The 2020 Guide to Homebuying
The homebuying experience is changing. Are you prepared?
2020 is the year! You’ve decided to buy a home, pictured your dream place, and you’re ready to go out there and find it. Only issue is you don’t know where to start or how much to save up. Luckily, we’re here to help.
Your homebuying experience is dependent on many different factors. While personal wants and needs in the home will shape the what, when, and where you buy - outside influences such as, a fluctuating market, mortgage company services, and your financial history, will shape how you buy. With 86% of homebuyers needing to finance their purchase with a mortgage, it’s good to get a general idea of what to expect from your loan and rate.
Here are the main financial factors that affect your rate:
The FICO system calculates credit scores on a scale of <580 – 800+. A high score tells lenders you’re a sure thing—helping you secure a great home loan with a low interest rate. For conventional fixed-rate mortgages in general, the higher your score the lower your interest rate. At Proper Rate, we require a minimum score of 580 for mortgage approval.
Bonus tip: You may be able to buy “discount points” from your mortgage lender to lower your monthly bill. Learn more here.
It’s important to check your Debt-to-Income (DTI) ratio. You calculate this by dividing all your monthly debt payments by your monthly income. Experts recommend keeping your DTI below 43% when buying a home.
There is a popular myth floating around stating, “if you’re buying a home, you need to put 20% down.”
Here’s when you should consider putting 20% down:
- You’re in a competitive market.
- You’re in a bidding war.
- You’re trying to avoid PMI.
- You want lower payments.
- You are paying short term.
But needing 20% isn’t always the case. Qualified borrowers who need down payment help have dozens of down payment assistance (DPA) programs to consider.
What do you do if you don’t have 20% to put down, have less-than-stellar credit, and/or are around 40% DTI?
You do exactly what a third of first-time homebuyers do - you get assistance. Even if you’re not a first timer you can get down payment assistance in a variety of ways.
- State/Local Programs
Imperfect Credit Programs
FHA Loans: By featuring down payments, flexible credit requirements (minimum of 580), and more down payment purchasing power – FHA home loans could make it easier to buy a home.
First-Time Buyer Programs
First-time homebuyers and veterans can qualify for loan programs that aren’t available to other borrowers. It’s important to keep your buying situation in mind when shopping for the best rate and product.
Some of these include:
- FHA Loans
- USDA Loans
- Fannie Mae and Freddie Mac
- Local Loan Programs
What mortgage fits your homebuying situation?
Simply put, the numbers are key to the decision.
Get a loan estimate before choosing your loan. Our loan officers have calculators that are designed to help you gain personalized insight into what home loan works best for you, allowing your dollar to go further when getting a home mortgage. If you have any more questions, speak to one of our experienced loan officers to get started.
PROPER RATE IS NOT A CREDIT REPAIR OR CREDIT COUNSELLING COMPANY, CREDIT REPORTING AGENCY, BROKER OR ADVISOR.
This article does not imply any sponsorship, approval, endorsement or affiliation of FICO or products by FICO