An article in AOL.com thinks first time buyers should find certain signs encouraging after many have faced a difficult time trying to get a foot on the housing ladder.
Fannie Mae and Freddie Mac recently introduced new mortgage options with just a 3% down payment and interest rates are continuing to average just below 4%. In addition the economy is still recovering. As such, the article has outlined several important tips to help prospective buyers realize their dream this year.
The first is pretty straightforward and is simply to get your credit in order. The good news is that mortgage lenders are reducing credit requirements as the average credit score required for a loan last year was 726 compared to 738 in 2013. Those buyers without high scores may now stand a better chance of getting a mortgage. The scores needed for getting a conventional loan are around 720 or more but VA and FHA loans need a considerably lower score of around 620. In addition, buyers are warned to get reports of their credit rating and to examine them carefully for any mistakes that could bring down their score. It’s also important to work at bringing down any debt.
Although it may be possible to get a mortgage with a relatively low down payment, buying a home still brings about a plethora of potential upfront costs such as home inspections, closing costs and appraisals. Building up a nest egg towards these costs will put buyers in a stronger position when they find a home they’d like to purchase. Having additional funds also makes a loan application look that much stronger.
It also pays for potential buyers to understand the type of mortgage options they may qualify for, along with the benefits and drawbacks of each. Not having to save up for a substantial down payment or having to pay private mortgage insurance definitely qualify as huge benefits but only a small percentage of people will qualify for this type of loan.
Preapproval is another huge factor and is critical when house hunting. Getting a loan preapproved does require more documentation and paperwork than getting prequalification for a mortgage but it also provides buyers with a much clearer indication as to how much they can realistically spend on a property. A preapproved loan also indicates to sellers and real estate agents that a person is serious about purchasing a property and is more likely to follow through on an offer.