Homeownership has been described as the ultimate “American Dream” for and for Good reason. Aside from the stability that owning a home can provide with a set monthly payment, expected tax breaks (if you qualify – be sure to consult a tax advisor), and the ability to earn equity, owning a home is perhaps the most popular way for families to build generational wealth. . In honor of June being National Homeownership Month, we thought this would be the perfect time to take a closer look at what homeownership is like in this country a generation as well as potential hurdles and solutions for anyone hoping to start the journey toward homeownership. their own house.
New entrants to the housing market are Generation Z (those between the ages of 18 and 21) and they make up just 2% of buyers and sellers in 2021. While their sample is too small to amass unique properties, it does show that a new generation is interested in homeownership and is Make sure to make a bigger impact in the future. Last year, millennials continued to make up the largest share of buyers and have done so since 2014 at 37%. In fact, 82% of younger Millennials and 48% of older Millennials were first-time homebuyers, more than any other age group. The highest-earning group of homebuyers was Gen Xers (ages 41-55) who purchased the largest and second most expensive homes at a median price of $305,000. Baby Boomers also made up a large share of the housing market with younger baby boomers (ages 56 to 65) making up 18% of new buyers and older baby boomers (ages 66 to 74) making up 14%. This generation is also expected to own their homes for the longest period of 20 years.
First-time buyers made up 31 percent of all homebuyers in 2021, but there are still common myths that keep many from seeking homes. Perhaps the biggest one is that a 20% down payment is required. This misconception is dangerous because 20% of home purchases is usually a lot of money. Therefore, the idea of needing that amount upfront scares most potential homebuyers. This belief may have arisen from the fact that without this down payment, many are subject to paying mortgage insurance, which can be costly. However, there are a lot of low and no repayment programs available to both first time homebuyers and homebuyers. There are also options to help secure your mortgage so that your total monthly payments are more affordable. The most important thing to consider when deciding to apply for a mortgage is choosing the right program for you and your down payment needs. Once you realize that having a large down payment isn’t necessary, you can begin the process with peace of mind.
Down payment assistance programs can also be a great help in opening up homeownership possibilities. Down payment assistance is a form of financial assistance available to help homebuyers cover the cost of a down payment so they can own a home. They are mostly reserved for first time homebuyers but are sometimes extended to other types of borrowers. Usually, this type of assistance can be requested through your local or state housing authority or via nonprofits. The amount you can receive depends on the type of program and your situation. Some will make the decision based on the price of the home you’re buying, while others will limit the assistance to a specific dollar amount.
Eligibility for down payment assistance is usually determined by your income and credit history. There are thousands of down payment assistance programs across the country and they come in many different forms including grants, loans and credits. Therefore, assistance may require reimbursement. If you do not qualify for the Down Payment Assistance Program through your local location Housing Finance AgencyThere are also government-backed programs that require lower upfront amounts. Some of the most popular loan programs that offer low or no down payment options include: FHA, Virginia, and USDA* home loans.
Another step on the road to home ownership is simply understanding the process. Deciding to own a home of your own can be a daunting idea but once you know what to expect and how to prepare, it can become much easier. The foreclosure process typically involves six general steps:
First step: pre-approval
During this stage of the mortgage process, the lender decides whether you qualify to borrow the money. This is done by taking a close look at your credit, employment history, income and debt obligations to check the maximum amount you can borrow. The licensed loan originator will use this information to help determine the appropriate loan program for you, taking into account your down payment amount and available interest rates. Once pre-approved, you will get a letter stating that you can actually afford a home loan of a certain value. This is the green light to start your home search. A pre-approval gives you an idea of how much you can afford and lets sellers know that you are a serious buyer. The key to a successful pre-approval is working with a trusted and licensed loan originator who can help you qualify for the right mortgage.
Second Step: Submit your preliminary documents
After the pre-approval process, you will have to decide which type of mortgage loan is right for you and provide specific documents to verify your income and prove your ability to afford the loan. This usually includes your tax returns for the past two years and your W-2 as well as 30 days of tax returns. You will also have to disclose any additional income such as alimony, bonuses, freelance work, etc. This information is used to prove that you have the funds to pay your down payment, closing costs, and any other fees that may occur.
Requirements vary based on your loan type, but a credit check is also essential. Usually, lenders require a credit score of 620 or higher to be approved for a conventional loan. A lower score doesn’t necessarily mean all is lost; There are still many options available, but they may include loans with higher interest rates.
Step Three: Processing
Once you submit the initial documents, an experienced therapist reviews, packages, and monitors your loan application. The processor collects all the information necessary for loan approval. They also contact credit bureaus, employers, accountants, and anyone else who needs to verify your information. When the time is right, the loan processor will order a home appraisal, ensure proper policies are followed, and request final loan documents. When the time comes, the therapist will also be the one to help you schedule closure. The processor is a critical person in the loan process because they keep a track of your loan from start to finish.
Fourth step: Subscription
Once the wizard has collected all of the supporting documents, your loan is sent to the guarantor. It is the guarantor’s job to review to assess the lender’s risk in working with you. If they decide that the loan is something you can manage, they will issue a mortgage obligation. To come to this conclusion, the underwriter will look at various elements, such as your credit history, proof of income, debt-to-income ratio, savings, and any other factors that help them determine if you are financially prepared to take on the responsibility of a mortgage payment. It is also their job to look at the value and type of the property in question to ensure that the terms of the mortgage meet the requirements of all parties.
Fifth step: pre-closing
Once your loan is secured, it’s time to finalize all of your loan details with the lender and get everything in place for closing day. This usually involves taking a detailed tour of the property and taking out homeowners insurance to be in effect on the day you move in. Doing your due diligence during pre-closure ensures a smooth closing day for you and everyone involved. You will receive a closing disclosure at least 3 days before closing and your closing agent and lender will work with you to make sure you have everything ready for closing day.
Step Six: Closing
This is the final step to becoming a homeowner. The good news is that the brunt of it has already been done. Now, all that is left to do is to execute the final closing papers. You will also need to bring a photo ID. When all is said and done, you’ll have the keys to your house! The first mortgage payment is usually due one month after the last day of the month in which you close.
While it may seem daunting to begin your home ownership journey, it is important to remember that you have a lot of people working on your behalf who can help you through the process. From start to finish, the mortgage process takes about 41 days, and while it can be daunting, the result is getting your own home.
The bottom line is that homeownership is not an unattainable goal. Regardless of age, race, gender, or sexual orientation, home ownership is something that should be affordable for everyone. Being familiar with home loan options, down payment assistance programs, and the mortgage process is a great place to start on your home ownership journey. This is where we can help. At Silverton Mortgage, we understand that home loans are as diverse as the people seeking them, and we’ll work closely with you to help you find the right program to fit your unique needs.
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