As we head into peak home-buying season, Connex has some fundamental tips for buying a home in Connecticut’s robust real estate market. In addition, Connex is offering its members who are first-time homebuyers up to $1,000 credit at closing.
“Buying a home is a huge step, and it’s important to understand the risks and rewards before jumping into a market like this one that is characterized by rising prices and quick-selling homes, said Suzanne Mink, assistant vice president, Consumer Lending, Connex Credit Union. “In addition to support from our mortgage specialists, Connex members can receive a $500 credit at closing just for being a first-time home buyer and another $500 at closing if they attended one of our free First-time Homebuyers seminars.”
While the benefits of owning a home include tax advantages, a more stable monthly housing payment, building equity in your home and the potential for significant property value appreciation, the risks can include a higher monthly housing payment, costs for repairs and maintenance, decreased mobility and a chance that property values can depreciate.
Mink suggests that potential buyers ask themselves these questions before searching for a home:
- Do you have steady income and stable employment?
- Do you anticipate remaining in the same geographic location for the next couple of years?
- Have you created a budget so you know how much you can realistically afford?
- Do you pay your bills on time and have an established credit record with “good” credit?
How Much Money Do You Need?
“A 20 percent down payment used to be the “norm”, but today depending on credit scores, we see as little as 3 to 5 percent as doable. However, with less than 20 percent down, Private Mortgage Insurance (PMI), would be required as part of the monthly mortgage payment because the lower the down payment, the higher the risk for the lender. All checking and savings accounts, stock, bonds, stock options, 401k value, 401K loan, gifts from family can be used, but no ‘mattress money’,” said Mink.
Understanding the Terms
In addition to terms such as PMI, pre-qualification is when a lender evaluates your overall financial picture, including your debt, income and assets to give you an idea of the mortgage amount for which you qualify. It does not include an analysis of your credit report.
Pre-approval is the next step, and it tends to be much more involved. Homebuyers first complete an official mortgage application then supply the lender with the necessary documentation to perform an extensive check on their financial background and current credit rating. Applicants need to provide:
- Two most recent W-2 forms
- Two most recent paystubs that show salaried, hourly, overtime, bonus, commissions, and if self-employed, net Schedule C income from last two tax returns
- Two months of bank statements
- Two months of investment/retirement statements, and
- Two years of tax returns
When you are ready to buy, Mink suggests following the advice of your agent or lawyer when deciding how best to make your offer. The offer should include the price you are willing to pay, when you want to move in and what kind of inspections are needed (structural, electrical, plumbing). Generally, the amount of time the buyer and seller have to make all these things happen is usually 30 to 60 days.
For more information, contact our Home Loan Consultant, Mark Frank, at 203.603.5811 or by e-mailing him at email@example.com.