Buying a home is scary and often times confusing for most people. There are a lot of steps involved and questions, especially when working with a mortgage. What’s the best mortgage? How much down payment do I need? How do I better my credit score? What should I be doing today to buy a home in the next few years?
I’ve teamed up with local lenders, Katie Erickson and Jeremy Joslin, of Bay Equity Loans in the Roaring Fork Valley to do a Q & A that will help shed some light on what’s going on in the mortgage world and how to best prepare for purchasing a home.
+ What are your top 3 tips to prepare for buying a home?
1. Get pre-approved for your mortgage when you start thinking about buying a house. You want time on your side in case you need to make any adjustments or save up additional money. The more you can do up front, the smoother the entire purchase process goes. Plus, it is good to know what you qualify for so that you are looking at homes in your price range.
2. Review your credit report and try to get your credit as good as you can. Credit score makes a big difference on a lot of aspects of the mortgage so the higher the better.
3. Don’t become self-employed right before buying a house. We generally need a 2 year history of self-employment to use the income.
+ What are current interest rates right now?
Rates are all over the place right now in reaction to the COVID-19 situation and the economic impact it has had on our country and world. You can get 30 year fixed rates in the low to mid 3’s but it depends on your qualifications, down payment, property type, loan size, loan program and the list goes on. Overall, we are in a low interest rate environment but the loan world has been a bit rocked by the corona virus so it really depends on all of the factors.
+ Are you seeing new contracts at this time, or refinancing primarily?
We are seeing mostly refinances but people are still buying at the entry level prices. The higher price points are somewhat on pause it seems.
+ How do you determine how much you can afford?
This is a 2-fold question. First of all, it is really healthy to do a personal budget so you can see what you are comfortable paying for your housing expense. Household factors should play into that – for example, do you have kids, plan to have kids, aging parents, etc. What expenses are on the horizon that need to be factored into what the ideal housing expense would be? Also, you should factor in maintenance expenses for the home as well. Secondly, the mortgage lender will tell you how much you can qualify you for which may be more or less than you can comfortably afford. Both exercises are important to assess what price point of home you should look for.
+Can you lock rates?
You can lock rates for 15, 30, 45 and 60 days but you have to have a signed purchase contract for a home to lock the rate.
+ How much down payment is required?
There are a lot of different loan programs with varying down payment options from 0% to 20% or more. 20% is a great bench mark but a lot of times that is not possible when buying your first home. If you put 20% down, then you can avoid having to pay for mortgage insurance. Mortgage insurance can add an additional $50-$500/month to your payment based on various factors. It is very common to put 3% – 10% down on the home and we have a lot of programs that work with that amount.
+ What’s one thing you can start doing today to prepare to buy a home?
Minimize your other debt.
+ Anything other needs to know that would be beneficial for first time homebuyers that is specific to our market?
I think it is really important to work with a good realtor to help navigate you through the process. Additionally, it is important to have a realtor who has access to an internal realtor network to gain more knowledge of and access to listings before they hit the market. The entry level homes move so fast that having a little edge on the general public can be a huge advantage. Furthermore, there are a lot of steps involved in buying a house and your realtor makes sure that you are doing all of the things that you need to do and in the right order. Your relator is your advocate and will help you to negotiate the price, contract terms, inspection resolutions, etc. You need a good realtor in your corner for the process to go smooth and to be done right.
Contact me at jordie(dotted)karlinski(at)compass(dotted)co with questions or if you’d like to speak with Katie Erickson from Bay Equity Loans in Basalt, Colorado.