A considerable number of potential buyers shy away from jumping into the real estate market due to their uncertainties about the buying process. A specific cause for concern tends to be mortgage qualification.
For many, the mortgage process can be scary, but it doesn’t have to be!
In order to qualify in today’s market, you’ll need a down payment (the average down payment on all loans last year was 5%, with many buyers putting down 3% or less), a stable income, and good credit history.
Throughout the entire home buying process, you will interact with many different professionals who will all perform necessary roles. These professionals are also valuable resources for you.
Once you’re ready to apply, here are 5 easy steps that Freddie Mac suggests to follow:
Find out your current credit history & score – even if you don’t have perfect credit, you may already qualify for a loan. The average FICO Score® of all closed loans in September was 731, according to Ellie Mae.
Start gathering all of your documentation – income verification (such as W-2 forms or tax returns), credit history, and assets (such as bank statements to verify your savings).
Contact a professional – your real estate agent will be able to recommend a loan officer who can help you develop a spending plan, as well as help you determine how much home you can afford.
Consult with your lender – he or she will review your income, expenses, and financial goals in order to determine the type and amount of mortgage you qualify for.
Talk to your lender about pre-approval – a pre-approval letter provides an estimate of what you might be able to borrow (provided your financial status doesn’t change) and demonstrates to home sellers that you are serious about buying!
Bottom Line
Do your research, reach out to professionals, stick to your budget, and be sure that you are ready to take on the financial responsibilities of becoming a homeowner.
Orlando Vacation Villa For Sale in Fairways Lake Estates
227 Marilyn Ln
A beautiful four bedroom pool home backing onto the golf course. This move in ready property is tiled throughout, tastefully decorated and extremely well maintained. Currently used as a second home you can see the pride of ownership from the front screen storm door through to the south facing, inground private swimming pool. Located close to Disney and all the Central Florida attractions the home is being sold furnished as seen and is perfect for a primary residence, second home or short term vacation rental. With low HOA fees and access to the 600 acre Lake Davenport this home is going to go fast !!!
Orlando Vacation Villa For Sale in Windsor Palms Resort
2346 Silver Palm Dr
Absolutely stunning 3 bed/3 bath, executively furnished, end unit pool home in the much sought after Windsor Palms Resort, Kissimmee. This exceptional home is being sold fully furnished and equipped as seen and offers accommodation comprising: 3 ensuite bedrooms; Queen bedroom on the 1st floor with an ensuite shower room which can also be accessed from the hallway; the gorgeous King master suite & beautiful ‘Mickey’ themed twin room are on the 2nd floor along with laundry facilities. The fully equipped kitchen is open plan to the comfortable living & dining area. Sliding doors lead to the screened SW facing splash pool & brick paved deck area – perfect for sunbathing, relaxation and enjoying our lovely Florida sunsets. The home has no rear neighbours and enjoys open wooded views. Ideally located for the theme parks, restaurants and shopping, this guard gated resort features a beautiful clubhouse, Olympic size salt water pool, spa, 58 seat cinema, tennis courts, basketball, volleyball, playground, fitness centre, sundry shop, tiki bar and more….
Orlando Retirement Home For Sale in Polo Park West
108 Belle Isle Ct
Orlando Retirement Home For Sale – Looking for the ideal location within this desirable community? Then you are looking at the right place. Minutes from the grocery store and Hwy 192 with its abundance of restaurants and stores. This well maintained 3/2 manufactured home is what you are looking for. Located a short distance from both clubhouses and community amenities. This home will suit someone looking for a second home, investment or family home. This nicely maintained property has lots to offer its new owner. Beautiful laminated flooring in the main living area, large kitchen with an abundance of kitchen cabinets and counter space. Adjoining the kitchen is a small dinette and laundry closet. The Florida room is accessed via the kitchen/dinette area. The master bedroom is well proportioned, and the closet space extends along the back wall. Double doors provide access into the master bathroom with garden tub and walk-in shower. The guest bathrooms are on the opposite side of the great room along with the family bathroom. The A/C and roof have both been replaced in the last 10 years. This desirable golf community offers lots of activities and amenities for the home owner. Enjoy the Florida lifestyle.
Saving for a down payment is often the biggest hurdle for a first-time homebuyer as median incomes, rents, and home prices all vary depending on where you live.
There is a common misconception among homebuyers that a 20% down payment is required, and it is this limiting belief that often adds months, and sometimes even years, to the home-buying process.
So, if you can purchase a home with less than a 20% down payment… why aren’t more people doing just that?
One Possible Answer: Private Mortgage Insurance (PMI)
“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.
Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”
As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. The monthly cost of your PMI depends on the home’s value, the amount of your down payment, and your credit score.
Below is a table showing the difference in monthly mortgage payment for a $250,000 home with a 3% down payment and PMI vs. a 20% down payment without PMI:
The first thing you see when looking at the table above is no doubt the added $320 a month that you would be spending on your monthly mortgage cost. The second thing that should stand out is that a 20% down payment is $50,000!
If you are buying your first home, $50,000 is a large sum of money that takes discipline and sacrifice to save. Many first-time buyers save for 5-10 years before buying their homes.
To save $50,000 in 10 years, you would need to save about $420 a month. On the other hand, if you save that same $420 a month, you could afford a 3% down payment in less than a year and a half.
In a recent article by My Mortgage Insider, they explain what could happen in the market while you are waiting to save for a higher down payment:
“The time it takes to save a (larger) down payment could mean higher home prices and tougher qualifying down the road. For many buyers, it could prove much cheaper and quicker to opt for the 3% down mortgage immediately.”
The article went on to say,
“Since renters typically devote a higher percentage of their income to housing than homeowners, providing flexible down payment options can help renters with solid earnings purchase a home – and gain a fixed-rate mortgage with principal and interest payments that will not increase over the life of the loan.”
If the prospect of having to pay PMI is holding you back from buying a home today, Freddie Mac has this advice,
“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”
Based on results of the most recent Home Price Expectation Survey, a homeowner who purchased a $250,000 home in January would gain $50,000 in equity over the next five years based on home price appreciation alone (shown below).
Bottom Line
If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, meet with a professional in your area who can explain your market’s conditions and help you make the best decision for you and your family.
Looking for a spacious family home with no rear neighbors in a gated community? Located in the Marbella North community just off HWY 27 this would make a great primary residence or vacation home. At the front of the home is a formal living / dining room with lots of natural light and access to the staircase and the kitchen / family room combo to the rear of the home. A fully equipped kitchen with breakfast bar and closet pantry leads to the family room with double sliding patio doors and a great view over the south facing inground pool and spa to the large retention area beyond. A good sized master bedroom benefits from large double sliding patio doors with direct access to the pool area and an en-suite with his and her sinks, separate tub and shower stall. A half bathroom with access to the pool deck completes the downstairs accommodation. Upstairs you will find four additional bedrooms sharing two house bathrooms – great layout with no wasted space. With new carpets in all the bedrooms and tile in the main living areas you just need to pick your favorite color scheme and make this place home.
