Throughout most of the United States each year, the homebuying season traditionally kicks off at the start of spring, and sales climb up through the summer and start to decline in the fall as the school session starts. One way to look at buying a home during the summer is that it’s half-time – time to pause, regroup and check your homeownership plan.
The best coach to have on your side as you plan your move for second-half homebuying is a professional who works at a housing counseling agency approved by the U.S. Department of Housing and Urban Development, a free or low-cost service provider that has been evaluated and approved by the department.
A housing counselor is equipped with a variety tools and offers a range of services that could make the homebuying process go more smoothly. For one thing, a housing counselor can walk a customer through what many Americans admit is a very complicated process. Taking the time to make the right decision is important, especially with a purchase as significant as a house.
When buying a home, there is a lot to talk about with a housing counselor – just look at mortgage rates, for example. According to recent weekly surveys from mortgage giant Freddie Mac, the rate for a 30-year, fixed-rate mortgage recently hit a low point not seen in three years. A lot of factors have driven the rate to recent lows, and some analysts are suggesting that it could drop even further. Should a homebuyer wait for rates to fall again? Should he or she think of something other than a 30-year, fixed-rate mortgage?
All of these questions are important, and a housing counselor is an impartial source to help consumers make the best decision. They’re not economists, but housing counselors are equipped to help a buyer understand the choices that are available.
[Read: Finding the Right Mortgage for You.]
The homebuying choice should start with knowing the right numbers. Mortgage rates are just one of four key numbers a homebuyer should know well before “signing on the dotted line.” Here are three others:
What is an affordable monthly payment?
Consumers who only have a vague idea about how much home they could afford may find themselves falling in love with a home that is out of reach. Homebuyers who work with a housing counselor can identify how much they could afford each month and own a home comfortably.
There is more to owning a home than the monthly mortgage payment – maintenance needs to be factored into the budget along with utility and commuting costs, which could be very different when renting.
Not having a good sense of these monthly expenses could lead to financial trouble. A housing counselor helps a buyer develop an eyes-wide-open, realistic budget and not go into homeownership wearing rose-colored glasses.
But affordability doesn’t stop after the purchase has closed. A housing counselor works with consumers to prepare and stick to post-purchase budgets that helps them stay successful homeowners.
According to the National Association of Realtors, there are fewer homes on the market this season than one year ago. That could lead to intense price competition, especially at the entry level end of the market. Having a firm grasp of what mortgage payment is affordable will protect a buyer from getting into hot water this summer.
What is a “good” credit score?
Summer is when most people take vacation, generally reducing the number of buyers looking at homes. However, summer is also when a majority of people overextend themselves with credit.
According to data from credit bureau Experian, 68 percent of people spend more during vacation than they anticipated. While overspending doesn’t mean the person will necessarily miss a payment, not adhering to a budget could lead to extra stress when bills come due. A single 30-day late payment could damage a credit score by as many as 100 points, making homeownership extra expensive despite today’s low mortgage rates.
Different mortgage programs require different credit scores. A housing counselor who knows the range of mortgage products available in the market can explain the various programs and how a consumer’s credit score opens the door to one or more different programs.
Has enough money been saved for a down payment?
Even with today’s low mortgage rates and a good credit score, many people believe homeownership is out of reach because they lack sufficient down payment funds. For one thing, too often consumers think that a 20 percent down payment is required. The truth is, a down payment as low as 3 percent is enough for some lenders to make a mortgage. But if down payment is a problem, housing counselors may be able to help.
One way a housing counselor could help a buyer bridge the down payment gap is by providing information on down payment assistance programs. Downpayment Resource, a Chicago-based databank of homebuyer programs, has gathered information on more than 2,000 of these programs, and many housing counselors around the country have access to this vast database.
However, most people are unaware of down payment assistance programs available to middle-income consumers. A strong housing counselor can tailor a homebuying plan that helps a consumer identify the right program that provides access to these financial options, and that enables the buyer to get closer to affordable and sustainable homeownership.
The traditional home buying season is at its halfway point, but with the help of a housing counselor coaching a consumer through the process, the challenge of finding a great home against tough competition is that much easier.