Beginning a career, starting a family, buying a first home – these are a few of the most anxiety-inducing yet exciting times in anyone’s life. The highest costs are waiting for those who are striking out into the real estate market, though. If you’re thinking about buying a home for the first time, it might seem easy and straightforward but the stages between now and move-in time are a little more complex.
MBANC wants to make homeownership easy for non-QM borrowers. Here’s a first-time home buyer’s guide to walk you through one of the biggest financial decisions of your lifetime.
Your credit rating, current monthly commitments, how much down payment you have, and particularly your income will influence how much home you can afford. An excellent start is to establish the maximum monthly payment you can afford by determining how much of your income is currently spoken for, as a percentage. For most lenders, your maximum debt-to-income (DTI) ratio is 43% including the mortgage.
As well, you’ll need to have a portion of the sale amount saved up. Most lenders require 20% down payment, although there are exceptions for first-time home buyers and non-qualifying mortgages.
For a major purchases, especially real estate, it makes sense to ensure you’ll be able to finance it affordably. Contacting a lender to determine how much you could be approved to mortgage. For high-net worth individuals, investors or self-employed borrowers who are buying for the first time, it makes sense to seek a non-QM lender like MBANC who can help you meet your needs.
Find a realtor
Although you could try to purchase a home without a realtor, it’s not a great idea for a first-time homebuyer. An industry professional that’s experienced in both buying and selling homes in the price range and area you want is the best option. They’ll help you find homes including exclusive listings, and their insight is invaluable to narrowing down the huge selection on the market.
Choose a home
The fun part is walking through homes and imagining what it will be like to live there. However, important components to a walkthrough include practical aspects like a feasible floorplan, enough bedrooms and bathrooms, and seeing any imminent repairs or upgrades to be completed.
Shopping for a home that fits within your pre-approval is crucial. Unless you can make up the difference with additional money down, you could be bidding on a home that you can’t get approved for.
Place an offer
Once you’ve narrowed your selection to a single home, your realtor will draw up an offer. It’s a binding agreement to purchase the home. Any provisions for fees or closing costs, any sales conditions, and a target closing date or possession date will be specified on the offer.
Two common conditions of sale include “subject to financing approval” and “subject to satisfactory home inspection”. While some sellers will counter with an offer of no conditions, it’s definitely recommended to have a home inspection performed.
With some luck, your offer will be accepted. If it isn’t, you can revise your offer, counter a counter-offer, or look for a different house altogether.
Have a home inspection performed
Unless it’s a new home, an inspection from a qualified individual should be completed within the time frame specified on the offer. It’s your assurance that the home you’re planning to purchase doesn’t have any major structural issues, safety concerns, or expensive repairs necessary. It may not catch everything but it will give an excellent idea whether to proceed with closing the deal.
Secure the mortgage
Wrap up the conditions of sale by securing your mortgage. With a pre-approval in place, it should be relatively quick to get the deal approved. The mortgage lender will require an independent appraisal and you’ll need to provide supporting documents for income.
Close the deal and get the keys
Your realtor will help walk you through the close. You’ll need to hire an attorney to complete the contracts and pay closing costs, if required. There may be taxes or additional fees to pay also. Then, on the predetermined date, you’ll receive the keys for your new home!
When it comes time to determine affordability and secure a mortgage, MBANC is here to help non-qualifying borrowers. With options to secure bank statement mortgages, jumbo loans, and other non-QM loan products, we often get you approved when no one else can.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.