Mark Treiber: Homeownership is a realistic goal
Submitted to the Tribune
A recent survey by Zillow Inc. (the online real estate shopping tool) found that 10 percent of renters — or 4.2 million Americans — would love to become homeowners this year. Ten percent is an incredibly low percentage but seems to be confirmed by the fact that the number of people buying homes for the first time has fallen to the lowest level ever. The National Association of Realtors says that only 26 percent of sales in January were attributed to those entering the market.
Historically, first time buyers make up 40 percent of the market. While we can’t be absolutely certain about the reason for the low number it stands to reason that potential homebuyers are discouraged from even trying to buy a home because of what’s been written about the mortgage process lately. But the reality is that the goal of buying a home is much more realistic than most people realize.
It costs you nothing to talk with a mortgage lender and obtain a realistic vision of how much home for which you can qualify. Generally speaking, lenders limit a homebuyer’s debt limit to 43 percent including any fixed expenses such as credit card debt, car loans, and student loans. But lenders don’t include many expenses such as health or auto insurance premiums, your utilities, or discretionary expenditures (groceries, entertainment, etc.). Your prospective house payment will include the monthly principal and interest, property tax, and hazard insurance (and mortgage insurance if applicable).
You don’t need to have huge amount of cash in the bank either. FHA loans only require a 3.5 percent down payment, HomePath (Fannie Mae resale properties) requires 5 percent down, and USDA and VA (Veterans Administration) require NO down payment. HomePath and FHA permit the down payment to be gifted by a relative or long-time, close friend. Incredibly, neither HomePath, USDA, or VA require mortgage insurance which keeps your payment lower (USDA does charge an annual fee but it is less than one-third of the cost of FHA mortgage insurance). Plus, the seller can pay for your closing costs and pre-paid expenses — just last month, a good friend used USDA financing to buy a home with zero cash out of pocket.
Nor does your credit history have to be perfect. Even with a credit score as low as 580 (FHA) or 620 (conventional) you may still qualify for a mortgage. There are some restrictions with regards to bankruptcies, short sales, and foreclosures. But if you don’t think that you’ll qualify on account of your credit, you should check with a mortgage professional. Even if you do not qualify at the moment, a mortgage representative can at least help you to map out a strategy to address any possible home buying obstacles.
By the way, while I mentioned Zillow in the opening paragraph I cannot over emphasize the importance of working with a local real estate professional (Realtor). Zillow is fine for looking at properties but their valuation engine is woefully inaccurate, their so-called comparable properties generally aren’t comparable, and Zillow lacks accurate description of a property’s upgrades and amenities. There simply is no substitute using for a local Realtor. When you’re thinking about buying your biggest investment and taking on six figures of debt you want somebody that you know and trust in your corner. So between the still low real estate prices and the still low interest rates, the time to buy is now. Talk to a real estate or mortgage professional.
Mark Treiber is a senior mortgage originator with One Trust Home Loans, 297 Kingsbury Grade, Suite 207, Stateline.
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