June is upon us: Famous for all the
dads, grads, and brides who are celebrating this time of year. College
graduates and newlyweds are just starting out in a new life, full of big plans
and dreams. Home ownership is usually a major item on their to-do list, but
there are often hurdles to overcome on the way to fulfilling this dream.
Hurdle #1:
REALITY
Most young
adults face a gap between what they want in their first home and what they can
realistically find, afford, and be pre-qualified for in their neighborhood of
choice.
Before
starting out on your home search, write down your list of top features in order
of preference. Property location, number of bedrooms and baths, yard size,
garage size, single or multi-level, detached house or condominium are all
important questions the list should answer. Be prepared to compromise on some points
on the list if your search fails to locate a property that miraculously meets
every one of your requirements.
Hurdle #2: CREDIT & LOAN PRE-QUALIFICATION
Unless
you’re in the position to pay cash for your home, you’ll need to borrow money
in order to make the purchase. How much you’re able to borrow, the interest
rate and terms of the loans available to you will depend on a number of
factors, your individual (or combined in the case of a married couple) credit
score being one of them. Your credit score is determined by your history of
borrowing and repaying on things like revolving charge accounts, car or school
loans, and so on.
Another
crucial factor affecting your borrowing power is your ratio of debt to income.
Lenders have strict limits on that number, and most borrowers with a ratio of
55% or more will not qualify for a loan, even if they believe they can afford
the monthly payment.
For example, let’s say you’re a newlywed with a combined
income of $80,000 and $50,000 in school loan debt. Your income-to-debt ratio is
62.5% and would likely prevent you from qualifying for a mortgage. You can
understand now why it’s so important to have your lender pre-qualify you for a
loan BEFORE beginning your search: it not only saves time, but it also spares
you any disappointment in finding a dream home that is beyond your reach.
A number of
internet sites can help you with preliminary loan calculations based on your
income, expected down payment on the property, and other factors such as debt
and property taxes. The FDIC (Federal Deposit Insurance Corporation) offers
some valuable information about credit for consumers here: http://www.fdic.gov/consumers/consumer/ccc/establish.html
Hurdle #3: INEXPERIENCE
Face it, the
home buying process can be extremely complicated, time-consuming, and
overwhelming, especially for first-timers. A professional, licensed real estate
agent has the experience, the knowledge, and the time and resources to not only
help you find the home that meets your needs, but to also help guide you smoothly
through the process. Choose someone who will remain committed to you throughout
the journey, and who will treat your search as if it were for their own home.
Are you
ready to search for your first home? I can e-mail you my First Time Buyer Packet for a complete understanding of my services
and what to expect from me in helping you navigate your way to owning your
first home!
Nanette Shapiro
(714) 924-0781
nanette.shapiro4@gmail.com
