It is both easier and harder to buy a home.
Average long term mortgage rates saw
their biggest one week jump in 35 years,
but the demand for homes is less,
which means less competition for you,
no matter if you want to now do it
now or wait, you need to get your
finances in order first to buy a home.
Nathan Grant from money tips
is here to help us.
He's also answering your money questions.
Anything, money, credit card,
credit score related.
You can text us those questions.
The number is
336-379-5775.
Remember your question is anonymous
and it gets answered in real time.
All right, Nathan?
So we're talking about home buying.
Everything's crazy now,
but not as crazy.
Maybe as it was before with people
just making cash offers that
were like 10 and $20,000 more.
Yeah, the main thing to remember is
no matter what happens externally.
Whether the markets crazy
we're in a recession,
the federal rate changes and stuff.
There are things that like personal
financial responsibilities that
you can take to get yourself
ready for buying a house,
so that's kind of what I want to go over.
And I guess we could start
with credit scores.
All right, let's
do that. Yeah, what do we need to have
when it comes to if we want to get
ourselves in a position to buy a house?
So if you want to get a conventional
home loan you wanna have at
least a credit score of 620.
That's considered a good credit score.
But if you're, uh, 7:40 or above
on most credit scoring models,
that's going to be put you
in the excellent range.
So you're gonna get the best terms
and rates for a conventional loan.
If you're above that number now,
if you don't have 620,
you're not totally out of
the loop of getting a house.
You just might still qualify for an
Federal Housing Administration loan,
FHA loan,
or if you're a veteran or in the military.
There are VA loans that have
some lower requirements too,
so you still may be able to get in there,
depending on where you're
at. OK, and just a little side.
Dog here if you're looking to
build up your credit score,
what are some of the best ways
to build up your credit score?
Yep, there's kind of some
general things across the board,
no matter where you're starting
from with your credit scores that
you can steps you can take to
personally take responsibility
and start turning things around.
It always begins with paying
your bills on time,
because late payments will remain on your
credit reports for seven years at least.
So paying those on time
in full when possible.
If you're carrying debt month to month,
that's going to not only cost you more money,
but it's gonna affect your credit.
And if you end up closing
accounts once you pay them off,
that's gonna hurt your credit score.
So keep those accounts open if you aren't
paying an annual fee to keep them open,
and that can help your credit too.
And of course,
having a low credit utilization,
which is the amount of your
available credit being used,
will definitely help too.
So as you're paying down that,
that that percentage is going to go
down and help you a lot as well.
OK, and we can dive into more of those
if you have some more questions about any
of those kinds of things that he said,
but we're going to kind of go
down what we are looking at here.
So let's talk about that debt
to income ratio.
That is one of the things you just mentioned.
So let's talk about that.
Yeah, so when you go to apply
for a loan for a mortgage,
the debt to income ratio basically
is all of your monthly debt payments
divided by your monthly gross income.
So if your monthly gross income is,
say, $4000 and all your rent and
other debts add up to about 1200,
that would be a DTI of 30%.
You want to be at or below a 36%
to qualify for Inventional loan.
So even if you're making more per month.
Let's say you get like 10 grand
per month if you if 5000 of that
is going towards your you know
payments and stuff for each month
you actually have a 50% TI,
so that could actually show lenders
that you're a higher risk borrower.
So really looking at that number
doing that calculation really can
kind of give you a big picture
idea of where you're at even before
you start the home buying process.
All right, let's talk about down payment.
I think that's what keeps a lot of people,
sometimes from buying a house is not
thinking that they can have enough money
to scrape together for that. Payment,
yeah, so if you generally
wanna make a down payment of at
least 20% when buying a home,
but don't look at that as like
a brick wall preventing you
from getting a house completely,
the thing that will happen if you
don't make at least 20% of a down
payment towards the home is you're
going to have to pay the mortgage insurance.
And depending on the type of loan,
there's different things.
You get a private mortgage insurance
if you have a conventional loan
and basically you're paying.
It's like adding to your monthly
payment up until.
You've paid about like 22% of the principal,
so that's one.
And if you have FHA loan that I
mentioned earlier, it's a similar thing.
It's an MIP,
a mortgage insurance premium
that's divided into 2 payments.
You're going to pay an upfront
premium at closing,
which is about 1.75% of the loan amount,
and then you will have a monthly annual
premium rolled into your payment as well,
so you obviously don't want to pay
more than you can really have to,
but it's good to know that people are
coming from different starting points
when they're looking into buying a home.
And it's nice to know that it's
not just like a absolute hard no.
In a lot of cases if depending
on where you're coming from,
you might be able to work around it.
You just want to know these things
ahead of time so you're not blindsided.
We have a whole bunch of
mortgage questions like this one.
Will having a large student loan
debt stop us from buying a home?
So you know when I when you're looking
at that you it's good to have a
variety of debt cause it helps with
your a variety of credit accounts,
but that's kind of like the hardest
thing for a lot of people is like where
do I start and you should generally
start when it comes to like paying debt,
you wanna obviously pay at least the
minimum amounts due on everything.
But if you're trying to save money
and stuff you towards something
like a house purchase or something
else just as big as that,
paying off the high interest debt
like credit card debt unfortunately
is the good starting point.
So you know, try to like.
Make sure you have a pretty good
like emergency savings so you're
not dipping into the credit cards
to and building up that debt more,
but targeting credit card debt,
which is usually 20% or more APR.
On those accounts you target the high
interest that's going to free up more
money in your budget to go towards
things like your student loans,
like saving for a house, etcetera.
Yeah, and paying regularly on time.
Your student loan could actually
help your credit score some,
because you're showing that
you can actually do that.
Alright, we're going to take a quick break.
Going to be back, we've got two
more segments with our money expert,
so make sure you get your text question.
We'll be right back.