Buying A Home
Determine Your Affordability
Once you’ve decided to begin your research, set your budget so that you can give yourself a realistic sense of what falls within it. Keep in mind that the property cost is just one of the many variables included in your monthly payments. Other factors include but aren’t limited to:
Prequalify for a Home Loan
The next step is to get preapproved for your mortgage so that you can actualize your budget. You’ll be asked to supply financial information including:
Value of Assets
Total Amount in Savings
With these records, we’ll be able to determine just how much you can afford when shopping for your new property.
Further on, you’ll be required to provide additional information to get approved for credit to use towards your home. Information you’ll need to have ready includes but is not limited to:
Tax Documents (minimum of one tax season, some cases may require more to further assess your financial health)
W-2’s or 1099 if you are self-employed
Pay Stubs or proof of income if self-employed
Keep in mind that all of this information is being used to determine whether or not you display the necessary qualities that deem you a suitable candidate to receive such a large loan. That’s why it’s of the utmost importance that you prioritize your financial health, and work to address and strengthen any weaknesses you identify prior to buying a home.
Reliability as a Borrower
Outlined below are additional factors that help determine whether or not you’re a low risk borrower with the capacity to pay back debts in a timely fashion:
Your credit score will have a major impact on determining whether or not you qualify for a loan. When financing through specific programs, this number will also influence the rates and terms that you’re offered.
What is your oldest credit line?
How much total credit do you have available to use?
Do you regularly make payments?
Do you have any delinquencies?
Have you previously filed for bankruptcy, short sale or foreclosure?
Debt-to-Income Ratio (DTI)
Your debt to income ratio will be considered to determine, if after all bills are paid each month, you still have reasonable amount of money left over. Each loan program operates with different DTI requirements.
How do I calculate my debt-income ratio?
Step 1: First add together each of your monthly bills (anticipated mortgage payments, school loans, credit card payments, car payments, child support, etc.).
Step 2: Once you calculate that total number, divide the sum by your income each month
Begin Saving Money for a Down Payment
Some programs do offer zero percent financing, however, keep in mind that those rates will also increase the amount of interest you accrue over the lifetime of the loan. In addition, zero-down programs are typically offered to specific buyers, (such as veterans or those purchasing property within a rural area) so expect to put down a minimum of 3.5%.
To ensure you’re prepared with the funds necessary to close on a home when you want to, its recommended that you begin saving towards that down deposit well in advance of securing your new home.
Explore Your Loan Options
Your dedicated loan officer will work with you to explore the program that best aligns with your needs:
FHA Home Loan
Government-backed FHA home loans are often relied upon by first time home buyers. They’re accompanied by some of the industry’s most flexible guidelines, require little down payment and don’t discount homeowners with lower credit scores.
Conventional Home Loan
Conventional Home loans are often not associated with the federal government but rather adhere to guidelines initiated by two agencies known as Fannie Mae and Freddie Mac. While they don’t have requirements as forgiving as FHA, these programs offer competitive rates and reasonable down payments that suit many first-time home buyers with adequate credit.
USDA Home Loan
USDA Home Loans are programs designed to benefit homeowners looking to purchase property in rural areas. Similar to VA and FHA, it is backed by the government and has the potential to offer great terms that benefit home buyers. It’s the only home loan program that offers a 0% down payment available to people who are not veterans.
VA Home Loan
VA Home Loans are government issued loans offered to qualifying individuals who are currently active duty personnel, veterans, or surviving spouses who meet necessary requirements. These programs offer zero down payment, no minimum credit score and no cap on debt-income ratio.
Factor in Total Costs
Be sure to factor in all costs when budgeting your overall monthly mortgage payment. These can include but are not limited to:
Property Value: This is the total cost of the home itself
Appraisal Fees: This typically costs a few hundred dollars and is required to assess the property value
Property Inspection: Your home must be inspected to ensure it aligns with requirements set by the entity backing your home loan. Government issued loans will have stricter requirements which could require you to make necessary improvements prior to moving in.
Mortgage Insurance: A premium paid either monthly or upfront to offer lenders a sense of security should you default on the loan.
Insurance: This is required to protect property owners of any liability should an unforeseen event result in the damage or destruction of your property, possessions or a third party.
Property Taxes: You’ll be required to pay property taxes which will be determined once you decide on the area where your home is located.
Align the Neighborhood with Your Lifestyle
When looking at different properties, be sure to consider how they align with your lifestyle. From surveying the surrounding school districts, to discovering if there’s a sense of community, we’ve provided a list of questions that you may want to keep in mind when exploring different neighborhoods.
How is the school district?
Are things easily accessible by foot or do I need a car?
Is there a strong sense of community?
How long will your new commute take?
Also you travel a lot, is it close to an airport?
How is the school district?
What is the neighborhood like?
What is the crime rate like?
You’re Almost There…
Once you’ve narrowed down your desired property, you’re on your way to securing the necessary financing for your new home! With our help, we’ll make sure that we equip you with everything you need to support your new investment. Even after you’ve dotted your ‘I’s’ and dotted your ‘T’s’ we’ll be standing right by your side to get you ready for move in day. (link to move in checklist)
You’re on your way to accomplishing an enormous milestone, and we’re thrilled to help guide you throughout this exciting journey. As Oklahoma’s leading lenders, we’re the team you can depend on to address all your needs when looking to move to the address you want.