Homeownership Demystified
Posted
on Friday, June 7, 2024
in
Financial Education
No matter what stage of life you’re in, homeownership can be stressful. That’s especially true in today’s market, which has been hampered by higher loan interest rates, low inventory, and high-priced listings.
Whether you’re in the market for a second home or your starter home, it’s easy to let yourself become intimidated by the prospect of homeownership. However, with a little knowledge and preparation, you can be ready for the homebuying process.
“Homeownership is a strategic investment in your future, but it doesn’t have to be a daunting venture,” said Cindy Smiley, Vice President & Mortgage Loan Officer at United Bank & Trust. “Even in today’s market, owning a home is an attainable goal that fosters stability, builds equity, and unlocks a wealth of possibilities.”
Determine Your Homebuying Readiness
Before you even consider buying a home, it’s important to know how the homebuying process works. It starts with making sure you’re financially ready to make such a large purchase. Factors to consider include your total savings, total debt, and credit history. These factors will help determine your qualifying loan amount, interest rate, and how much you can afford as a down payment.
Speaking of down payments, the more you pay up front, the lower your payments and the higher your equity. Typically, homebuyers try to put down 20%. This isn’t a requirement, but doing so could help reduce the interest rate on your mortgage. If you’re able to pay 20% as a down payment, you won’t have to pay for private mortgage insurance, which will save you even more money.
Once you determine you’re ready to own a home, it’s a good idea to get pre-approved for a mortgage. By getting pre-approved, you will have an understanding of the home loan you qualify for, and it will eliminate the approval step when you are ready to make an offer on a home.
Types of Loans
When you go through the pre-approval process, talk to your mortgage loan officer about the different loan options available. A conventional loan is the most common type of mortgage, and is generally available to buyers with good credit histories who have a significant down payment. There are other options that are backed by the federal government that could reduce closing costs.
Once you are pre-approved and have an idea of what type of mortgage you need, it’s time to start home shopping. Be sure you stick to your budget as determined by the amount you were pre-approved for. Look at as many houses as you can to get a good sense of the type of home you need.
Documents You Will Need
Once you’re ready to apply for your mortgage or pre-approval, you can make the process more efficient by having the following documents readily available for your mortgage loan officer.
- W-2 forms from the past two years.
- Pay stubs from the past 30 to 60 days.
- Federal income tax returns from the past two years.
- Bank statements from the last two months.
- Information about your other long-term debts.
- Driver’s license and Social Security number.
- Any other information your lender requires.
“Finding a new home may carry its share of stress, but it’s an equally thrilling milestone,” said Smiley. “Being prepared for each stage of the homebuying process enables you to fully savor the excitement that comes with purchasing a new home.”
More Information
To learn more about the homebuying process and to get a pre-approval today, visit United Bank & Trust or call at (641) 754-5900.