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.
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.
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.
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:
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.
It's always lovely when schedules line up perfectly. But, the reality is that when it comes to real estate transactions, there's likely to be a slight lag between the day you buy the home and the day you can move in. You may sell your home before you find a new home, may need to wait until the seller can move into their new home, or wait while the renovation company completes any necessary repairs or upgrades. Or, you may want to wait until you find the best deal on a house that fits within your budget. Our real estate agents know there are plenty of reasons you may need to rent a home, and we advise all clients to carefully think over the possibility of living in a short-term rental before moving into their new home.
We invite you to contact us to learn more about the best strategy for your specific situation. We're happy to answer your questions and help guide you in the right direction to move into your new home at a time and price that's most convenient for you.
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.
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!
The decision to buy a home is among the most important decisions you'll ever make. As with all big decisions, it isn't one you want to walk into blindly. Our real estate agents understand that it's perfectly normal to want to focus on finding your dream home. However, the largest and most important detail to take care of is the mortgage, and you should get the preapproval process out of the way before ever starting your search.
Preapproval is your ticket to comfortable homeownership. Unlike pre-qualification, the preapproval process is more in-depth and detailed. Your lender will thoroughly review your W2 statements, bank records, credit reports, tax records, employment records, etc. This is often referred to as the "4 C's" since the lender will look at your capacity to pay the mortgage, your credit, the capital/cash reserves you have access to, and the collateral you're putting down for the loan.
The lender will carefully calculate your total liabilities and financial capacity to take on more debt. At the end of the process, the lender will tell you precisely how much they are willing to lend you. This allows you to search with confidence, knowing what you can comfortably purchase in Akron or North Canton.
Further, you can obtain preapproval letters from multiple lenders. This is advisable because it allows you to shop for the best rates and loan terms. When you find the North Canton homes for sale that you want to make an offer on, you can buy with confidence, knowing that you can comfortably afford the mortgage obligation.
One of the most important reasons to secure a preapproval letter is that it can significantly reduce the amount of time it takes to find the ideal home. By removing homes outside of your budget, you can narrow down your search to listings within neighborhoods where you can settle in comfortably without having to stretch your budget to cover the mortgage.
It's a highly competitive market right now. In much of the country, the number of homes available is far less than the number of buyers in the market. While not guaranteed, this means you need to plan for "bidding wars" to erupt. When you are preapproved, you know precisely how much you can spend to get the home you want.
A preapproval letter also shows the seller that you can seal the deal without any problem. This gives you a slight edge over other buyers who submit bids without a preapproval. Sellers may be willing to take a risk that a high bid will come through, but more often than not, they will take the offer that is already backed by money in the bank.
When you have a preapproval letter in your pocket, you can move forward quickly and confidently. There's no need to waste time waiting for the bank to review your application because everything is already done.
If 2020 taught us anything, it's that modern technology is a more flexible tool than we ever realized. In the past year, more than just shopping moved online. Businesses big and small realized how productive office workers could be from home. We figured out how to offer even the most location-based services online, and the internet even enabled us to keep some semblance of our social lives, with things like watch parties and Zoom happy hours.
We may be itching to get back to "normal," but we've discovered how some things can be better, too. Buying a home, for instance, will be easier than ever now that we've discovered how much of the traditional process can be done virtually. Here are just a few things that, with the help of one of our real estate agents, are more convenient than ever.
Modern technology and connectivity can offer so many conveniences that we're only just beginning to realize. In some ways, 2020 was the push we needed to let go of traditional notions that were holding us back. If you've been hesitant to buy a home right now, contact us today to find out just how easy it can be.
Virtual home tours have become one of the most popular real estate tools this year thanks to the COVID-19 pandemic, and they won't be going away any time soon. Virtual tours are a convenient way to check-out these North Canton homes for sale from your couch, but they're not without their limitations. It's important to remember that virtual home tours can't completely replace the benefits of an in-person viewing.
Since many people are still unfamiliar with this innovative technology, our real estate agents thought it would be helpful to compile a list of questions you should be sure to ask during your next virtual home tour.
Knowing how to make the most of virtual home tours can save you from wasted in-person visits. Best of all, virtual home tours are easy to fit into your busy schedule. If you're interested in one of these Akron homes for sale, simply contact us today to set up your tour today.