Pre-Approval: Be Smart – The First Step to Home Buying

Pre-Approval: Your 1st Step in Buying a Home | MyKCMIn many markets across the country, the number of buyers searching for their dream homes outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.Even if you are in a market that is not as competitive, understanding your budget will give you the confidence of knowing if your dream home is within your reach.

Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

One of the many advantages of working with a local real estate professional is that many have relationships with local lenders who will be able to help you through this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.” Aside from the application information it is very important to obtain some upfront expectations on price point, payment amount and cash to close.

Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:

  1. Capacity: Your current and future ability to make your payments
  2. Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
  3. Collateral: The home, or type of home, that you would like to purchase
  4. Credit: Your history of paying bills and other debts on time

Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.

Bottom Line

Many potential homebuyers either underestimate or overestimate the down payment and credit scores necessary to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so.  Ask us about our Home Express Mortgage Plan and how this can save you time and money in the home buying process.

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Home Buying Myths Slayed

Home Buying Myths Slayed [INFOGRAPHIC] | MyKCM

Some Highlights:

  • The average down payment for first-time homebuyers is only 6%!
  • Despite mortgage interest rates being over 4%, rates are still below historic numbers.
  • 88% of property managers raised their rents in the last 12 months!
  • The credit score requirements for mortgage approval continue to fall.

How Much Do You Need to Make to Buy a Home in Your State?

How Much Do You Need to Make to Buy a Home in Your State? | MyKCM

It’s no mystery that cost of living varies drastically depending on where you live, so a new study by GOBankingRates set out to find out what minimum salary you would need to make in order to buy a median-priced home in each of the 50 states, and Washington, D.C.

States in the Midwest came out on top as most affordable, requiring the smallest salaries in order to buy a median-priced home. States with large metropolitan areas saw a bump in the average salary needed to buy with California, Washington, D.C., and Hawaii edging out all others with the highest salaries required.

Below is a map with the full results of the study:

How Much Do You Need to Make to Buy a Home in Your State? | MyKCM

GoBankingRates gave this advice to anyone considering a home purchase,

“Before you buy a home, it’s important to find out if you can afford the monthly mortgage payment. To do this, some financial experts recommend your housing costs — primarily your mortgage payments — shouldn’t consume more than 30 percent of your monthly income.”

As we recently reported, research from Zillow shows that historically, Americans had spent 21% of their income on owning a median-priced home. The latest data from the fourth quarter of 2017 shows that the percentage of income needed today is only 15.7%!

Bottom Line

If you are considering buying a home, whether it’s your first time or your fifth time, let’s get together to evaluate your ability to do so in today’s market!

You Can Save for a Down Payment Faster Than You Think!

Saving for a down payment is often the biggest hurdle for a first-time homebuyer. Depending on where you live, median income, median rents, and home prices all vary. So, we set out to find out how long it would take to save for a down payment in each state.

Using data from the United States Census Bureau and Zillow, we determined how long it would take, nationwide, for a first-time buyer to save enough money for a down payment on their dream home. There is a long-standing ‘rule’ that a household should not pay more than 28% of their income on their monthly housing expense.

By determining the percentage of income spent renting in each state, and the amount needed for a 10% down payment, we were able to establish how long (in years) it would take for an average resident to save enough money to buy a home of their own.

According to the data, residents in Ohio can save for a down payment the quickest in just under 3 years (2.44). Below is a map that was created using the data for each state:

You Can Save for a Down Payment Faster Than You Think! | MyKCM

What if you only needed to save 3%?

What if you were able to take advantage of one of Freddie Mac’s or Fannie Mae’s 3%-down programs? Suddenly, saving for a down payment no longer takes 5 or 10 years, but becomes possible in a year or two in many states as shown on the map below.

You Can Save for a Down Payment Faster Than You Think! | MyKCM

Bottom Line

Whether you have just started to save for a down payment, or have been saving for years, you may be closer to your dream home than you think! Let’s discuss so I can help you evaluate your ability to buy today.

Veterans Affairs Loans by the Numbers [INFOGRAPHIC]

Veterans Affairs Loans by the Numbers [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Since the creation of the VA Home Loans Program, 22 million veterans have been able to achieve the American Dream of homeownership.
  • So far in 2017, $188 billion has been loaned to veterans and their families through the program.
  • VA Purchase Loans are on the rise in 46 out of 50 states and Washington, DC.

No… You Do Not Need 20% Down to Buy NOW!

No… You Do Not Need 20% Down to Buy NOW! | MyKCM

The Aspiring Home Buyers Profile from the National Association of Realtors (NAR) found that the American public is still somewhat confused about what is required to qualify for a home mortgage loan in today’s housing market. The results of the survey show that non-homeowners cite the main reason for not currently owning a home, as not being able to afford one.

This brings us to two major misconceptions that we want to address today.

1. Down Payment

NAR’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 39% of non-homeowners say they believe they need more than 20% for a down payment on a home purchase. In actuality, there are many loans written with a down payment of 3% or less.

Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.

2. FICO® Scores

An Ipson survey revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking a “good credit score” is over 780. In actuality, the average FICO® scores of approved conventional and FHA mortgages are much lower.

The average conventional loan closed in August had a credit score of 752, while FHA mortgages closed with a score of 683. The average across all loans closed in August was 724. The chart below shows the distribution of FICO® Scores for all loans approved in August.

No… You Do Not Need 20% Down to Buy NOW! | MyKCM

Bottom Line

If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now, but are not sure if you are ‘able’ to, let’s sit down to help you understand your true options.

The Mortgage Process: What You Need to Know

The Mortgage Process: What You Need to Know [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Many buyers are purchasing a home with a down payment as little as 3%.
  • You may already qualify for a loan, even if you don’t have perfect credit.
  • Take advantage of the knowledge of your local professionals who are there to help you determine how much you can afford.