SAHBA Home Hints
November 9, 2008
Financing Tips for Your First New Home
Buying a first house can be very exciting. But financing it can be daunting. In both cases, potential homebuyers should research and shop carefully to ensure they find exactly what they want and need.
First, new homebuyers should f igure out what they can afford on a monthly basis. In addition to the monthly principal and interest, they also will be paying property taxes, hazard insurance and possibly a homeowner's association assessment. Buyers shouldn't be tempted to agree to an amount higher than what they are comfortable spending.
Also, when purchasing a home, cash will be needed to furnish, repair, and update the house.
“Putting additional money down on a mortgage and financing the furniture/repairs with a credit card is the worst thing one can do,” said Rey Robles, Mortgage Banker at M & I Bank. “The interest rate on the mortgage is likely to be a third of what the credit card companies charge. In addition, the mortgage interest rate is tax deductible.”
It's also important to maintain and grow a reserve account.
“Unanticipated expenses occur frequently when owning a home and it's important to be able to weather the storm,” Robles, a SAHBA member, said.
“Before applying for a loan, homebuyers should pay down debts because it will limit what they will qualify for. Lenders want to see a total debt service ratio that is less than 40 percent of their monthly income.”
The U.S. Department of Housing and Urban Development also has a handy booklet on its website called, “Buying Your Home: Settlement Costs and Helpful Information.” It describes the home-buying process and explains expenses homebuyers will encounter.
Once buyers determine the most suitable loan, they should visit a lender to get pre-approved. It still will be subject to a final verification of credit and a satisfactory appraisal, but it's a big step toward becoming a homeowner.
“First-time homebuyers have a tremendous opportunity to benefit in this market. Interest rates still are low despite the market volatility,” Robles said.
“Unlike other prospective buyers, they don't have to sell their home before they purchase another; therefore, they have a lot more leverage when negotiating.”
Details: Robles at 520-232-6252.
SAHBA represents about 750 member businesses and 40,000 jobs serving the residential construction industry in Pima and Cochise counties.
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