Buying a home is a complex process and, as the recent housing crisis demonstrated, requires a thorough education on the part of the buyer. First, fully understand your financial position — credit score, available savings, monthly income and expenditures. Subtracting your expenditures from your income, for instance, will yield the amount you can afford for housing.
Be sure to account for all insurance costs associated with owning a home, possible homeowner association fees and property taxes in your monthly expenditures. Overall, loan rules changed in 2015, but according to www.ginniemae.gov (Government National Mortgage Association) and www.homebuyinginstitute.com (the Home Buying Institute) loan programs continue to vary on the percentage of your income that can be used for housing-related expenses. Lenders balance debt against income to decide if an applicant will be able to repay a loan. Most conventional loans require borrowers to have no more than 43 percent total monthly debt versus their total monthly income, though there are exceptions, such as for those with significant savings. The Federal Housing Administration has a two-tier qualifying system: FHA sets its top thresholds at 31 percent front-end debt (housing expenses as a percentage of income) and 43 percent back-end debt (all debt as a percentage of income) for a 31/43 qualifying ratio. Like commercial lenders, Veterans Affairs combines front-end and back-end debt for a 41 percent limit against income.
Next, research the different types of home loans to determine the right fit for your financial situation and discuss your options with a lending professional. Lenders are diverse today, and not all homebuyers obtain their mortgage loans through their banks and credit unions. For example, you may choose to work with an internet lender, a mortgage broker, a homebuilder or a real estate agency lender. To determine which lender is best for you, get recommendations from friends and family members and check credentials as well as Better Business Bureau ratings.
A preapproved loan before starting your search for a home can determine your spending limits and signal any potential issues in the way of receiving a loan. For any home loan application, the mortgage company will order a credit report, so it may be good to get a free report in advance to determine your credit status and make sure the report contains no erroneous information.
There are three ways to order your free annual report from one or all of the national consumer reporting companies: Visit www.annualcreditreport.com and complete and submit the request form online; call toll free 877-322-8228; or download and complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. For more information, visit www.consumer.ftc.gov/topics/credit-and-loans.
Knowing your monthly budget and the amount of your loan are invaluable during the next phase, especially finding the answers to questions before the hunt for a home begins.
First, determine your home preferences. Does a single-family house, condo, town house or duplex best fit your needs and budget? Do you prefer a new home, an existing home or to build one? Though new homes generally cost more, existing homes may come with maintenance issues and renovation costs. How many bedrooms and bathrooms would you like? Do you want an attached garage? Will you live in the city, a suburb or in the country? How close to work, school, shopping or public transportation do you want to be? Answers to these questions will greatly assist your search and the next stage — hiring a real estate agent.
The ideal agent will help find your ideal home and guide you through the purchase process. First, interview potential candidates to ensure they understand your needs, know your homebuying and neighborhood preferences, and are readily accessible.
Good luck and happy hunting!
North Carolina provides housing programs and incentives to help residents with home ownership. For more information, visit
http://portal.hud.gov and select North Carolina from the “State Info” drop-down menu.
USDA Rural Development offers programs to help rural Americans with essential services such as housing, economic development and health care. As part of USDA Rural Development, Rural Housing Service offers a variety of programs to build or improve housing and essential community facilities in rural areas. Rural Housing Service does this with loans, grants and loan guarantees for single- and multi-family housing, child care centers, fire and police stations, hospitals, libraries, nursing homes, schools and more. Visit www.rd.usda.gov/nc for more information.
The North Carolina Housing Coalition provides guidance to help residents find programs that secure housing for veterans, the elderly and people with special needs or those in need of financial assistance. For more information, visit www.nchousing.org/need_help or contact the housing coalition at 919-881-0707.