The biggest shopping trip you’ll ever take will probably be when you buy a home. Most of us only experience the home purchasing process a few times in our life. For some of us, it may only ever happen once. Needless to say, buying a home is a huge decision and one that must be approached with caution and tact. Below are a few things to remember when you go shopping for a new home.
Getting Ready to Buy a Home
Buying a home is a major purchase; one that should not be made on a whim. Once you decide that you are ready for home ownership, preparing your finances is the next step that should be taken. One of the smartest financial moves that you can make when buying a home is to build your credit beforehand by maintaining three revolving accounts. Being consistently on top of these payments will prove worthwhile on your credit report and also look good to lenders when you decide to purchase a home.
Keeping your credit cards with a small balance is also a good step to take. Many people often make the mistake of completely closing their credit card accounts, which is not recommended. Finally, making your payments on time not only on your credit cards and revolving accounts, but also on your utilities will raise your credit ranking to a rate that gets noticed by lenders. While you are practicing these tips to raise your credit score, start putting money aside.
The more money that you have to put down on any loan, the less money you will have to pay each month once you do purchase your dream home. It is also best to keep in mind while you are putting money aside that besides the loan amount there will also be additional costs like property taxes and brokers fees that you need to budget into the amount of the loan as well.
Community Homebuyer’s Programs
An option that home purchasers may have is a community homebuyer’s program that is funded by the Federal National Mortgage Association, a.k.a. Fannie Mae. They are only given through direct lenders and certain restrictions apply to obtaining this type of loan. You are required to attend a seminar on home ownership and the home purchasing process, in addition your income cannot exceed one hundred and twenty percent of the area’s median income.
This loan allows ninety seven percent financing; meaning that the prospective homeowner can put down as little as three percent of the cost. Once you agree to the offer, a contract is placed on the property to make it affordable for the borrower for at least ten years. If the property is sold within the “affordable period” the home can’t be sold for more than the maximum resale price that is set from city to city.
One of the negative aspects to this program is that if the home value does appreciate within ten years you will be required to give back twenty five percent of the appreciation to your lender. The lender will then use this money to assist in another homebuyer’s program. For more information about obtaining this type of loan, visit your local board of realtors.
Renting Versus Buying a House
Deciding between renting and buying a house is a tough decision. Although people tend to think that renting an apartment is a waste of money, for some it is an ideal situation since they are not committed to being in one place for a long period of time. The list of pros and cons for renting versus buying is long, but there is one thing that both of these housing situations have in common; they both require money.
There is a difference in down payment when you are comparing renting versus buying a house. Apartments normally require the first months’ and the last months’ rent as well as a security deposit. When you are buying a house, the down payment can be around 10% of the cost of the house, depending on the loan you apply for.
Can I Buy a Home after Bankruptcy?
Yes, you can be approved for a loan to buy a home after filing bankruptcy. Your down payment and income verification typically needs to be higher, however, but financial institutions are willing to approve a loan if these two requirements are met.
After you file bankruptcy lenders prefer you wait at least two years before you apply for a loan. After two years elapse then it is quite easy to get a mortgage loan for your new house. Many lenders will even offer you 100% financing on your home. This is usually offered to individuals who have kept their credit history in good standing after they filed bankruptcy. If you have paid your credit cards, auto loans, hospital bills, or any type of loan on time then you will generally qualify for 100% financing after the two-year period.
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