As the housing market thaws and financial market hand-wringing subsides, some consumers are ready to dive back into home ownership. The National Association of Realtors indicates that historically low mortgage rates, rising rents, and relatively positive economic indicators make buying a home an attractive option right now. The market is favorable for sellers, too: Home prices are expected to increase by up to 5 percent in 2013.
But —unless you have a significant amount of cash on hand — there could be a few bumps on the path to home ownership.
According to FindLaw.com, the nation’s leading legal information website, lenders are carefully scrutinizing buyers’ ability to repay a loan. The generally accepted principle is that no more than 30 percent of a household&’s take-home income should go toward the principal, interest, taxes and insurance.
If you’re ready to become a homeowner, there are three actions you can take to make the process smoother.
- Plan. Build up your cash for a down payment plus other expenses that come with owning a home. Check your credit report for accuracy.
- Get a pre-approval letter. After shopping around for a financial institution, get pre-approved for a home mortgage.
- Hire a lawyer. Some states require a real estate attorney to be part of the process of making an offer and reviewing loan documents as part of the closing. Where a real estate attorney isn’t required, buyers and sellers should consider seeking legal assistance for more complex matters.
Daniel Watkins, an attorney who specializes in real estate law at the Watkins Firm, APC in San Diego, says that financing is any prospective home buyer’s biggest obstacle. “Expectations among lenders and sellers are a lot higher today,” according to Watkins. “If you’re serious about buying a home, you need to have a sizable down payment, a good credit score, low debt and a solid track record of employment to qualify for a loan.”
Michelle Croteau, Director of Marketing Communications
with Robyn Hagan Cain, FindLaw Audience Team