At last, you have decided to fulfill a lifelong dream of homeownership. Good for you! You will finally have a place to call your own. Moreover, you will have a fundamental tool for financial growth.

You may feel discouraged when you learn the process involved in becoming a homeowner. It is true that it can be challenging. You will work with many different people along the way and you are inevitably going to have many questions. Buying a home doesn't have to be intimidating and you don't have to go through the home buying process with feelings of helplessness and uncertainty. Our staff at Direct Correspondent Lender provides you with the knowledge that you need to go through the process knowing what to expect every step of the way so that you may sign on the dotted line with peace
of mind. When working with Direct Correspondent Lender you will find that buying a home can be exciting and rewarding,
as it should be.

Benefits of homeownership

Home ownership brings you both monetary and personal rewards. But purchasing a home is an important decision. Here are some tips to help you determine if owning a home is right for you.

What are the rewards of owning a home?

Tax savings

You may receive considerable tax savings as you can deduct mortgage interest and property taxes from your federal income tax and many states’ income taxes if you itemize your deductions.

A more established monthly housing expense

Your monthly housing loan or mortgage expense can remain the same for the life of your mortgage, depending on the type of loan you choose.

Equity

You may build equity in your home over the life of your loan, which allows you to prepare for future expenses like children’s education or your retirement.

Drawbacks of homeownership

Are there risks of owning a home?

For most people, homeownership is a good investment. However risks do exist. If you recognize the benefits and risks of homeownership, you can decide the most practical time for you to purchase a home.

Your monthly housing expenses may of increase

Your monthly mortgage payment may be greater than your rent. Nonetheless, these increased monthly payments may be offset by a tax benefit at the end of the year. Talk to a tax professional to understand your particular situation.

You become your own landlord

If an appliance breaks, you will be responsible for paying for the repair or replacement. You are also accountable for the maintenance of your home and property. There are home warranties available that cover your new home and major appliances like heating and cooling systems.

You must sell your house to move

Depending on the local real estate market, the time it takes to sell your home may vary. But it usually takes longer than simply moving from a rental property.

Property values can depreciate

You can lose value in your home for several reasons, such as an economic decline, the quality of your home, or a decline in a neighborhood's home values. If your home value decreases and you have to sell it for under the amount you owe, you will be required to pay the full mortgage.

What is affordable for you?

To get an estimate of what is affordable for you spend, multiply your annual gross income (before taxes) by 2.5. For instance, if your annual household income is $50,000, you may be capable of qualifying for a $125,000 home. The actual amount will be based on your income, your debt, and your credit history.

Mortgage lenders normally use the housing cost and debt-to-income ratios to more precisely conclude how much you can afford to invest on your mortgage.

Housing Expense Ratio

Mortgage lenders advise that your monthly mortgage expense should be less than or equal to a quarter of your monthly gross income. This proportion can change depending on the type of mortgage you select.

Debt-to-Income Ratio

Mortgage lenders determine whether your total debt is greater than 30-40% of your monthly gross income. Keep in mind; debt is not just credit cards and student loans. It may also include alimony, child support, car loans, and housing expenses.

Buying a Home

Mistakes to Avoid – Quick Tips   

Most new homebuyers are eager to move into their home as soon as the seller accepts their purchase offer. Here are some mistakes buyers often make during that exciting time.

1. Not planning for closing costs

The day you’re scheduled to sign your loan documents, you’ll also be expected to write a check for a number of expenses, which typically include escrow fees, title insurance, taxes, prepaid homeowners insurance, points and other lenders’ fees. Together, these are known as closing costs.

Plan for closing costs by getting a good-faith estimate from your Direct Correspondent loan consultant.

2. Not having enough cash on hand after closing

After securing their mortgage and paying closing costs, many homebuyers have no money left to pay for unforeseen events. Some people even realize they are not able to make their first mortgage payment on time. That’s why most lenders require that borrowers have cash reserves equal to three months’ worth of expenses after closing.

3. Shopping for a house without knowing how much you can afford

Borrowers often begin their home search without a clear idea of how much they can afford. Which usually means wasted time and frustration over finding “the perfect” house that you can’t afford.

The amount you can spend on a house depends on your income, the amount of cash you have available, and the mortgage terms, including interest rates, points, term, down payment requirements, and the maximum allowable ratio of housing expense to income.

Tips on having the money you need when you need it 

Avoid making a costly purchase as you’re looking for a home

It’s often tempting to buy things on a whim when you’re in the excitement of looking for a new home. But it is wise to wait for your loan to close to make major purchases. Financing major purchases with a credit card could put your credit value at risk during the most critical stages of your loan. Using cash to buy costly items can also generate a setback since many banks also consider your cash reserve when approving your mortgage.

Avoid getting a new job

Lenders prefer to see a stable job history. In general, changing jobs will not influence your capability of being eligible for a mortgage loan - particularly if you are going to receive an improved salary. However for some people, getting a new job while in the loan approval procedure could elevate some concern and ultimately effect your application.

Avoid switching banks or moving money around

As your lender evaluates your loan package, they may request bank statements for two or three previous months on your accounts, money market funds and other liquid assets. To avoid fraud, most lenders insist on a meticulous paper trail to document the basis of all funds. Changing banks or transferring money to another account - even if it’s just to merge funds - might make it complicated for the lender to document your finances.

Avoid giving a good faith deposit directly to the seller in a For Sale By Owner (FSBO) purchase

As a rule, your good faith deposit belongs to you, not to the seller, until the deal closes. Your FSBO seller may not know that your good faith funds should be applied to your expenses at closing. Get an Escrow Company or other neutral party such as a Title Company who can hold the deposit or put it in a trust account until you close on the home. Your purchase contract should dictate to whom the funds go if the transaction falls through.

Avoid overlooking your lenders requirements

In order to process your loan, lenders require that you meet certain conditions. Your lender will need duplicates of several of your monetary documents. You are responsible for providing them as soon as possible. Failure to present certain eligibility credentials may cause your loan to be denied.

Frequent misunderstandings about homeownership

Perception:

You need excellent credit to become a homeowner.

Reality:

You may qualify for a mortgage with less-than-perfect credit. And you can improve your credit over time.

Perception:

20% down payment is required to buy a home.

Reality:

There are many types of mortgages and programs that permit low and no down payments. However remember to include other costs such as closing costs, property taxes, moving expenses, and repairs.

Perception:

You can only buy a home in the U.S. if you're a citizen.

Reality:

If you’re a legal resident, you can purchase a home in the U.S.

Perception:

You cannot qualify for a mortgage loan unless you have a bank account or credit card.

Reality:

Possessing a bank account is always a wise choice and helps you establish credit. However, lenders can approve you for a mortgage even if you don't have a bank account or credit cards. You'll likely need to maintain records showing a history of payments you've made for items such as rent, utilities, and car payments.

Perception:

Your lender shares your personal and financial information with other companies.

Reality:

By law, banks and other financial institutions are limited in the use and disclosure of your personal information.

Perception:

If you're overdue on your monthly mortgage payments, you'll lose your house.

Reality:

If you have a financial suffering, like the casualty or a medical emergency and fall behind, most lenders will be lenient and help you make payment arrangements.

Perception:

If you’ve recently changed jobs you cannot obtain a mortgage.

Reality:

You can change jobs several times and still get a loan to buy a home. Lenders recognize that people change jobs. However, it’s important to show that you've had steady income.