Should I talk with a bank before looking at homes?
The answer to the question is YES! There are many reasons why you should talk with a bank and get pre-approved before looking at homes but here are just a few.
- Talking with a bank before looking at homes can help you understand exactly how much you can afford. There is no reason to look at homes that are listed for $250,000 if you can only afford up to $200,000.
- If you’re a first time home buyer, talking with a bank before you begin your home search is a great way to learn about first time home buyer programs and to see which you might qualify for.
- Another important reason to talk with a bank before looking at homes is so you understand exactly what costs are associated with buying a home. A mortgage professional can give you advice on the type of financing you should be looking for, what your rates might be, and also whether or not you should request the seller to contribute towards your closing costs, also known as a "seller help."
Can you help us find a mortgage lender?
Yes. Not only does Kelly have 10+ years of experience in the industry, she has a wealth of connections and can help you find the perfect lender to get you qualified and walk you through the financial steps of the process. A mortgage lender will help you understand the costs associated with buying a new home, inform you of what your rates might be, and provide guidance when you prepare to make an offer.
What is a seller's market?
In sellers’ markets, increasing demand for homes drives up prices. Here are some of the drivers of demand:
- Economic factors – the local labor market heats up, bringing an inflow of new residents and pushing up home prices before more inventory can be built.
- Interest rates trending downward – improves home affordability, creating more buyer interest, particularly for first time home buyers who can afford bigger homes as the cost of money goes lower.
- A short-term spike in interest rates – may compel “on the fence” buyers to make a purchase if they believe the upward trend will continue. Buyers want to make a move before their purchasing power (the amount they can borrow) gets eroded.
- Low inventory – fewer homes on the market because of a lack of new construction. Prices for existing homes may go up because there are fewer units available.
What is a buyer's market?
A buyer’s market is characterized by declining home prices and reduced demand. Several factors may affect long-term and short-term buyer demand, like:
Economic disruption – a big employer shuts down operations, laying off their workforce.
- Interest rates trending higher – the amount of money the people can borrow to buy a home is reduced because the cost of money is higher, thus reducing the total number of potential buyers in the market. Home prices drop to meet the level of demand and buyers find better deals.
- Short-term drop in interest rates – can give borrowers a temporary edge with more purchasing power before home prices can react to the recent interest rate changes.
- High inventory – a new subdivision and can create downward pressure on prices of older homes nearby, particularly if they lack highly desirable features (modern appliances, etc.)
- Natural disasters – a recent earthquake or flooding can tank property values in the neighborhood where those disruptions occurred.
What kind of credit score do I need to buy a home?
Most loan programs require a FICO score of 620 or better. Borrowers with higher credit scores represent less risk to the lender, often resulting in a lower the down payment requirement and better interest rate. Conversely, home shoppers with lower credit scores may need to bring more money to the table (or accept a higher interest rate) to offset the lender’s risk.
How much money do I need for a down payment?
The national average for down payments is 11%. But that figure includes first time and repeat buyers. While the broad down payment average is 11%, first time homebuyers usually only put down 3 to 5% on a home. That’s because several first-time home buyer programs don’t require big down payments. A longtime favorite, the FHA loan, requires 3.5% down. What’s more, some programs allow down payment contributions from family members in the form of a gift.
Some programs require even less. VA loans and USDA loans can be made with zero down. However, these programs are more restrictive. VA loans are only made to former or current military servicemembers. USDA loans are only available to low to-middle income buyers in USDA-eligible rural areas.
For many years, conventional loans required a 20% down payment. These types of loans were typically taken out by repeat buyers who could use equity from their existing home as a source of down payment funds. However, some newer conventional loan programs are available with 3% down if the borrower carries private mortgage insurance (PMI).