First-Time Homebuyers, you have come to the right spot. There’s nothing quite like the sense of security that comes from owning the roof over your head. No wonder home ownership is such a big part of the American dream. It means putting down roots in a place of your own, joining a community, and having a stake in future financial growth.
It also means making one of the biggest investments of your life. At Summit Mortgage, we’re here to help you manage that investment wisely. We’re dedicated to guiding you through the process of making informed choices and we never stop trying to exceed your expectations.
So when you walk through the door of your first home, you’ll have full confidence in the financial decisions that brought you there – along with the satisfaction that comes from making your dream a reality.
The Benefits of Homeownership
Responsibilities of Homeownership
Are You Ready to Buy?
Income and Debt
Preapproval vs. Prequalification
What are the advantages of being preapproved?
Who can benefit the most from preapproval?
The rewards of owning your own home include many benefits unavailable to renters. Among other things, homeownership allows you to:
Start building wealth: Making a mortgage payment every month builds up your equity stake in your home, contributing to your long-term savings and helping you solidify your financial future.
Reduce your tax burden: The interest you pay on your mortgage is usually tax-deductible, which can lead to significant tax savings–especially in the early years of the mortgage term, when most of your monthly payments go toward interest. Make sure you consult your tax adviser about the deductibility of interest.
Build your credit history: Timely mortgage payments can contribute to a positive credit history.
Eliminate landlord hassles: You’ll no longer have to fear non-renewed leases and rent increases.
Make the house your own: Aside from zoning rules, Homeowner’s Association requirements, and local building codes, you’ll be free to decorate, remodel, and renovate as you wish.
Before deciding to buy a home, consider the responsibilities that will accompany your purchase. You will most likely have to make some adjustments to account for the following:
Additional financial responsibility: Whether buying is more costly than renting depends on your individual circumstances. As a renter, some or all of your utilities may have been paid for, but they will now be solely your responsibility. You’ll also be responsible for property taxes and homeowner’s insurance in addition to your loan.
Maintenance and repairs: Maintaining your property will be up to you, not the landlord.
Less mobility: Unlike having a lease where you can move with minimal notice, moving when you own a home is more complicated since you’re responsible for ensuring the mortgage gets paid.
Depreciation: Real estate often increases in value over time, but not always. Owning a home means facing the risk that its value will depreciate.
Financial preparation is the first — and perhaps the most important — step in the homebuying process. Get ready for your purchase by taking a careful look at your finances, especially your savings, credit, income, and debt.
Buying a home doesn’t necessarily mean having to make a large down payment. Summit Mortgage offers a variety of low and no down-payment options that can help you buy a house using little or no cash.
If you have a down payment goal in mind that you need to save for, you’ll reach it more quickly if you stick to these simple rules:
Increase Personal Savings. After you’ve paid your bills, invest in yourself by adding to your savings account. Try to set aside a specific amount each month.
Avoid unnecessary purchases. The less you spend on big-ticket items that you don’t really need, the sooner you’ll become a homeowner. Keep that goal in mind when you shop.
Set realistic goals. Take an objective look at your monthly income and expenses, and decide how much you can really afford to put aside. If saving for a home causes you to fall behind on your other obligations, it will defeat the purpose.
The way you use credit is an important part of the mortgage equation. Your lender takes your credit history into account when deciding whether to approve you for a mortgage, and what interest rate you will have to pay.
If you’ve experienced financial difficulties that may have impacted your credit, it doesn’t mean you can’t get financing to buy a home. There are many flexible programs that can help you achieve your goal of homeownership.
To qualify you for a home loan and determine how much you can borrow, your lender will compare your income to your outstanding debt. Guidelines vary, but lenders usually prefer that the amount you spend on monthly debt and housing expenses be no more than 36% to 45% of your gross monthly income. Try to avoid taking on any new debt in the months leading up to your purchase.
Even if your debts add up to more than 45% of your income, that doesn’t have to mean you can’t get a mortgage. Our financing programs help make homeownership affordable for people from a variety of financial backgrounds.
A preapproval is your lender’s written commitment to finance your home purchase up to a specific amount. Getting preapproved is a smart move for serious homebuyers because it shows sellers that you come to the negotiating table ready to complete the transaction.
Prequalification is a basic look at your financials. Using your assets and debts an outline of the general idea of the mortgage amount that you may qualify for. Preapproval is much more significant as more documentation is required, including a credit report. The documents are reviewed by an underwriter and a more specific loan approval amount can be determined.
Preapproval offers a number of advantages over waiting to apply for a mortgage until after you’ve found a home. It lets you:
Shop for a home with the confidence of knowing exactly how much you can afford.
Take advantage of the preference many home sellers have for preapproved buyers.
Find out about possible qualification problems early in the homebuying process.
Preapproval is a great advantage for anyone buying a home, but it can be especially useful for buyers looking for their first home and those who are self-employed or work on commission.
First-time homebuyers. Without a record of previous mortgage payments, sellers may see first-time homebuyers as less likely to obtain financing than a similar buyer who’s already demonstrated the ability to meet a monthly mortgage payment. A preapproval helps even the field by showing the seller that a lender has already run the numbers and is willing to proceed with the transaction.
Self-employed buyers or commissioned employees. Because their incomes may fluctuate more dramatically, self-employed and commissioned buyers often lack the financial documentation of salaried employees, which can send up a red flag to some sellers. Showing that a lender has already considered these factors will help mitigate this risk.
So, before you begin shopping for a home, submit your financial information to Summit Mortgage! We’ll review your loan application and then, if you qualify, we’ll provide you with a written preapproval for a specific mortgage amount, down payment, and interest rate, subject to the terms of the commitment letter. This gives you valuable buying power, so you know what you can afford and it provides assurance to home sellers so they feel confident selling to you!
Partner with Summit Mortgage today and experience relationship lending.
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