1. Will I live there in 3 years?
Renting has one advantage over buying - mobility. Otherwise you should be buying in most markets, but can you ask yourself if you'd want to be there 2 or 3 years from now. In some real estate markets the average person moves so often they think they may not want to be there. Still even with (Arizona's) unique growth and sprawl, the rent rates make it an almost given that you should be buying. 3 years is the number that basically helps a home buyer break even with appreciation helping cover the initial costs.
2. What's My Real Budget?
If you've been renting it makes sense to buy, but a lot of buyers just see what they can get vs what they can afford. It's very common to see first time home buyers end up "house poor" where they can't afford to furnish the home. While quite possibly the worst way to buy all other items, using a monthly budget is ideal for real estate. It's good to work on this monthly budget before talking to a loan officer for a pre-approval.
3. Will I use more than the internet to shop
Not shopping / interviewing is a (HUGE!!!) mistake that most buyers make (in fact, it is for most. According to an NAR Study, 85% of home buyers and sellers pick the very first agent they talk to). In addition, they often choose the first vendor they interact with, whether that's a real estate agent, attorney, inspector, the list goes on. It's so worth it to get good people. The same goes for picking a home.
In addition, many home buyers use sites like Zillow that have one goal. Traffic. They convert this traffic into advertising dollars for real estate agents. It doesn't matter whether a home sold or that their Zestimate of is off by 20% or even if they are misrepresenting a listing. It's worth it to use an agent here.
4. More Money Question
As in "do I have enough money to pay for the cost of purchasing (closing costs, appraisals, inspections)... and do I have enough to actually furnish the home?" Going back to the house poor questions, but basically there is a cost to owning a home and there's a cost to decorating it. If you're thinking of buying a home you should consider these costs. That isn't to scare you but rather prepare you.
If you can answer these questions confidently, then the only other question is where do you want to buy?
In an effort to reach out to homebuyers and owners juggling student loan and mortgage payments, Fannie Mae announced several new policies that ease some of the challenges these people face.
There are three major changes that are expected to make obtaining a residential mortgage easier for borrowers with student debt.
Three new rule changes
The first is the student loan cash-out refinance. This allows borrowers to refinance a current mortgage to use the funds to pay down the remainder of their student loans. They could also potentially get a lower mortgage rate in the process.
“44.2 million Americans are paying down student debt.”
The second change applies to borrowers who have some debt that’s paid by others, such as a borrower whose parents pay down the monthly credit card, auto loan or student loan payments.
Under the old rule, these balances would be included in a borrower’s debt-to-income ratio – a measure lenders look at as one way to determine the risk associated with a potential borrower. The new rules state that they can be excluded from the DTI calculation, as long as they meet two requirements:
According to Student Loan Hero, 44,2 million Americans are paying down student debt, and the typical graduate is leaving college with around $30,000 in debt; 1% of this amount would be $300. While the average monthly student loan payment is higher than this – $351 – the median monthly student loan payment is just $203.
Many times, factoring in an amount that was different than borrowers’ actual loan payments artificially increased their DTI calculation and disqualified them from getting an affordable home loan with many lenders.
Addressing a growing trend
Fannie Mae announced these rules in response to an obstacle many prospective homebuyers have encountered in recent years. While there are many ways people can balance student loan debt and mortgage payments, it isn’t easy. The National Association of Realtors found that 13 percent of homebuyers in 2016 said saving for a down payment was the hardest part of the homebuying process. Nearly half of these respondents said it was student loans that held them back.
“We understand the significant role that a monthly student loan payment plays in a potential home buyer’s consideration to take on a mortgage, and we want to be a part of the solution,” Jonathan Lawless, Fannie Mae’s vice president of customer solutions, explained in a statement. “These new policies provide three flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers.”
While these new rules are designed to aid borrowers, there is always a risk associated with new programs such as these. Some worry that, by changing the DTI formula, lenders won't get an as accurate a picture of a borrower’s actual ability to pay down their mortgage, The Washington Post reported. In reality, these rules will likely be a wonderful help for some borrowers, but not quite the right solution for others. To determine whether any of them are a good option for you, reach out to Academy Mortgage.
Information courtesy of Paige Diamond or Academy Mortgage.