Introduction
A new home is perhaps the single most exciting purchase many people make in their lives. It is also, more often than not, a wise personal and financial choice. Home ownership provides clear tax advantages and the opportunity to build equity over time. In the long term, money gained from home equity can be used for other goals, such as retirement income, higher education costs, or to pass on to loved ones.
If you are considering home ownership, start planning today. The counselors at the Home Ownership Resource Center are available to walk you through every step.
Step One – Find out What Funding Assistance is Available
A number of programs are available to help low, very low and even moderate income individuals. The sources of funding include:
SHIP (State Housing Initiative Program)
The SHIP program channels a portion of new and existing documentary stamp taxes on deeds directly to local governments for the development and maintenance of affordable housing. Lee County's SHIP program provides down payment/closing cost assistance to qualified homebuyers. Currently, no SHIP funds are available.
CDBG (Federal Community Development Block Grant) and NSP (Neighborhood Stabilization Program)
Both SHIP and CDBG funds support a certain amount of downpayment assistance to individuals who qualify. Currently, the SHIP program has no funds to contribute. We do expect that CDBG funds will become available as part of the federal Neighborhood Stabilization Program (NSP). We will post updates as more information becomes available.
First Time Home Buyer Tax Credit
In 2009, first time home buyers are also eligible to receive the benefit of a tax credit up to $8,000. To be eligible for the first-time home buyer tax credits, you must not have owned a home for the past three years. So, if you sold your home 4 years ago, you could still qualify as a first-time home buyer. HORC can help you through this process, including the required 8 hour home buyer education class.
For details about the tax credit, click here.
Step Two – Learn whether you are eligible for affordable housing assistance
Eligibility requirements for SHIP include very low and low income applicants. For details, view the attached: >CLICK HERE FOR PDF
Eligibility requirements for the NSP Program include very low, low and moderate income applicants. For an overview of the NSP Program, view the attached: >CLICK HERE FOR PDF
If you are unsure about your annual income, check this hour wage conversion chart to give you the information you need.
Step 3—Affordability Analysis--Determining how much home you can buy
In a nutshell, our team will work with you to carefully analyze your ability to afford a house,
taking into consideration income, liabilities, available funds, the type of mortgages available, home prices and closing costs.
Our team is skilled in matching home buyers with the type of loans, down payment assistance programs, and lending products they need to meet their financial capabilities.
Credit Report Review
In our Credit Report Review session, a counselor will furnish your report, review and explain its content, and help you to check for any reporting errors. Then we can determine what actions, if any, are needed to improve your credit standing. You will also receive information about credit reporting laws and learn how to correct inaccurate information.
Understanding your credit score
To lenders, credit scores help them to rank their risk in loaning money. The Fair, Isaac and Company FICO score is the most common with a range between 300 and 850. The higher your FICO score, the lower the lender's risk. High credit scores also increase your chances of getting the lowest and best interest rates available. We are told that most mortgage lenders look for a score of at least the mid-600 range.
So, what influences your FICO score?
Payment history
Late payments can significantly lower your score, particularly when the lateness is frequent, recent, or severe. Bankruptcies, judgments and collection accounts are major factors in lowering your credit score.
Amount Owed
A large credit balance owed can lower your score, especially if the amount owed is close to the credit limit.
Credit History
The longer you maintain a positive credit card history, the stronger your credit score. Newer credit card accounts have less of a positive impact.
Pursuit of New Credit
Applying for credit frequently can reduce your credit score. However, promotional inquiries do not affect your score.
Types of Credit Used
If you can demonstrate that you have a variety of credit for which you have made responsible, regular payments, this can positively influence your credit score.
Step 4--Repair your credit, if needed
If your credit score isn't where you want it to be, there are steps that our counselors can help you to take to improve your ranking. Here are some examples of positive actions you can take, starting today:
- Pay bills on time, every time
- Avoid transferring balances to new cards
- Maintain credit card balances well below the maximum available limit
- Apply only for the credit you need and close cards you do not use
- Repay collection accounts, judgments, and liens
Step 5—Find a Home & Prepare for the Loan Approval Process
One of the best ways to show stability on a loan application is through steady employment for at least two years before applying for a mortgage loan. If you change a job within two years, it looks best on an application to stay within the same field of work. While it may be tempting, it is very important to avoid making any large credit purchases before applying for a mortgage, because that purchase could seriously impact your debt ratio. This in turn, directly affects the loan amount for which you could qualify.
Get Organized
Lenders will want to know the details of your financial situation. They will ask for information about all of your assets, including cash, investment accounts, and property you own. Compiling this information beforehand will simplify the process. Once you have compiled all of your information, you are ready to get pre-qualified.
Get Pre-qualified
The lender will help you to pre-qualify for a home that you can afford. This will help you to find just the right property for the right price. Be aware that once you are prequalified, there will be a set amount of time to go out and purchase a home. If you do not purchase a home within the designated prequalification period, then you have to go through the prequalification process again.
Make an Offer
At the Home Ownership Resource Center, we can help you to learn what affordable properties are available on the market, and, if you desire, we can help refer you to a number of qualified lenders and Realtors. Once you have a home contract in place, the loan application typically needs to be formally submitted within five days of signing the contract. A typical loan financing process takes from 30 to 45 days. The Home Ownership Resource Center team can help you through the process from loan application through closing.
Budget to Stay in your New Home
At HORC, we believe in preparing buyers not only how to acquire a home, but also how to budget to stay in that home for as long as you desire. We offer follow-up budget counseling services to ensure that you are staying on course. This, in turn, helps our communities to stabilize and grow stronger.