Buying a house is a giant investment.
For most, it is the single largest purchase they will ever make. Before you purchase your dream home, Ocean Lending wants to make sure you are prepared. There are 6 tips that are pertinent first steps in the home buying process. In this article you will learn about score requirements, mortgage options, and several other must-do first steps.
Have a checklist
Even if this is your 10th house, or you are buying a home for the first time, it is always a great idea to have a checklist. Read on through Ocean Lending’s blog post, to make the most out of your “pre-purchase checklist”, with these 6 tips!
1. Strengthen your Credit Score
Does having a higher score still matter? Yes and No. The old rule still applies to the majority of loans: The higher your score, the lower your monthly payments.
Although higher scores will help you obtain a more attractive loan, there are still several loan products that can help those with Bad Credit. Ocean Lending has programs that can help you buy a home or refinance an existing mortgage with a FICO as low as 500! These loans still have attractive interest rates and payments; they are designed to help you boost your credit and get you away from renting (because no one likes renting! why pay your landlords mortgage when you could pay your own!).
If you have less than perfect credit and are not sure how to strengthen your score and report, give us a call at 949.916.3544 or fill out the Quick Quote form on this page. We will show you what you need to do to get your score ready to qualify for the loan you want!
2. Find out what you can afford
You always here everyone say: Get a home that’s financially comfortable. And you know what? Those people are 100% right, why stretch yourself thin? It is always smart to purchase within your means.
This now leads us to the questions: What is within my means? How much can I afford to purchase? These are great questions, and Ocean Lending is here to help you find the answers!
The best way to find out what is financially feasible and how much you can purchase, is to speak with a Qualified Loan Expert. Thankfully you are in the right place! Ocean Lending has several phone experts here to answer all of your questions. For a rough estimate you can also check out our Mortgage Calculator.
Improve you chances of maintaining a new financial obligation (such as a house), by testing out the new payment for a few months! After speaking with one of our Loan Experts, you will have a general idea of what a payment for a house in your area may look like. Take the difference from your current rental payment and your new proposed mortgage payment and put it away in the bank each month. It is smart to test out the new payment before you sign the dotted line; if it becomes to tight you can always decrease the amount. After this, we are another step closer to narrowing in on what your perfect monthly payment is!
3. Save for a Down Payment and Closing Costs
Depending on your credit and overall financial situation, you’ll typically need to save in between 3.5% and 20% of the home’s sale price, to use as a down payment.
To get an FHA loan with 3.5% down, you need a credit score of 580 or higher.
One exception to the Down Payment, is for Veterans. With a credit score of 580 or higher, Veterans may qualify for 0% Down Home Loans.
If you want to read further on FHA or VA home loan programs, check out these other articles on our website about: FHA Home Loans & VA Home Loans
If you don’t have enough saved for your down payment, there are several options that may help you get your down payment. Most counties offer down payment assistance programs for those with Good credit standing. Ocean Lending also works with unique programs that can help you achieve your down payment with FICO’s as low as 660.
Don’t forget! All loans have closing costs involved in the loan process. It is important to save above and beyond the down payment. In FHA and VA loans there is usually some room for the lender to cover some closing costs through what are called lenders credits. How much you can have covered by the lender is largely determined by your credit score, and as the motto goes: The higher the credit score the better! In purchase transactions there also is room for your Realtor to negotiate the seller covering a portion of the closing costs. In the preliminary steps of the Loan Process, it is difficult to tell how much of the closing costs will be covered by each party. This is why it is wise to start saving for closing costs when you start saving for your down payment.
4. Build a Healthy Savings Account
Building a savings account is something you should do on top of saving for the down payment and closing costs. It is good to show your lender that you are not living paycheck to paycheck while you are attempting to receive financing to buy a house. If you are able to have 3 to 5 months’ of mortgage payments set aside, that makes you a much more attractive loan candidate. Some lenders, especially ones backed by the FHA (like Ocean Lending is), will give you a little more latitude on certain other factors if you can show you have a cash cushion.
Having a little extra money in your savings account will also help cover any maintenance and repair issues that come with owning your own home. While repairs are usually far and few between, items such as a new roof, water heater or HVAC system can hit hard and sudden. If you have a cash cushion you can be prepared for anything that comes your way.
Improve your chances: by setting aside money every month, for a rainy day fund for your house. A good rule to abide by is trying to save on average 2-3% of your homes value per year. On average that is the amount homeowners spend on upkeep, repairs, and maintenance, each year. If you’re buying a $300,000 house, your goal should be to save $500 to $750 per month.
5. Get Pre-Approved before Buying a Home
If you want to be taken as a serious shopper, the No. 1 thing you need to do, is have everything in order. That means that, before you actually start shopping, you should get the financing in place. If you are ready to start the Pre-Approval process, your first step should be to reach out to a Qualified Mortgage Banker, luckily you are in the right place! Ocean Lending offers same day Pre-Approvals.
Why is it important to have a Pre-Approval before shopping for a house? Having a Pre-Approval letter is the most powerful tool you can have when shopping for a home. A Pre-Approval letter from a trusted lender shows that you have your ducks in a row. You have reached out to someone that offers mortgage financing, together you ran through your situation, and they Pre-Approved you to purchase for a certain amount. When you make an offer with a Pre-Approval letter, the selling Realtor knows you mean business.
Having a Pre-Approval letter ties into what we spoke about above. A Pre-Approval letter gives you the best idea of how much you can afford to buy, you want to make sure you do not stretch yourself too thin. Also, the majority of shoppers in the market will be making offers with Pre-Approval letters. You don’t want to be the only one without a Pre-Approval letter, do you?
6. Buy a House you like
If you are buying a home for yourself or your family, you want a home that you love and will make you happy for the next few years. Quick sales are always nice, but the last thing you want is to move into a house that you are not 100% in love with. Short term ownership can sometimes be an expensive endeavor, which is why it is important to make sure you will be happy in the home for the next few years to come.
Pre-Approval letters from Ocean Lending are good for 90 days and are easily renewable after the 90 day mark. We want to make sure that you have ample time to find your perfect home. Whether it is a first starter home or your dream home that you are going to retire in, we want to make sure you will be happy in that home. That is why we work with our clients to tailor the pre-approval to their specific needs.
How do I get Pre-Approved?
If you are ready to get Pre-Approved to buy a home, call us today at 949.916.3544 or fill out the Quick Quote form on this page, and one of our Qualified Loan Experts will reach out to you. Don’t forget, we have programs with down payments as low as 3.5% and can help clients with credit scores as low as 500.