Making homeownership a reality
Madera’s housing market has changed dramatically in the past year. In April, Madera’s home prices were up 13.82 percent compared to April 2020. It’s a buyer’s market and there are several things to consider if you are looking to buy a home. The first step is to meet with a home loans advisor to review the process and answer any questions you might have. This pre-qualification process includes an assessment of the following elements:
Income — Eligible income is what you expect to bring in steadily for the next three years. Lenders are required to document any consistent monthly income and the likelihood of continuance. This can include salary from your job (whether employed or self-employed), pension, social security, secondary employment, tips, retirement, rental property, and many others. The goal is to prove you have dependable income that will continue for at least three years.
Credit — Your credit will be analyzed for both quality and quantity and it is important to understand both. Quality is your history of prompt payments. This doesn’t mean your credit history has to be perfect, but it should be good or at least fair. Given the different pricing variables of conventional, jumbo, or FHA/VA loans, the better your quality of credit, the better your interest rate will be. Good credit goes a long way toward securing the best interest rate available. Golden 1 can run a credit check for free to verify a credit score. Quantity is the ability to live within your means. Carrying too much debt can be a liability during the mortgage analysis, which combines all proposed housing expenses (principle, interest, property taxes, homeowner’s insurance, and mortgage insurance) plus your monthly consumer debt, and should not exceed 45-50 percent of your gross income.
Assets — You will need access to sufficient seasoned funds with acceptable reserves. Seasoned funds are those that have been in your accounts for a minimum of two months. This includes checking, savings, investment accounts, and retirement funds. However, use of retirement funds requires documentation of the withdrawal or loan terms that give you access to the account. Cash and borrowed money typically do not qualify as seasoned funds, but if you can document a two-month history of those funds in your accounts, they would be considered. In many cases, gift funds from immediate family members may also be considered eligible funds.
These general parameters should help you understand if homeownership is within your reach and, if it’s not, how to set goals to make homeownership a reality.
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Paul Fausone is a Home Loans Advisor at the Golden 1 Credit Union Madera Branch located at 1934 Howard Road.