SECRET #1: Loan Programs
If you are on a shoestring budget, there are 5 home loan programs that you need to know about: USDA (also called “Rural Development” or “RD”), FHA, VA, and Idaho Housing.
USDA (also called “Rural Development” or “RD”): This program offers 0% down loan options in areas that are considered “rural.” In North Idaho, this includes all locations except Coeur d’Alene and Hayden. Post Falls will continue to qualify until 2020.
* FHA: This program is open to all of North Idaho. It requires 3.5% (of the total purchase price) down payment. FHA usually provides the best interest rates.
* VA: This is one of the best programs available, and it is exclusively for US Veterans. VA Loans offer 0% down options, low interest, and some of the most flexible terms available.
* Idaho Housing: This program is a type of “down payment” assistance for qualified Idaho residents. It is usually paired with an FHA or conventional loan, and covers all or most of your down payment costs.
* Conventional: There are as many different conventional loan programs as there are lenders. Many lenders offer 5% down loans on homes that are in good condition. Fixers, vacant land, and other specialty projects usually require 15%-20% down.
Lenders should always recommend the loan type that has the terms that will be the best deal for you, and if you speak with a lender about getting pre-qualified for a home loan, they will most likely reference one of the loan types above.
SECRET #2: Realtor Services Are Generally Free to Buyers
Here is a little known secret: Most Realtors don’t charge buyers for any home purchased through the Multiple Listing Service (MLS), which is the network used by most real estate brokerages in a given area. If your Realtor demands payment upfront, try a different agent. Realtors are expected to first seek to obtain payment from the sellers of the home you buy, and virtually all listed homes include a promise to pay your chosen agent when you buy.
Going directly to the agent who lists a property will not save the sellers money. On the agent’s side, it’s called “double ending” a deal, and they get both commissions that are reserved. There are some benefits and some drawbacks to this, but the important thing to note is that using the listing agent will not save money, and you will not have an advocate working for you.
Your 3rd option is to represent yourself as a buyer, and many brokerages permit you to do this. Because representation by a Realtor doesn’t cost or save anything, it’s usually to the buyer’s benefit. If you don’t trust the first agent you speak to: don’t sign a contract – find a trustworthy Realtor who will be your advocate.
SECRET #3: It’s Cost Effective
Renting a home or apartment is usually comparable in cost to paying a mortgage on a similarly sized home in a similar neighborhood.
Go to an online mortgage calculator to get a ballpark idea of what you might pay per month on your own home. Most mortgages also include mortgage insurance and property taxes in the mortgage calculation, so you don’t have to worry about extra expenses later.
Don’t forget to speak to a lender to get pre-qualified and to find out exactly how much you can spend and keep your monthly payments the same.
SECRET #4: Credit Score
You DON’T need perfect credit to buy a home.
Most lenders can offer you a great mortgage if you have a credit score of 620+. Some will work with credit as low as 580, but you generally need a bit more down payment. If your credit isn’t quite ready, it’s ok to contact a good lender 6 months, or even a year, in advance to guide your process. Many private lenders will look at your credit, show you which debts have the greatest impact on your credit score, and give you tips to raise your score quickly.
Don’t be surprised if the lender tells you NOT to pay off your credit cards. Your credit score may be at its highest when your credit lines are about half full. Ask your lender to know for sure.
SECRET #5: It’s A Simple Process
Home buying is easy – If you have the right team: A lender, a Realtor, and you.
Lender- Lenders exist in banks, credit unions, and private mortgage companies. Some offer more flexible loan programs, some can work exclusively through email (which is great if you work full-time), some are available on weekends when you need them. Ask for referrals. Get a lender who will keep your specific needs in mind and ensure that your mortgage gets set up correctly.
Realtor- Find a Realtor you trust to be available for showings, to advocate for your interests, to draw up your offer, and to coordinate closing.
Once you have chosen a home and submitted an offer, your lender and Realtor get to work to grease the wheels and ensure that you have a smooth closing. The lender focuses on the loan; the Realtor focuses on everything else: inspections, appraisals, coordinating with sellers and title company, putting out the little fires unique to your home purchase. In many closings, all the buyer has to worry about is packing!
Don’t let your home be subject to the whims of a landlord.
Invest your earned money into a home that allows you freedom.
Invest in a home that will increase in equity, and that may one day become an inheritance for your children.
Buying a home is easier and less expensive than many renters believe. Take a few minutes and call Forever Home Realty today and discuss if buying a home is an option for you.