How to Stop Paying Rent and Own Your Own Home Instead
Would you like to own the home you always wanted for you and your family? If your answer is YES, I can show you how!
Why should you buy now?
Think about it! You are paying your landlord from $12,000 to $22,000 dollars per year (or more) in rent. Instead of that,
- You could be putting your money into your own home instead.
- You could be building equity – something that belongs to you and grows in value over time.
- There are tax benefits for being a homeowner.
But, there are some roadblocks to homeownership too!
- Not having enough cash for a down payment
- Not being able to get approved for a mortgage loan
- Not being able to find a home within your budget
- Not having good enough credit to qualify for financing.
Here are some ways to get past these roadblocks.
You need to know your options
With the confusion about the types of mortgages, interest rate options, discount points, closing costs and down payment amounts, you need to rely on someone who SPECIALIZES in mortgage lending- not the advice of well-meaning friends and family.
Don’t let this happen to you…
- Betsy and Andrew were tired of paying rent and having nothing to show for it. On the way to the grocery store, Andrew saw an open house sign, with a bunch of balloons tied to it, lots of cars in the driveway–and decided to take a peek.
- It was perfect for them. He made an appointment with the real estate agent for him and Betsy to go back the very next day. They made an offer. It was accepted! They told all their friends.
- They wanted to buy that home, but they were worried that they would not get approved for the loan. They had just bought a new car. One of their credit cards was at its limit. Betsy had just started a new job about 6 months ago. And they had no money saved for a down payment. They were afraid that they would not get approved to buy the home of their dreams, and it turned out their fears were justified. Their loan was declined because their debt ratio was too high, the lender couldn’t count Betsy’s income because she hadn’t been in her job long enough, and because they didn’t have enough money saved for even the minimum down payment required to get the loan.
This doesn’t have to happen to you. The way to avoid what happened to Betsy and Andrew is to know and understand your options before you even think about looking for the home you want to buy. And most importantly, know how much house you can buy before you try to buy one!
You want to put yourself in a position where you can be certain of your ability to obtain financing approval before you start looking for a home. All of us on the Bjornson Team are dedicated to helping people find the answers they need, so they know all these things:
- How to buy a home with little-known financing options
- How to be pre-approved for a mortgage ahead of time — even if you’ve had credit problems in the past
- Why all banks and mortgage companies are not alike
- Rates and closings cost are not the same everywhere
- How your income will be used to figure the payment you can afford
- How to negotiate with the seller to get your home for the lowest possible price, given current market conditions
- How to work with credit counselors if your credit has been damaged
- How to choose the loan program that will work best for (there are many, and some you’ve probably never heard of).
- Why you need to use a “Buyer Broker” type of real estate agent to help you buy your first home.
Get pre-approved for your mortgage before you buy your home – your credit and income are verified ahead of time. When you do, you will know:
- How much you can spend for a home
- How much money you will need to close
- If you need to consolidate your debts
- If your credit is good enough
- What’s the best mortgage loan for you
- How much money you are saving by owning a home.
A word of CAUTION: If your mortgage lender does not collect, review and verify information about your income, tax returns, bank accounts, employment and credit, you have not been pre-qualified or pre-approved. Be sure to get a real, honest-to-goodness pre-approval — not one of those “approval letters” that when you read the fine print, you find out that there are all kinds of disclaimers and you are NOT really approved at all.
There are different types of mortgage companies.
- Mortgage Bankers can offer you unique loan programs that others cannot offer you. Mortgage Bankers submit your loan to an underwriter who works for the same company they do, so they tend to know and trust each other. That works to your advantage in getting approved and closed on time.
- Mortgage Brokers have the ability to “shop” different banks, savings and loan companies and other mortgage companies to find the best rate and program for you. However, they must submit your loan to the underwriting department of the wholesale lender, and they generally have limited influence with either the underwriter or the lender’s closing department.
- Bank Mortgage Departments are usually limited on the types of loans they can offer you, and bank “loan officers” are not required to be licensed and may have limited experience and understanding of loan programs and guidelines.
A word of CAUTION: Beware of the loan officer who quotes you an interest rate and closing costs-only to add “if you check around and find a better rate, call me back because I might be able to match my competitors’ rates.” Doesn’t that make you suspicious as to WHY they did not give you their BEST rate to begin with?
There are different types of loan programs.
- FHA requires 3.5% down payment
- Conventional-type financing requires as little as 3% down
- If you are a veteran, VA may be the best loan for you. VA loans are available with 0% down payment.
- USDA may work best for you if the home is located in a rural area and you do not exceed their income limits.
A word of caution: Compare the loan programs, side-by-side, to see which one is the best for you.
You might have to pay mortgage insurance.
Mortgage insurance is something that’s included in your monthly payment if you don’t have at least a 20% down payment. Most mortgage programs have some version of it, except for VA loans. Mortgage insurance may be tax deductible (income restrictions may apply).
How to find the cash that you need for the down payment
You may already be saving for a down payment. But, you might already have resources that you did not really know have always been available to you. Sources like:
- Income tax refund checks
- Checking & savings accounts
- Cash value of life insurance policies
- Gifts from your family
- Borrow against an auto that you own
- 401k savings at work
- IRA account
You may qualify for first-time homebuyer tax credits
From time to time, the federal government, your state and even your city housing agencies offer tax credit for first-time home buyers. Be sure to ask what’s available to you now — and whether you qualify for one of these programs.
Consider a 25-year Fixed Rate Mortgage Instead of a 30-year Mortgage
you can save tens of thousands of dollars in interest payments by applying for a 25-year instead of a 30-year fixed rate mortgage. Even if you plan to only live in your home 5 years, you still save a couple of thousand dollars in interest-and MORE of your monthly payment goes towards paying off your principal balance.
A word of CAUTION: Be wary of loan officers who tell you that there is no such thing as a 25-year fixed rate mortgage. There most certainly is!
Plan ahead to be in the best financial position before you buy
Time works in your favor for this, as credit scores make a big difference on mortgage rates. If for some reason you can’t be approved for a mortgage loan today, we can show you how you can get approved a year from now – maybe even sooner. Don’t give up! We’ll be with you every step of the way.
Let us recommend a real estate agent
There is a type of real estate agent that works only for you — and not the seller. They are called Buyer’s Agents. You don’t have to pay them a commission (they are paid by the seller when the transaction closes). We can recommend a Buyer’s Agent Realtor®, one that we know personally, and who will truly have your best interest at heart.
What’s in It for You?
- There are ways to buy your own home and stop paying rent forever.
- By being pre-qualified ahead of time, you are not RUSHED into making the wrong choice when it comes to finding a mortgage loan.
- We may be able to save you thousands of dollars.
- And we won’t waste your time, either.
- Even if you’re skeptical, which is only natural, a phone call is free. The worst thing that can happen is that you might not be able to buy a home RIGHT NOW- but we can discuss your options.
- The best thing is having the peace of mind that comes from knowing you can be approved for a mortgage, save yourself a lot of money, and buy your first home.
Please call as soon as you have finished reading this-while the tips are still fresh in your mind. We look forward to working with you!
*This advertisement is not tax or financial planning advice. You should consult your own tax or financial planning expert for your specific situation.