Planning for a Home Purchase in 2021
You may have decided to postpone your home purchase until 2021 because of the Pandemic.
The landscape for buying a home this year is much better. With months of experience under our belts and changes to how the housing market does business, this year should be much smoother.
Home appraisals, home inspections, lender mortgage applications, seller home showings and buyer offers have all now had a chance to make adjustments to ease the minds and increase the safety of all parties involved in a real estate transaction.
A home purchase can be different for a 1st time buyer compared to a repeat home buyer. The steps and home buying process in 2021 are not the same as even 2 years ago. This major purchase decision that you are considering making, can be affected by many factors: Home inventory availability, mortgage financing options, qualifying, personal finance budget and your realtor’s effectiveness.
- Home buyers that have been through the process still could use a refresher since the process and market is ever changing. First time buyers should be aware of the various mortgage programs and down payment assistance options. It’s always valuable to be up to date on current market conditions and mortgage lending options.
In this home purchase article we will cover the key steps in buying a home in 2021. And we have included some links to calculators that will help you along the way.
- Getting started: Evaluate your reasons for wanting to purchase a home
Is it for tax break reasons, wanting to take advantage of low interest rates, tired of renting and not building equity, would like to benefit from home value appreciation, have a goal to own a home free and clear someday or do you just want to invest your money in real estate?
Whatever your reasons are, home ownership is part of the American dream. There are many benefits and some risks. Working with a good lender and real estate agent that have your best interest in mind, will help you to make the right educated decision.
If you are buying your first home or a repeat buyer, preparing for the requirements is the first step. Maybe you are considering purchasing a second home or a vacation home. Or perhaps being a landlord, and buying a rental unit.
Preparation is an important first step. Knowing what you can afford for the monthly home loan payment is a good starting point. And evaluating how much liquid cash you have to work with for a down payment and closing costs.
FAQ: Owning a home has many benefits vs. renting. Many times a monthly mortgage payment is less than a rent payment. The “net” effective house payment is what you should compare after tax deductions and other benefits.
Today's National Mortgage Rates
Here is a quick history on the home purchase rates
October 20 2021
October 20 2021
October 20 2021
Important FAQ’s regarding purchasing a home
Where do I start if I want to buy a house? +−
Start by getting a pre-approval from a mortgage lender. You need to know the financing you are qualified for so you know the price range to look in. The first step is preparing your income, debts & assets documentation for a lender.
How much do you have to put down on a house? +−
Down payments can be as low as 3 percent of the purchase price. Eligible veterans can go with a VA loan with zero down. FHA is 3.5 percent down. Conventional has 3 percent down programs but you need a very good credit score.
Is 2020 a good year to buy a house? +−
Yes because mortgage rates are still very low. Next year the rates may be higher which can have a big impact on the price range you will be able to qualify for. The real estate market is strong for both home buyers and sellers. The economy is booming so if you are serious about owning a home, there is no better time to buy than 2020.
How do you qualify for first-time home buyer? +−
FHA is usually the best first-time buyer mortgage program. You only need 3.5 percent as a down payment and the credit score requirements are very flexible, as low as 620 FICO credit score. There are other first-time home buyer programs but these can differ from lender to lender. Ask this question when you are shopping for a lender to see how they may offer special programs that other lenders do not.
Is getting pre-qualified the same as obtaining a pre-approval? +−
No, pre-qualifying is only an opinion and will not satisfy realtors or sellers.
Does the type of home loan I want change what lender I go decide on? +−
Yes because banks, mortgage brokers and mortgage bankers tend to have their niche mortgage products they are experienced in and specialize in. Once you know the program that is best for you, choose a lender that understands that home loan program fully. Ask the loan officer what their experience is in that program. Many mistakes are made by choosing a lender that simply is not good with a specific loan type.
How do I know what property taxes will be? +−
When you zero in on an area or sub-division, property taxes are usually consistent.
What if my budget changes from year to year? +−
Figure out the worst case scenario for your budget and use that number.
How do you know if you are ready to buy a house? +−
The best way to really know is by getting a pre-approval from a home loan lender. Besides the financial side, you should be ready to take care of a home and have savings left over after you buy a home. The emotional aspect of homeownership is very rewarding and tends to elevate careers and pride. If you are renting then you are not building equity like you would if you owned a home. Home appreciation in in itself can be very lucrative.
Does the home loan program I choose have an effect on the type of home I am interested? +−
Yes it can have an impact. Many factors can affect underwriting guidelines. It is best to share with your lender the home you are interesting in before proceeding with an offer. Good realtors usually know if a certain home has potential lending issues.
What kind of credit score do you need to buy a house? +−
This depends on the mortgage type you need or want. The lowest acceptable FICO score is usually for FHA loans which is as low as a 580 score. Of course the higher your credit score is the better options you will qualify for.
Can I lock-in the interest rate and for how long? +−
Once you have an executed signed purchase agreement (PA) you can lock-in a mortgage rate. Be sure to select a lock-in period that will be long enough to close on your new home.
Does my mortgage payment change much between 5 percent down and 10 percent down? +−
Not as much as you might think. For example, on a $200,000 sales price with 5% down ($190,000 loan amount), principal and interest (P&I) for a 5% interest rate is $1019.96 per month. For a $200,000 sales price with 10% down ($180,000 loan amount), principal and interest (P&I) for a 5% interest rate is $966.28 per month. That’s only a difference of $53.68 per month and would free up $10,000 for other purposes.
How long does it take to get to the closing table? +−
Anywhere from 4 to 6 weeks is the norm. If lenders are extremely busy due to market conditions it may take a bit longer. The more you help and participate with clearing underwriter conditions, the faster you can close.
How do I build my credit? +−
- If you have bruised credit or no credit at all, start with a secured credit card or co-signed loan. This will help you establish a better credit score. Just make sure you make all payments on time.
Is it a good idea to buy a house in foreclosure? +−
Yes it is always a good time to buy a foreclosed home. If you can be patient the type of deal you can get could be a large savings. The home market is not as vast as it was a few years ago in finding foreclosure homes to purchase. They are still out there and an online search can help find them. Your realtor will also know what might be available in areas you are interested in.
How long does it take to buy a foreclosed home? +−
The amount of time it takes to purchase and close on a foreclosed property can take anywhere from 3 months to a year. The process is pretty much out of your hands as the lender who owns the property has their own policies & procedures that need to be satisfied. Patience is the key but can pay off handsomely if you have the time to wait. The bank will want to recoup as much of their investment as possible.
How can I buy a foreclosed home with no money down? +−
These are not currently available to purchase with no money down. There are programs like FHA 203b that can get you a foreclosed home with no out of pocket investment. These loans provide financing to repair and renovate a home as well as the end mortgage. You need a lender and loan officer that are well versed in this program.