By Sandra Bernardo
LatinaListaCC*
Where do you start when you want to purchase a home? Well, besides visualizing what your perfect home would look like and researching the neighborhoods with the best schools, you need to make sure your finances are in order. We’ll focus on this area of the home buying process. Let’s take it step-by-step.
First, how much can you afford?
For most purchases, you will need a 20% down payment on the cost of the home. Saving that much can be a daunting endeavor, especially today with the housing market being much less affordable than just a few years ago. According to the National Association of Realtors, the median home price in June 2017 was $263,800 so a 20% down payment would be $52,760.
Besides the down payment, there are additional costs to consider such as closing costs to finish the sale and monthly expenses along with the mortgage—taxes and homeowner insurance as well as possibly community association dues. However, by saving a little bit each month and managing your debt, you can be on your way to making your home buying dream a reality. To learn more about budgeting and saving, go here.
The good news is that the community is making strides in homeownership. Since 2000, Hispanics have accounted for 52% of the growth in the housing market, according to the National Association of Hispanic Real Estate Professionals.
Second, know your credit scores and what is on your credit report.
Unfortunately, the community has not been diligent in this area. Lenders look at a credit score to assess the risk in extending credit — basically what is the likelihood that you will repay the loan. According to a 2016 report, only 54% of Hispanics had checked their credit score in the last year and one in five has never checked their score. You should check your score and report on an ongoing basis to see how your spending and debt is affecting the score and to make sure all of the information in the report is accurate.
There is a score and report available at each of the three credit bureaus and you should check each one. You can obtain a free Experian credit score and a free report from each bureau every 12 months.
Unfortunately, credit reports are not available in Spanish. However, Experian offers information that explains credit scores and reports in Spanish. If you would like to speak to an Experian customer care agent, you can request a Spanish-speaking representative.
For a home loan, most lenders look for a credit score above 500 (there are different scores but most lenders use the FICO® Score and the range is 300-850), which is also the minimum to qualify for a home loan through programs such as FHA, which is a government program that offers loans with a down payment as low as 3.5%.
Speaking of home loans… another key step is to shop around for who will extend you the loan. Home loans are offered by different organizations including banks, mortgage companies and credit unions and the price of the loan is negotiable.
So just like when you are out shopping at different dealers to buy a car, see who offers you the best home loan deal. When you have selected a lender, get pre-approved (pre-approval is when the lender confirms an exact amount that they can lend you). Sellers want to know that you will be able to afford and finance the cost before agreeing to sell to you.
The home buying paperwork can be confusing. While obtaining a physical deed is key in some countries, note that is not the case in the United States. Once the transaction is recorded, it is official whether or not you have the actual deed in hand but you will receive the document after a few weeks.
Also, most likely, the owner you are buying from will not be financing directly to you. A good resource to learn more specifics about the home buying process is the U.S. Department of Housing and Urban Development. They also have information in Spanish.
It may be a challenging adventure if it is your first time buying a home, but by planning ahead and taking all the right steps it can go smoothly. Soon those keys will be in your hands and you will be hosting your family’s next party.
¡Buena suerte!
(Editor’s Note: LatinaListaCC denotes article is collaborative content.)
