• Stephanie Romano

Simple Steps to Owning a Home

Trying to become a homeowner? We got you covered. We’ll be going over steps you must take to become the best possible buyer in today’s market.

Let’s face it, today’s housing market is harsh for buyers. A house for sale could be receiving 20 offers or all cash buyers. So, how can you stand out from the crowd?

1. Figure out what you need vs. what you want

This step is the simplest but also the most forgotten. Many first time home buyers enter the market looking for their dream home straight out of HD TV. Reality soon hits them that homes with that type of quality are usually way over their budget.

Therefore, it is critical to differentiate your needs versus your wants. Is a wine cellar nice? Of course. Is it necessary? Not at all.

Deciding exactly what you need in a home makes the home finding process a lot smoother. Once you’ve decided your needs it is time to do some research. Find homes with everything you are looking for in the areas you are interested in. Look at fully renovated homes and homes that need some work.

Discovering the value of a fully renovated home versus a home in need of some work will help you discover what you can afford. Can you afford a $660k fully renovated home or a $500k home with about $20k worth of work?

2. Increase your credit score

Increasing your credit score increases your likelihood of being accepted for a loan. AND it can also dictate the type of loan you qualify for.

The easiest and most popular loan amongst first time home buyers is FHA (Which is backed up by the government). Using an FHA loan in today's market will only minimize your chances of getting your offer accepted.

FHA loans are backed by Housing and Urban Development (HUD). Therefore, FHA loans are insured and backed by the government. Consequently, lenders can take on more risk when dispersing FHA loans. Lenders are willing to lend money to potential buyers with lower to mid credit scores.

On the other hand, conventional loans are stricter with their credit scores because they are NOT insured and backed by the government. Consequently, buyers with conventional loans are taken more seriously than those with an FHA loan.

3. Decrease your DTI ratio

Debt-to-income ratios are the #1 reason why people get denied for loans. Surprised? Us too.

Debt-to-income ratio is used by lenders to determine how much of your gross income gets put into your debts. Ultimately, they are trying to determine if they have enough money to pay off your monthly loan payments.

You’ll get denied if your debt is too high in relation to your gross income. Anything over 49% will get you denied for a conventional loan.

Your debt excludes all your expenses such as a phone bill and electricity bill. Think of your debt as something you can not cancel such as student loans, car loans and credit card bills.

Check out my in-depth article on debt-to-income ratio to dive deeper.

All in all, make sure your debts are low in relation to your gross income

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