Home Buying Basics

40% of all homes in the U.S. are sold during the months of April through July. So if you’re thinking about getting into the home buying market, now is the perfect time.

Now, one thing you might want to be aware of as you venture out is that while home inventory is increasing – it still remains relatively low in terms of active listings. I spoke with a realtor friend recently who indicated that a moderately priced home she listed went on sale and the buyer had 26 offers in the first three days. And, many of the offers were for more than the selling price.

In this case, interested home buyers are matched against aggressive investors, and have opportunities to make a deal with people who are willing to pay cash. So if you see something you like, don’t hesitate to show interest.

The good news for us locally is that Salt Lake City is ranked as one of the top 10 cities in America to buy a home in the current housing market, according to the National Association of Realtors. In fact, Salt Lake is one of four major cities leading the housing recovery in the U.S. But this also means our home prices have jumped about 20%.

Those looking for bargains with home foreclosures or short sales are also going to find a dwindling market. Most of those homes in top condition have already been scooped up. But, there remains a large inventory of outstanding homes that provide excellent value when you combine the low market home costs with the historic low mortgage rates. Plus, most mortgage lenders, such as our family of credit unions, provide incentives such as no closing costs or cash incentives.

Earlier this year, the Consumer Financial Protection Bureau did issue new rules that will change the way homebuyers obtain a mortgage and protect borrowers from the kinds of risky lending practices that ultimately led to the housing market crash in 2007. But those new regulations won’t go into effect in 2014.

In fact, I am hearing reports from mortgage loan companies and lenders who say that underwriters are asking for a lot more documentation for all home buyers – especially for those who are self-employed. So get ready to provide income tax statements, bank statements, and any explanation for any declining income, and actual documentation that shows that checks deposited into your account were from business activities – not some other source. They are really looking for needles in haystacks.
All of our Utah credit unions – HeritageWest, Utah Central or SouthWest Community – are full-service mortgage lenders. And what this means is we offer an array of mortgage products that fit a wide range of home buyer needs.

This includes:

1. Conventional, VA or FHA loans with low, competitive rates
2. Fixed rate mortgages over 15, 30 or 40 years
3. With experienced loan advisors
4. No extra “junk” fees

We also offer a “First-Time Homebuyers Program” where our credit unions will finance the full purchase price of the home without mortgage insurance – and that’s big savings. The program is open to new members and no down payment is required. Annual income can’t exceed $65,000 and the loan amount must be between $80,000 and $250,000. They are a few other criteria relating to credit rating and debt-to-housing ratio that our loan advisors can help you with.

There are some important things to know before starting the process of buying a house.

1. What is your debt to loan ratio? This is the amount of your income that will go to the mortgage and all other debts including credit cards, car loans and child support. Lenders will want to see a ratio of 42% or lower.
2. How much do you have for a down payment? Most lenders would like to see 20% in cash. If you have a good credit score, lenders are willing to accept down payments from 5-10%. If your credit score is lower, you may have to pay mortgage insurance, which will add more costs to your monthly mortgage payment.
3. How many “points” will the lender charge you? Points are essentially finance charges that you pay up front when the loan is created and refer to loan origination fees, buy-down fees or discount fees that determine the rate of your loan. Generally the higher the points, the lower the interest rate the credit union or bank will charge you.
4. How do I know the house I want won’t fall apart? The best way to protect yourself is to hire an experienced home inspector to check the house’s structure and systems, including the roof, heating, plumbing, electrical and air-conditioning systems. A self-inspection could include checking for soft spots in the floor and fresh paint that might be covering up water damage.