Buying a Home in 2020: What to Consider
What to consider, learn from our magic 6 steps for buying a home in 2020.
A home purchase can be different for a 1st time buyer compared to a repeat home buyer. The steps and home buying process in 2020 are not the same as even 5 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 research efforts.
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.
Important FAQ’s regarding purchasing a home
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.
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.
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.
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.
No, pre-qualifying is only an opinion and will not satisfy realtors or sellers.
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.
When you zero in on an area or sub-division, property taxes are usually consistent.
Figure out the worst case scenario for your budget and use that number.
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.
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.
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.
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.
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.
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.
- 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.
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.
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.
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.