Make Ends Meet: Buying a home the right way
LOUISVILLE, Ky. (WAVE) - The housing market has been on fire with record-low mortgage rates and the renewed reliance on homes now that so many Americans must work or quarantine in them.
As with purchasing a house, there are some pros and cons to buying a house in a pandemic, or anytime, but those who feel they are ready to start the process now should ensure all the pieces are in place.
“Interest rates are phenomenal right now,” Osia Craig, a loan originator at Eclipse Bank in Louisville, said. “Thirty-year fixed rates below 3% on a regular, which is unheard of.”
Craig has been a loan originator for more than 35 years working hard to make sure that home buyers can make their dream come true without causing any undue stress in their lives or on other financial fronts.
“It’s a numbers game,” Craig stressed. “The lower the rate the better the payment. Interest rates are phenomenal right now.”
He said like everything else in the world, the pandemic has changed the homebuying process in a number of ways.
“I think it takes a little bit longer for us to do some of the things that we do,” Craig said.
He explained that while guidelines and regulations prevent coronavirus from infecting agents and their clients, they often also slow the process down. Buyers, agents, sellers, and everyone else that it takes to pull together to ensure the purchase of a home goes smoothly must adhere to social distancing and proper sanitary precautions because of the coronavirus.
Lending guidelines have also changed a bit.
“A lot of our investors kind of added some additional temporary guideline changes because risk kind of went up,” Craig remarked. “People were losing jobs and wasn’t working so they did add some extra criteria during this pandemic.”
As risk rose, so has the required minimum credit score to buy a home. A person’s credit score lets lenders know how much of a risk they pose to be, but Craig said that credit history also plays a big role.
“History of your credit can trump score all day long,” Craig said.
He said missed payments, late payments or accounts charged off by creditors can also turn a dream of owning a home into a nightmare.
“That could be the difference of someone getting an approval and someone not,” Craig explained.
A person’s debt-to-income (DTI) ratio is determined by dividing the monthly debt obligations by their monthly income and is something to keep in mind when buying a home.
“Every loan program will have its restrictions as to how much debt you can have compared to that income,” Craig explained.
He said no to be offended during the underwriting process if a loaner asks for bank statements, tax returns, W-2 forms and even pay stubs from an employer. The process not only protects the lender but the buyer. It can help you determine how comfortable a buyer is with their current debt and decide whether applying for credit is the right choice for them right now.
One thing to remember, Craig said, is that lenders cannot work with untraceable funds. Even cash gifts from family members can be a problem when buying a home.
“Keep your money in a verifiable account because our underwriting guidelines go back two months to verify that those funds have been there,” Craig said.
Asset verification is all part of the home buying process and it can be an invasive process.
Craig said it is also important to make sure to have liquid assets during the search for a home. Up front out-of-pocket expenses like home inspections and homes appraisal are fees that will be needed in the search, and they are nonrefundable, even if the home is not closed on.
Buying a home can be intimidating whether it is the first or fifth time. Follow the steps listed below, as it can help put a buyer on easy street and well on their way to homeownership:
- Buyers should check their credit score and credit history.
- Have a down payment goal. Craig reminds first time home buyers to ask about programs, grants and services provided to this step in their lives.
- Buyers should determine how much house they can afford.
- Get prequalified and preapproved.
- Look for the home that fits any needs; make sure that includes safety, area, schools, distance from work and any other details that may affect everything life.
- Get a home inspection.
- Get a home appraisal.
- Prepare for closing.
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