With the rising prices in the housing market skyrocketing over the last couple of years, potential homeowners have often lost hope in achieving their goals. If that includes you, don't give up now. Financial indicators point to the very real possibility of significant price drops in 2023, once again opening the door to your home purchase. Our real estate agents want to help you make sure your finances are in order by sharing these five focal points for your consideration.

• Safeguard Your Savings
  Now is not the time for extravagant purchases. Your available cash must be sufficient to cover the down payment, pay for inspections and closing costs, and cover moving expenses. Remember, the higher the down payment, the lower the amount you will be required to finance and, subsequently, the lower your monthly payment. 
  
  
• Clean Up Your Credit Report
  While credit cards often provide a monthly score to their holders, most Americans are in the dark about how the process works, the errors that can damage their credit score, and how they can repair it. A credit report is a guide to lenders as to the creditworthiness of the borrower. It records the individual's debt and payment status and history. From those facts, the reporting bureau assigns a score. If those facts are incorrect, the impact on the score can be negatively affected without merit.
  
  For this reason, the Federal Government passed the Fair Credit Reporting Act in 1970. It guarantees the creditor a free report from each bureau once a year via the website Annualcreditreport.com. This is the only authorized website, although plenty of pretenders can recommend actions that will damage your credit. Don't fall for their offers to clean up your score quickly. If you need assistance understanding the report, contact a credit counseling agency approved by the Department of Justice, which will provide free counseling, including specialized programs for first-time homebuyers. 
  
  
• Increase Your Credit Score
  In addition to correcting erroneous information on your credit report, you must also address the financial habits that affect your creditworthiness. Pay all of your bills on time, every time. A forgotten purchase on a seldom-used card can make your score plummet. You can avoid the issue by setting up each card to draw a minimum payment each month. Your bank won't forget to make your payment even if you do.
  
  
• Lower Your Debt Level
  Following your payment history, your debt load is the next greatest factor in determining your credit score. A healthy debt-to-income ratio is 15% or less, while 20% or higher is considered a red flag to creditors. The only ways to reduce your debt load are to pay down your current obligations and avoid incurring any more. It may be tempting to use a credit card to avoid dipping into your savings. But when you're planning a home purchase, the debt load is critical to the viability of the loan. Use cash when you must and avoid the purchase when you can. Put off large purchases such as new vehicles or furniture until after you buy your home.
  
  
• Seek Loan Preapproval
  Before you shop for North Canton homes for sale or Akron homes for sale, shop for a lender. By doing so, you will learn how much you can spend on a house and how much you will need for a down payment. Compare rates and terms to find the best deal for you. 

Whether you're at the beginning of the process or ready to buy, contact us to help you with your next steps toward homeownership. 

How big should your down payment be?

When home prices rise, so do the down payments required to purchase those homes. This has long posed a roadblock for many would-be first-time homebuyers. But it doesn't have to be the case.

Our real estate agents share everything you need to know about making a down payment on a home.

Down Payments: How They Work, How Much to Pay

A down payment is simply the part of the home's purchase price you pay upfront. It might be the biggest check you ever write in your life, and the amount you pay could impact your finances for years, if not decades.

Contrary to conventional wisdom, you don't have to put 20 percent down on a house. There's no law or rule for a universal minimum down payment. The amount you should put down is a personal decision that depends on what's best for your finances. Lenders require homebuyers to make a down payment for most mortgages. For instance, the amount is usually 3% of the home's price for conventional mortgages.

On that note, most lenders will require a down payment of 20 percent to avoid paying private mortgage insurance (PMI)—in case you're wondering where the 20 percent number comes from. Far from most types of insurance, this legally binding document protects the lender's vested interest in the home, not the homeowner.

When you make a down payment of less than 20 percent, your mortgage loan-to-value (LTV) ratio is over 80 percent. As such, you present a higher risk profile to the lender, which necessitates purchasing private mortgage insurance to offset this risk. PMI will increase your monthly mortgage costs until you have accumulated enough equity in the home that the lender no longer considers you high risk. So, there are advantages to making a larger down payment.

Another advantage is lower interest rates. A solid down payment may signify that you're less likely to default on your loan, which may prompt lenders to reduce your mortgage interest rate. Even saving a fraction of a percent on your interest rate could save you thousands of dollars over the life of your loan. Still, your overall interest will depend on factors other than your down payment, such as credit scores, home price, and loan term.

Down Payment Requirements by Loan Type

As mentioned, down payment requirements vary depending on the type of mortgage you qualify for. For instance, if you qualify for government loans, your down payment may be as low as zero.

There are several options for a mortgage with no or low down payment:

1. Veterans Affairs (VA) Loans
   The Department of Veterans Affairs partially guarantees these loans. VA loans typically have low down payment requirements, are more flexible in terms of credit score, and carry lower interest rates than conventional mortgage products. However, you must be a veteran, active-duty service member, member of the National Guard, reserve, or an eligible surviving spouse of a veteran to qualify.
   
   
2. FHA Loans
   Insured by the Federal Housing Association, these loans require a lower minimum down payment than many conventional loans. Many first-time buyers may find FHA loans the more affordable mortgage option.
   
   
3. USDA Loans
   The U.S. Department of Agriculture (USDA) provides zero-down homeownership opportunities to low- and moderate-income Americans. However, you must live or plan to live in an eligible rural area to qualify.

It's important to weigh your mortgage options before committing to a down payment amount. Even though a 20 percent down payment is ideal, you shouldn't fixate on it. The right amount depends on numerous factors, including how much you can comfortably afford. You don't want your down payment to be so large that it leaves you with too little savings.

Ready to Purchase Your First Home?

Our agents have the expertise and years of experience to guide you through the process. Contact us today to view North Canton homes for sale.

Before you peruse real estate listings or pick out curtains, there's one thing you need to check that's more important than anything on your list. That one thing is your credit score because it will determine your ability to qualify for a mortgage and the amount of money you'll pay over the life of that loan. What you find may surprise you, but our real estate agents know there are some things you can do to get those numbers up to where you can qualify for the most favorable loan terms and the best interest rates.

The average credit score in the United States is 711. That's considered "good" credit. Those with "very good" credit have scores between 740-799, and those with "exceptional" credit fall between 800-850. These three ranges will allow you to qualify for most loans, but the higher the score, the better the loan terms and the lower the lender's interest rates.

• Pay Down Your Credit Card Balances
  It would be best if you got your credit utilization rate down to the point that is far below the credit you have available. Anything above 30% can weigh heavily on your score. Ideally, you want to pay your credit cards down to zero to not waste money each month on interest charges. The exception to this is any 0% interest cards you can pay off at your leisure, but even those should not be higher than 30% of your credit limit.
  
  
• Keep Accounts Open
  Don't close credit accounts! It seems counterintuitive, but the length of credit history accounts for 15% of your score. The longer the history, the better it is for your score. Further, be sure to use old credit cards periodically. Many issuers will close dormant accounts, so spend a few dollars on each card every year to keep them active. 
  
  
• ... But Don't Open Accounts
  Credit inquiries can lower your score, so you want to avoid opening any new accounts prior to purchasing Akron homes for sale or other properties. Unless it's an absolute necessity, focus on paying down balances and paying off installment debt. This will also help to improve your debt-to-income ratio, which is another crucial number lenders will examine.
  
  
• Make Your Payments
  Payment history accounts for 35% of your score. Make sure that you pay existing mortgages, car loans, medical bills, etc., on time, every time. Once payments are missed, they can stay on your credit report for a very, very long time.
  
  
• Check Your Report for Errors
  An alarming number of credit reports have inaccurate information on them. Before exploring North Canton homes for sale, explore your credit report for mistakes made by creditors. If you do discover errors, file a dispute. The creditor then has 35 days to investigate and respond. If it is a true error, they have a legal obligation to remove the offending information.
  
  
• Be Ready to Negotiate
  Creditors don't want to hurt your credit; they want your money and the debts you owe them. Often, creditors will remove negative information from a credit report if you pay the debt early or adhere to an established payment plan. If you've found yourself in a bind, it never hurts to try negotiating a solution.

When your credit is in order, and you're ready to buy, contact us, and we'll help you find the home of your dreams. It's our pleasure to help guide you through the process and give you the reliable advice you need to secure the most favorable mortgage for your future home!