By Lance-Cody Valdez
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Homeownership is a long and expensive process that requires financial planning, market research, and fulfillment of future needs. If you are veteran planning to buy a home, in this article from Put Veterans To Work you'll learn about four practical ways to manage finances and find the home which best suits your needs.
Plan Your Finances
Having a low credit score will act as a barrier to getting mortgage approval and convincing sellers. Using the annual credit report website, request a free report to check your score.
Here are a few ways to improve a low credit score:
● Pay off your existing debt, including credit card bills, personal loans, etc.
● Set up automatic payments from your bank account to make timely monthly debt payments
● Contact one of the three bureau agencies to get any errors in your report rectified
A pre-approved mortgage will clarify how much home you can afford, the required down payment, and interest rates, allowing you to create your budget accordingly.
Essential documents for pre-mortgage approval include:
● Bank statements
● Salary slips
● Employment verification
● Monthly debt payment statements
Compare Loan Options
As a veteran approaching a lender for a home loan, you must have a steady job, as you'll need to prove to your bank that you have the means to pay monthly mortgage payments. Also, you should fully take advantage of applying for a VA Loan as it provides the considerable benefits of zero down payments and a waiver from purchasing a PMI (Private Mortgage Insurance) as VA guarantees around 20% of the loan. Additionally, VA mortgage interest rates are significantly lower than other loans.
However, if you don't qualify for a VA Loan, there are some excellent alternatives.
● Federal Housing Association Loan: This is catered towards first-time homebuyers with credit scores in the 500s. According to FHA Lenders, the down payment requirement is between 3-4% of the home price, and you can qualify with a Debt-to-Income ratio as high as 50%.
● USDA Mortgages: These loans can have fixed interest rates as low as 1%, extended repayment periods, and zero down payments. However, your property needs to meet the USDA's requirements of location, size, and cost.
Plan Your Home Search
While you can start your home search at any time, according to Ramsey Solutions, the best time to go house hunting is during the end of summer and the beginning of fall, as it is the time with the least competition but still an abundance of homes on the market. Additionally, homes listed during winter could be from those looking to sell urgently, are open to negotiation, and offer a lower selling price.
But, before you start shortlisting houses, create a list of requirements based on your needs, which can include:
● A home with an extra bedroom to accommodate guests
● Outdoors spaces such as a patio or lawn
● Close proximity to restaurants, theaters, markets, etc.
● A neighborhood with low crime rates and easy access to emergency services
● An expected high future resale value of houses in the area
Close on a Home
Once you have found the perfect home, it's essential to take the following steps to homeownership swiftly but carefully. Here are the steps you need to follow:
● Make a solid offer to convince the sellers that you are serious about the property. Your pre-approved mortgage will serve as a big plus here.
● Once your offer is accepted, opt to open an escrow account for the safekeeping of funds while all formalities are cleared, which can take a few weeks.
● The Philadelphia Inquirer points out that you should conduct a title search to ensure no claims or liens are attached to the property.
● Complete a thorough home inspection to check for any structural damages, functioning of plumbing and electrical systems, or any other issues with the property.
● If problems are found, renegotiate the offer with the seller. Depending on the damages, you could reduce the asking price or make the seller pay for repairs.
● Negotiate closing costs with your lender. Often these are inflated, and negotiation can help bring these down.
When it comes to buying a home, there are various moving pieces. However, you can make the process easy and affordable by getting approved for a VA loan and strategically planning your house hunt.