Buying a house is a minefield full of “I didn’t know thats.” From choosing the right home to qualifying for the best mortgage, you want to minimize the things you don’t know.
So let’s lower your “didn’t-know” ratio. With a shifting lending landscape, unpredictable interest rates and down payment priorities based on your local market, here’s what you’ll need to know about buying a home this year.
1. What Price Range of houses can i afford?
‘How much house can I afford?’ is the first-time home buyer question Ishbia says he is asked most often. He offers a rule-of-thumb to help. “Instead of telling them about debt-to-income ratios,” Ishbia says he tells first-time buyers to consider three times their income as a starting point. So, if you and your spouse have a combined annual income of $110,000, “most likely $330,000 is your price range, plus or minus a couple of percent,” he says.
2.What’s up with interest rates?
Another change impacting the real estate market is interest rate volatility. Many experts predicted rates to steadily rise throughout 2019, yet so far 30-year mortgage rates aren’t far from where they were a year ago. At this point, it’s not clear where they’re headed over the next 12 months.
3. What credit score do I need?
A credit score of 620 is typically the minimum that mortgage lenders are looking for, Ishbia says, though some lenders will go as low as 580 or below.
4.How much do I need to put down on a house?
“People still think they need 20% down,” Ishbia says. “Three percent down, 5% down are the ways people are buying homes. Ten percent down is the average in the nation right now. You don’t need 20% down to buy a home. It’s the biggest myth out there.” “I think 20% down — especially in a tight market — is going to come into play,” she says. “If somebody else has 10% and you’ve got 20, that’s going to be a factor.” Michels says listing agents will usually advise sellers to go with the buyer who has the most cash on the table. How long does it take to buy from start to finish?
“You know what’s changed in the last three years in mortgages? Speed to closing is more important now than ever,” Ishbia says.