Most families would agree they would prefer to buy a home vs. renting a home. Buying a home is not for everyone and it does require a certain degree of financial aptitude and ability. Most people begin researching mortgage loans online. The Internet is a wonderful tool to get a feel for what you might be able to qualify for. While that might be the case you also want to be realistic about what mortgage loan program you’re looking for compared to the market you’re in.
You’re a first-time homebuyer. You have a $4,000 a month job, no savings in the bank, a good credit score with little to no debt. Based on the research online you’ve determined that you can find the USDA eligible program to buy a piece of land and do you construction financing. A traditional mortgage loan you don’t qualify for as traditional mortgage loans are designed for houses that are already built, i.e., regular real estate. So, you decide to pursue this construction financing product in a market in which the average house price is $500,000. Which would mean that lot prices can generally be $300,000-$400,000. Using this as an example it’s not realistic to think that such a program would be suitable for what you’re trying to do for a few reasons. Number one, you don’t have a down payment or money for closing costs. Number 2, there’s also not a safety net. What happens if you lose your job? These are things to consider for buying a home.
Another example is said you’re a first-time home buyer and you don’t have a down payment or any money in the bank. Your income is strong say $10,000 a month, credit score just under 700, and you’re looking for a down payment assistance program to buy a home. While you might qualify for that, the down payment aid programs all have income limitations in the areas in which you’re looking to purchase a home. This means that you must be in alignment with the annual income in the area in which you’re looking. Despite that, to be successful on the home purchase, you would need a seller credit for closing costs. On top of all those things you would need the ability to get into contract on a home.
One or two layers of challenges on a mortgage loan is attainable but three or more challenges as it relates to a financial picture on an eclectic mortgage loan is not the answer. It would be better asked mom and dad or a family member for a gift or borrow on your 401K for a down payment. Get a traditional mortgage loan that will allow your debt-to-income ratio to be pushed despite having a lower interest rate and a lower monthly payment. This would expand your borrowing power for a property that’s already built and ready to go. That would be far more pragmatic than trying to chase a utopian mortgage loan that could take you months if not years to try to get. Whereas if you took the advice of a reputable mortgage lender you could have bought a home during that time, gained the equity that the market would otherwise support for you and gotten a tax break. The whole time you could have come out financially ahead in a side-by-side comparison over the same course of time. Put another way, take the advice of your local lender and real estate agent. Even if the advice is not what you want to hear they know what they’re talking about, and they know what types of loans and escrows will fly and which ones are incongruent with market conditions. Something to consider when deciding what the best way to home ownership is for you and your family.
Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.
Why chasing the utopian mortgage loan is not a practical long-term solution | Business & Latest News Update
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