Tips For Home buying In Turbulent Economic Times
Buying a house is far from a stress-free endeavor, even in the best of times. However, the recent increase in interest rates coupled with inflation and the diminished supply of houses on the market have some home buyers more than a little rattled. Mortgage rates are up 2% since the start of 2022, which leads to higher monthly payments.
Workers Credit Union Mortgage Loan Officer Jessie Hopkins, NMLS# 944213, has been helping people buy homes for more than 13 years. She offered the following tips on what home buyers should think about when navigating these turbulent economic waters.
- Do the Math
- Debt-to-income - Before you go to your first open house, you need to know how much home you can afford. Key figures include your credit score and debt-to-income (DTI) ratio. In its simplest terms, DTI is an equation that compares how much you owe to how much you make. The typical benchmark is 36%, but Workers Credit Union offers a first-time home buyer mortgage that allows a DTI up to 50% and a credit score of 620 or higher.
- Down payment - You also need to know how much savings you can use for a down payment. Some home buyers strive to put down 20% of the value of the home because it allows them to avoid having to pay private mortgage insurance (PMI). Don’t forget to factor in property taxes, homeowner’s insurance, home improvement expenses once you move in, and closing costs. The average closing cost is approximately $2,500 without escrows included.
- Get preapproved for a mortgage - The next step is to go shopping for a lender for your mortgage. Comparison shopping is always a good idea, even now. Once you pick a financial institution, they can give you a preapproval letter agreeing to fund your loan based on the financial information you have given them. If you were preapproved even a couple of months ago, check to make sure the approval letter reflects current interest rates.
- Take advantage of first-time homeowner programs - Workers Credit Union is one of many institutions including the Federal Housing Authority, VA, and US Department of Agriculture that has programs for first-time home buyers who qualify. In addition to those programs, WCU’s Workers Way mortgage for first time home buyers accepts a credit score of 620 or higher with low down payment options on a single-family home. Workers Credit Union also offers a $1,200 discount on closing costs. For more on what Workers Credit Union offers click here.
And don’t forget, waiting is always an option. If you’re unsure of the best way to improve your DTI ratio and credit score, or how to set up a budget that includes saving, don’t be afraid to ask for advice. You can talk to a Workers Credit Union Financial Wellness Coach at no additional cost through the Workers Way.
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