Overcoming the Challenges to Buying a Home

December 22, 2022

By Nikkael Home Loans

Buying your first home is a big step, and we understand why it might feel overwhelming. Not only are you taking on a long-term financial commitment and the added responsibilities of maintenance, but you’re also navigating uncharted territory. Loan applications, finding the right lender, and negotiating interest rates and loan terms may feel confusing, but we’re here to guide you through the entire process.

Reframe Your Worry

Humans worry, but most of the things we worry about never actually happen. So before you even begin shopping around for lenders, seeking pre approval, or pulling bank statements and credit reports, identify your worry. Write it down. Then ask yourself, “Is this worry based on facts? Moreover, will I remember this worry in six months or a year?”

Reduce Your Debt

If you’re a first-time homebuyer and worry about your debt-to-income ratio, first, relax. Know that you’re not alone. Next, create a budget to gain a clearer picture of your monthly income, expenses, and debts. After that, begin paying off debts by consolidating or transferring high-interest debts to zero-interest credit cards. Additionally, consider tapping one of many free debt-management and credit repair experts to improve your financial status.

Prepare for the Transaction

Before jumping into homeownership, consider the cost of a down payment (3.5-10 percent), closing costs (2-5 percent of the total amount financed), and additional home repairs and expenses.

Tack these expenses onto your monthly budget and adjust your spending accordingly if you don’t like what you see. For example, some homeowners develop a year-long plan and live in smaller, more affordable apartments to save up for homeownership.

Find Out What You Can Really Afford

Now that you’ve determined your monthly budget, it’s time to implement it. To start, give Zillow’s affordability calculator a try. This tool will help you set your price range while factoring in your income, debt, credit score, and location.

Explore Mortgage Options

Numerous mortgage options are available on the market, and they all have benefits and downsides. Our mortgage experts are great at helping clients find mortgages with the right fit, but if you’re a first-time homebuyer, we highly recommend considering FHA loans. Why?

FHA loans are guaranteed by the Federal Housing Administration and allow more relaxed lending requirements. Here are some of the perks of FHA loans:

  1. FHA loans require a lower 3.5 percent down payment compared to conventional loans, which require a 10 percent down payment
  2. Conventional lenders typically require a minimum credit score of 620; the minimum credit score for an FHA loan is 500.
  3. FHA typically requires a DTI of less than 43 percent

Nikkael Home Loans: Your Mortgage Specialist

Need help overcoming challenges to buying a home? We’re here to help! Nikkael Home Loans has 60 years of combined experience in mortgage law, loan origination, and home protection. Plus, we’re attorney-owned and operated, so we have a higher level of ethics and accountability than you might find elsewhere. Request rates to get started today!

Curious What Terms You Can Get?

Let’s find the right loan for you—contact your Orange County mortgage broker today!

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