THINGS TO KNOW BEFORE ENTERING THE HOUSING MARKET

Monday, November 14, 2022

At YNCU, we know entering the housing market is a daunting task. School does not prepare you for the financial risk you take when purchasing a home for the first time. We want to share with you some tips to help you enter the housing market, responsibly.

Do your homework

Before you do anything that involves a large portion of your finances it is important that you do the proper research. With high prices, rising mortgage rates, and low inventory, following trends in the housing market is extremely important. Learning the language related to real estate can be extremely helpful, including terms like “earnest money” which is the deposit you put down on the property you’d like to buy. The funds of this deposit go toward your down payment. Another need-to-know term is “appraisal contingency” which is a provision in your contract that allows you to back out if the appraisal price comes in lower than the sale price.

Learn about down payments A down payment is the amount of money you put toward purchasing your home. If your down payment is less than 20% of the price of your home, you must purchase mortgage loan insurance. The minimum down payment for a home is typically 5%. If you have poor credit you may be required to pay a larger down payment. It is essential to be aware of what the down payment is for the home you are about to purchase and if you are able to pay for it.

Check your debt and credit

Mortgage lenders will look at your debt and how much income you are making. If you have high debt and relatively low income, it is unlikely that you will receive a loan. This is important information to know before you begin searching for a mortgage loan. Any extra cash you have should be used toward paying off your debt before you can start looking for a house.

Another thing to look at is your credit score. Your credit will be a factor in determining what type of loan you will get. It will have an effect on the interest rates and possibly how much you will need for a down payment. Make sure you are working toward building good credit before you start looking for loans.

Know the extra costs

A lot of people enter the housing market without realizing all the extra costs aside from your mortgage and down payment. There are expenses such as closing costs, lawyers’ fees and changing the locks. There are also extra costs like hiring a home inspector, setting up utilities and buying insurance.

Talk to an expert!

Buying a home can be an overwhelming process, especially if it is your first time. Make sure you talk to your financial advisor to know what your options are and how to best prepare for entering the housing market. It is also important to ensure you have the financial ability to sustain owning a home. YNCU can help you to figure out the best options for your financial situation.

For all your general financial inquiries and how you can plan out your financial goals, come talk with someone at your YNCU branch!

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