A considerable number of potential buyers shy away from jumping into the real estate market due to their uncertainties about the buying process. A specific cause for concern tends to be mortgage qualification.
For many, the mortgage process can be scary, but it doesn’t have to be!
In order to qualify in today’s market, you’ll need a down payment (the average down payment on all loans last year was 5%, with many buyers putting down 3% or less), a stable income, and good credit history.
Throughout the entire home buying process, you will interact with many different professionals who will all perform necessary roles. These professionals are also valuable resources for you.
Once you’re ready to apply, here are 5 easy steps that Freddie Macsuggests to follow:
Find out your current credit history & score – even if you don’t have perfect credit, you may already qualify for a loan. The average FICO Score® of all closed loans in September was 731, according to Ellie Mae.
Start gathering all of your documentation – income verification (such as W-2 forms or tax returns), credit history, and assets (such as bank statements to verify your savings).
Contact a professional – your real estate agent will be able to recommend a loan officer who can help you develop a spending plan, as well as help you determine how much home you can afford.
Consult with your lender – he or she will review your income, expenses, and financial goals in order to determine the type and amount of mortgage you qualify for.
Talk to your lender about pre-approval – a pre-approval letter provides an estimate of what you might be able to borrow (provided your financial status doesn’t change) and demonstrates to home sellers that you are serious about buying!
Do your research, reach out to professionals, stick to your budget, and be sure that you are ready to take on the financial responsibilities of becoming a homeowner.
Urban Institute recently released a report entitled, “Barriers to Accessing Homeownership: Down Payment, Credit, and Affordability,” which revealed that,
“Consumers often think they need to put more money down to purchase a home than is actually required. In a 2017 survey, 68% of renters cited saving for a down payment as an obstacle to homeownership. Thirty-nine percent of renters believe that more than 20% is needed for a down payment and many renters are unaware of low–down payment programs.”
Myth #1: “I Need a 20% Down Payment”
Buyers often overestimate the down payment funds needed to qualify for a home loan. According to the same report:
“Most potential homebuyers are largely unaware that there are low-down payment and no-down payment assistance programs available at the local, state, and federal levels to help eligible borrowers secure an affordable down payment.”
These numbers do not differ much between non-owners and homeowners. For example, “30% of homeowners and 39% of renters believe that you need more than 20 percent for a down payment.”
While many believe that they need at least 20% down to buy their dream homes, they do not realize that there are programs available which allow them to put down as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined with programs that have emerged allowing less cash out of pocket.
Myth #2: “I Need a 780 FICO® Score or Higher to Buy”
Similar to the down payment, many either don’t know or are misinformed about what FICO® score is necessary to qualify.
Many Americans believe a ‘good’ credit score is 780 or higher.
To help debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.
As you can see in the chart above, 51.7% of approved mortgages had a credit score of 600-749.
Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Your dream home may already be within your reach.
Looking for outdoor lighting ideas that can inspire you to illuminate your front porch, driveway, or backyard? Aside from making it easier to see in the dark, outdoor lights can enhance the design of your yard. The type of lights you choose is a matter of preference, but there are pragmatic aspects to the decision as well as stylistic ones. What kind of lighting works best for walkways? Is it better to go with simple sconces to flank your front door or dramatic spotlights to highlight a stand of oak trees?
Our experts are here to explain the different types of outdoor lights, and how to select the ones that are best suited to your house.
How big of a glow do you want? Task vs. ambient light
Before you choose any type of light, consider the size of the glow you'd like. If you're hoping to illuminate the front stoop, garage door, or another spot that's not too large but well-traveled, bright task lights like sconces or wall lanterns with integrated LEDs are a great option.
"These bulbs last pretty much forever and cast a clean, crisp light," explains Justin Riordan, founder of Spade and Archer Design Agency.
Ambient lighting like spotlights can be equally bright, but are also made to highlight a certain design feature like a pathway, pool, or a group of trees.
For more on each category, here's a rundown of the best lights for your home's exterior so you can show guests the way—and avoid tripping when you're out after dark.
Floodlights are true to their name, flooding a particular area with light and offering a sense of security. To use floods, determine how wide a swath you'd like to achieve by comparing each fixture's beam spread, or the amount of space a light covers from different distances.
Floodlights can also be attached to timers so they'll turn on at dusk, and they're especially useful when installed with motion sensors to light up the yard when someone passes by.
"If you want the whole house and yard lit up, I would recommend double floods or pole lights," says Jeremy Halady, owner of Mr. Electric in Columbia, SC.
The main difference between floods and spots is the size of the area they light up, says Hunter McFarlane, an outdoor expert from Lowe's.
"A spotlight projects a bright, round beam that captures the attention of an outdoor accent, while a floodlight is more powerful and commonly used for security and safety in large spaces like backyards and driveways," he explains.
Slot this type of outdoor light in the ambient category; it'll throw some light but is generally installed for the purpose of charm. A lamppost light will cast a glow on your walkway and should coordinate with your home's style, if possible. Typical lamppost materials include wrought iron, wood, aluminum, and copper.
We couldn’t be happier to be named Top Listing Team for the month of October! A huge thank you to our clients for your trust and business! We would love the opportunity to assist you in the sale of your largest investment!
If you are considering selling your current house and moving up to the home of your dreams, but are unsure whether or not to believe what you’re seeing in the news, let’s look at the results of the latest Housing Affordability Report from the National Association of Realtors (NAR).
According to NAR:
“A value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that a family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.”
The national index results for August came in at 141.2.
This is up from 138.9 in July, but down 8.3% from last August’s value of 153.9.
One big factor in determining affordability each month is the interest rate available at the time of calculation. In August 2017, the 30-year fixed rate mortgage interest rate was 4.19%. This August, the rate rose to 4.78%!
With an index reading of 141.2, housing remains affordable in the U.S.
Regionally, affordability is up in three out of four regions. The Northeast had the biggest gain at 6.2%. The South had an increase of 2.4% followed by the West with a slight increase of 0.1%. The Midwest had the only dip in affordability at 4.8%.
Despite month-over-month changes, the most affordable region remains the Midwest, with an index value of 175.7. The West remains the least affordable region at 101.2. For comparison, the index was 146.7 in the South, and 151.2 in the Northeast.
There are many unsubstantiated theories about what is happening with home prices. From those who are worried that prices are falling(data shows this is untrue), to those who are concerned that prices are again approaching boom peaks because of “irrational exuberance” (this is also untrue as prices are not at peak levels when they are adjusted for inflation), there seems to be no shortage of opinion.
However, the increase in prices is easily explained by the theory of supply & demand. Whenever there is a limited supply of an item that is in high demand, prices increase. It is that simple. In real estate, it takes a six-month supply of existing salable inventory to maintain pricing stability. In most housing markets, anything less than six months will cause home values to appreciate and anything greater than seven months will cause prices to depreciate (see chart below).
According to the Existing Home Sales Report from the National Association of Realtors (NAR), the monthly inventory of homes for sale has been below six months for the last five years (see chart below).
If buyer demand continues to outpace the current supply of existing homes for sale, prices will continue to appreciate. Nothing nefarious is taking place. It is simply the theory of supply & demand working as it should.