By Charlestien Harris
June is recognized as National Home ownership Month, celebrating the value that owning a home brings to families, communities, and neighborhoods across America. During this month, I will be sharing information about the process of home ownership and other important details that future homeowners should be aware of before, during, and after purchasing a home. As a HUD-Certified Housing Counselor, I can provide you with beneficial information and services that will help you better understand the home buying process.
Here are some suggestions to consider before you start purchasing your new home:
- Know your numbers.
Before considering purchasing a home, it’s crucial to be aware of important numbers. Understand how much house you can afford, the current mortgage rates, your credit score, and the amount available for down payment or closing costs. These fundamental numbers are directly linked to the initial steps of buying a house. Your credit score is also significant as it can determine the interest you’ll pay on the loan or the type of loan product offered during the initial process.
- Take a homebuyer education class.
This step is essential in the homebuying process. The class covers various information in a short duration and may be required by the lender to close on your loan. It covers topics such as affordability, completing the loan application, insurance requirements, understanding credit, money management, and obtaining a mortgage. I recommend enrolling in this class before approaching a lender, as being well-prepared will help you ask important questions and avoid mistakes that could cost you later on.
- Learn about different types of loan products.
There are numerous loan products available to potential homeowners, so it’s important to conduct research to find the right one for you. Here’s a short list with brief descriptions of each:
- Conventional loan – Ideal for borrowers with a good credit score.
- Jumbo loan – Best for borrowers with excellent credit looking to buy an expensive home.
- Government-insured loan – Suitable for borrowers with lower credit scores and minimal cash for a down payment.
- Fixed-rate mortgage – Recommended for borrowers who prefer a predictable, set monthly payment throughout the loan.
- Adjustable-rate mortgage – Ideal for borrowers who don’t plan to stay in the home for an extended period, prefer lower short-term payments, and are comfortable with potential future payment increases.
- Have a money management plan in place.
As a future homeowner, it’s crucial to know how much money you have to set aside for purchasing your new home. Understand your current household income and expenses dedicated to existing bills. Tracking your spending for at least two weeks can help identify any leaks or patterns that could affect your budget. This process will assist in determining how much house you can afford.
- Work on your credit if you have an issue.
If you’re aware of having less-than-stellar credit, seek help from a HUD-certified housing counselor. We are certified by the Housing and Urban Development federal agency and can assist you throughout the home buying process. Working on your credit before applying for the loan can save you time and money. Your credit score will impact the interest rate and your loan approval. It also gives you an opportunity to pay down debt or raise your score to an approved level.
- Pay off or pay down excess debt.
Debt load can negatively affect your loan qualification. Taking the time to pay off or reduce your current debt can improve your debt-to-income ratio. Each loan product has a specific ratio that determines qualification. Once you find extra money in your budget, start paying down or paying off existing debt. This move can potentially improve your loan approval. Address any debt collections that appear on your credit report, as they can interfere with the loan application process.
These are just a few of the issues you may face while planning to become a homeowner. Purchasing a new home is one of the biggest investments in your lifetime. Before you start shopping for the right home, you’ll likely need to explore mortgage options and consider the topics mentioned above.
It’s important to note that not all home loans are the same, and conducting research beforehand can help you select the most suitable option for your financial situation, potentially saving you money. Additionally, signing up for a homebuyer education class will provide you with an understanding of guidelines when you’re financially ready to apply for a mortgage. Southern Bancorp has four HUD-Certified Housing Counselors on staff, ready to assist you.
If you need additional information on this or other financial topics, you can contact me at Charlestien.Harris@banksouthern.com or call me at 662-624-5776.
Until next week – stay financially fit!
Charlestien Harris is a financial contributor to DeSoto County News. She is a financial expert with Southern Bancorp Community Partners whose articles are seen in a number of publications around the region. You’ll be seeing her columns weekly on the DeSoto County News website and our social media channels.