The Path to Homeownership
Congratulations! If you are reading this you are at least thinking about purchasing your first home.
Buying your first home can be as confusing as it is exciting. It comes with many big decisions and it is easy to get swept up in the whirlwind of shopping.
At Sirva Mortgage, our goal is to make this process as uncomplicated as possible, guiding you along a path that will prepare you before and during your home purchase. It is important that before you begin your search you take into account not only your current financial situation but also your personal and financial goals for the future.
As you begin your search, there are several items that you should consider to become a more informed and organized home shopper.
Pros and Cons of Homeownership
- Purchasing real estate has continued to be a good investment. In addition to the potential of appreciation, as you make your monthly mortgage payments, you are building up equity which can be used in the future.
- Depending on your financial situation, mortgage interest and a portion of real estate taxes can still be used as an income tax deduction
- A mortgage payment can be comparable to the rent payment you are currently paying each month
- Consideration should be made to the cost of homeownership which will most likely include maintenance and repairs.
- Consider down payment requirements as well as the cost of closing costs
Choose a Real Estate Agent to represent you as a buyer
- You need to consider the following when choosing an agent:
- Knowledge of the area & market
- Track record
- Click here to learn about our sister company, Sirva Relocation’s preferred real estate agent network and how you can possibly earn cash back on your home purchase.
Get preapproved for your mortgage.
A Lender can provide you with a verified preapproval letter after your credit, income and assets have been verified. A verified preapproval letter lets a seller know that your Lender has verified all the aspects of your loan and qualified you based on actual data. If your Lender only pulls a credit report and relies on the income and asset figures that you provide (without verifying), this is considered a “pre-qualification” letter and will not hold up as well in a contract negotiation.
Understanding your credit report and credit scores
Knowing your what is on your credit report as well as knowing your credit score should be something that you can do well in advance of purchasing a home. You can get a free copy of your credit report by going to annualcreditreport.com. Check out our Frequently Asked Questions section to learn more about credit scores and how to improve your credit,
What will I need for a down payment and closing costs?
Understanding normal and customary closing costs will be to your advantage in the homebuying process. These fees are required to finalize your mortgage when buying or refinancing a home. Closing costs may include appraisal fees, loan origination fees, credit report charges, title searches, discount points and more. Buyers can typically expect to pay about 1-4% of their purchase price in closing costs. Be a smart shopper. Most of the closing costs are paid by the buyer, but often the seller will contribute to those costs as well. If you need help with closing costs check with your state or local housing agency to find out what opportunities for assistance exist. It is also important to research how much the lender's fees are and how they compare. A Sirva Mortgage Consultant can help you understand your loan estimate form any lender and explore also work with you to determine whether your home purchase through Sirva Mortgage is eligible for lender closing cost credits, corporate-sponsored relocation benefits, real estate cash back, or other programs.
Keep in mind:
- It is not necessary to have a 20% down payment in order to purchase a home. If you are a Veteran, you will be able to purchase a home with no money down through a VA loan. If you are not a veteran, there are other low down payment options such as an FHA loan or Physician Loan available that would require as little as 3% down payment.
- Most loan programs will allow some portion of your down payment to come as a gift from a relative. There are certain rules and restrictions around gifts and this is something that you will want to discuss with your Mortgage Consultant during your pre-approval application.
- If allowed by your plan, a loan or withdrawal from your retirement savings is also allowed. This should be considered as a last option, and again, discussed with your tax adviser and Mortgage Consultant during the preapproval process.
- Understanding normal and customary closing costs is the key to being a smart shopper.
- Fannie Mae also has an affordable mortgage option designed to meet the diverse financial and familial needs of buyers. The HomeReady program offers a 3% down payment option, allows co-borrower flexibility and accepts additional income sources.
Make sure to make your purchase contingent on getting a Home Inspection
- Your agent can assist in finding a reputable home inspector
- The average cost is between $300-$400
- Resolve any issues which might be uncovered with the Seller before finalizing the contract
What if I will need more assistance with covering my down payment and closing costs?
Fannie Mae has down payment assistant options through their Home Ready program. Some of the sources that you might be able to use to cover down payment and closing cost funds include:
- A gift from a family member
- A grant from a business or nonprofit
- A small loan
You can also work with your lender to research all the options and see which one is right for you. To see if you are eligible for down payment and closing cost assistance visit https://downpaymentresource.com/are-you-eligible/