Live the Home Ownership Dream

The lure of home ownership is catching on among renters across the US. Credit the surge in buyers to today’s record low mortgage rates, in large part. Freddie Mac says 40% of renters plan to purchase a home this year. Home sales are booming, and the National Association of Realtors says new mortgage applications are at levels not seen since 2008.

If you are ready to say goodbye to apartment life and join the ranks of home ownership, here are a few steps to start the process.

Engage a Real Estate Agent

In an active real estate market, going it alone can put a buyer at a real disadvantage. You’ll improve your chances of getting the home of your dreams by leveraging the knowledge of an experienced real estate agent.

Choose your agent wisely; ask friends and family for recommendations, and look for someone with experience in the areas in which you are most interested in buying. They have the knowledge to guide you to the right offer price, and to help you navigate from purchase offer through closed sale.

Determine What You Can Afford

Don’t waste time researching homes that are beyond your budget. Determine what you can afford, and look for homes within that price range. To determine what a borrower can afford, lenders use an underwriting system to evaluate all aspects of a person’s finances, including existing debt, credit history, assets, job stability, amount of down payment, and the occupancy type (owner occupied versus rental property).

There are many different types of mortgage programs, and each has a debt-to-income maximum threshold. That’s why it is always good to start your home-buying search by getting pre-qualified or pre-approved by a qualified loan originator.

Get Pre-Qualified or Pre-Approved

You’ll up your chances of winning out over other offers if you are a pre-qualified or pre-approved buyer. What’s the difference?

A pre-qualification letter is issued by your mortgage loan officer without underwriting’s review of your income, assets, financial history, and/or credit. UFCU’s award-winning real estate lending team can have you pre-qualified over the phone and by email within 24 hours; no in-person visits are needed.

While similar, pre-approval is more detailed and takes longer, around a week. Your mortgage lender will guide you through the pre-approval process. A strong pre-approval letter includes the underwriter reviewing your proof of income, such as W-2s and pay stubs from the last two years, as well as statements from all your financial accounts. If you are self-employed or receive incentive pay of any type, you will need to provide copies of the last two years’ income tax returns and a recent profit and loss statement. Your lender will run a credit report, consider your credit score, credit history, and debt-to-income ratio, and issue a pre-approval letter stating the loan amount you have qualified for.

Typically, pre-qualification and pre-approval letters are valid for up to 60 days. Armed with all the knowledge that comes with pre-qualification or pre-approval, you can target your new home search to properties for which you know you already qualify.

Protect Your Credit

Lenders will typically run a final credit report before closing a mortgage to confirm your financial situation. That’s why it is best to consider the home shopping period as a “quiet period” in terms of making any changes to your financial picture. Avoid the temptation to charge new furnishings or other large purchases, and don’t open new credit card accounts. Even if you don’t charge on the new cards, any new credit inquiries on your credit report can create a red flag for your mortgage lender. Continue paying all your bills on time, and postpone job changes if possible until after your mortgage is closed.

With a little preparation, there are many avenues to making your dreams of home ownership a reality. Happy house-hunting!