The process of buying a home can seem overwhelming until you know all of the facts. There is a lot of false facts out there about the process and the benefits of buying real estate which can make it appear much more arduous than it really is. Here are some facts to help clear up any worries about the path to homeownership.
Is it hard to get approved for a mortgage?
Getting pre-qualified for a loan is actually fairly easy. Begin by contacting a reputable mortgage agent and give them with some accurate details of your financial profile and they will pull your credit report. Based on that information they will give you with a prequalification letter with the amount that you could afford.
Once you find a home that you submit an offer on, then you will follow up by providing them with all the necessary supporting documents that confirm that the information you initially provided is accurate. The essential docs will include your pay stubs, bank statements and your tax returns. Statistically more than 75% of loan applications get approved.
Must you put 20% down?
There are a bunch of loan types for financing your home these days with some benefits for first time buyers as well. One thing to consider if you are putting less than 20% down is that this will mean you will be paying “PMI” or mortgage insurance. This is a small monthly amount that will be tacked on to your overall payment for the first few of years of your loan or however long until you build up to over 20% equity. Forty percent of millennials who bought homes this year had put less than 10% down on their homes as their down payment.
Do you need perfect credit?
Having good credit will help you for qualifying for a mortgage and getting the best rate, but this does not mean that you have to have a score of 800. It is a good idea to clean up your credit by pulling your report and checking for accuracy, avoid making any larger purchases and paying down your outstanding balances. The average score for loans that were approved at the start of fall was 724 which goes to show that you don’t need to have picture perfect credit to buy a home.
Is buying more expensive than renting?
Rents are on the rise today and mortgage rates are still historically low so buying can oftentimes be cheaper than renting. In a recent report it was shared that buying a home is 36% less expensive than renting nowadays in the United States. Buying a home earlier will also help you build equity now and over time and it can perform much like a savings account that you can cash in on the benefits from later when you sell.
Do I have enough equity in my home to consider a move?
Many think that you have to have a lot of equity in your home in order for you to sell. The reality is that more than 80% of homeowners in the U.S. have significant equity, as in more than 20% in their property which should be plenty to afford paying your closing costs with additional money left to put towards your next home.
Sources: CoreLogic, Ellie Mae