One of the biggest decisions for a person is the purchase of their first home. It’s an amazing feeling to walk in the door of a house that you now own. Being able to do what you please with it. The sense of pride that comes with saying you are a homeowner. The potential for wealth creation goes up substantially when you own a home. But there is also the unknown. There will be nervousness, anxiety, sleepless nights and perhaps second thoughts. It’s only natural to have uneasy feelings about a momentous achievement. So what can we do to help you prepare for that day?
First, Budget. We’ve talked about this before multiple times because it is so very important. As you start the pre-approval process this needs to be one of the first discussions that you have with your significant other. Determine what you are comfortable paying for the mortgage. If you are currently renting then you can use your rental payment as a basis and evaluate how comfortable you are. Take into account anything that you need to purchase now that you’re a homeowner. Normally a refrigerator, washer and dryer don’t convey in a purchase so you may need one of those AFTER the loan closes. If you need a little help, set your budget a couple hundred under your BAH. Your mortgage person can estimate principle, interest, taxes, and insurance (the components of your mortgage payment) and let you know who much purchasing power you have. Evaluate and adjust, but that is typically a good starting point.
Secondly, have open and honest discussions with the team that is helping you. The mortgage team is there to help you figure out how to get approved. Just because your situation is less than perfect it doesn’t mean that you can’t get approved. But the last thing that a mortgage company wants is to find something that wasn’t disclosed. These are the things you should ask about or tell your loan officer: income, assets, credit profile and score, job history, residence history, family size, child care expenses, divorces, child support, co-signed loans, or any other info that is related to your financial situation. Nothing here is a disqualifier for being approved, but each situation has a guideline on how to address it and your mortgage team needs to know the proper way forward.
Third, closing costs and earnest money. The VA home loan is a 100% financing loan. That means that you do not need a down payment. But, there are several third parties that work for you to help you find the right home and get the loan funded in order to make it to closing day. Depending on the state that you are in and your price range the total closing costs could be anywhere from $5,000 to $10,000 or more in some cases. Now the seller is allowed to pay for some or all of the closing costs, and that does happen sometimes, but knowing the total estimated cost will help you prepare for when you do find a home and will help your realtor negotiate the best possible deal for you. The second part of that equation is earnest money. Typically the buyer will put down an earnest money deposit of 1% of the sales price, and it shows the seller that you are committed to the transaction. Those funds will be applied to the closing costs, there are a few protections for you to get the funds back if the deal falls apart, and if the seller pays for the closing costs then you’ll get those funds back at closing. But the key here is to be prepared for making that deposit. Definitely have the closing cost discussion with your lender well before you start looking. The best thing you can do for yourself right now is preparation.
Lastly, have open conversations with your realtor on your needs, price point, and current market conditions in your area. At this point you really want to make sure that all lines of communication are open and everyone is on the same page. Are we currently in a seller’s market or a buyer’s market? Does your price range get you what you need in a home? When do you need to be in the home and what kind of inventory is currently on the market? Right now in some areas there aren’t a lot of homes on the market and it’s taking some clients several weeks to find a home and get a contract. As we progress through the spring more homes should come on the market which may make it easier. Have these talks with your VA focused realtor and take their feedback. Once you find your home the loan process will take about 30 days so being prepared to make an offer 45 to 60 days before you have to move in is ideal. Your team would rather you be ready and able so that you don’t miss out on a home that is available before you’ve taken care of the first steps.
Buying a home, even for someone who isn’t a first time buyer, can bring that range of emotions. The excitement of signing that first contract or picking up the keys can’t be replaced. Some will feel nervous or tentative. Don’t let the fear of the unknown dissuade you from taking that leap into homeownership. If you surround yourself with a good team that you trust, and do as much as you can to prepare, the process will be much smoother than expected. Know what is needed of you before and during the process so that your team can do their best job in representing you. If we all work together then calling yourself homeowner will happen quicker than you think.
This article was written by Aligned Mortgage. Their vision is to ensure that anyone who has defended our country will have an opportunity to own a piece of it. Click here to learn more: Aligned Mortgage
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