Making Your Dream of Homeownership a Reality!

The American Dream is the opportunity to own your own home and it’s becoming easier for all Americans to fulfill that dream. Freddie Mac, a government-established company that buys mortgages from banks, offers programs that allow low-income consumers the chance to purchase homes. They also have a program that doesn’t apply a maximum on housing-to-income ratio and raises the cap on the debt-to-income ratio thus making it possible for more Americans to buy a home. Freddie Mac offers a program to obtain a loan for as little as three percent down.

Wise and Rewarding

Buying a home is not only a rewarding experience but it is also a wise financial move. You can deduct some of the costs associated with the purchase of your home from your annual taxes. What’s more, real estate almost always appreciates making it one of the safest investments you can make. And since you’ve got to have shelter, you might as well build equity in your own home rather than increasing your landlord’s equity and paying his mortgage each month.

When figuring out how much you can afford, you should consider two things:
1. Your income, assets, liabilities and financial obligations
2. Your credit rating

Use our handy Financial Calculator to easily help you determine how much you can afford.

First bit of advice: Get pre-approved

Since approval for a loan is part of the loan process, getting pre-approved puts you ahead during the closing of your home. Even better, you’ll know exactly how much a lender is willing to loan you.

Lending guidelines

Although there are no absolutes in the lending industry, there are general guidelines such as the better your credit score, the better the interest rates will be.

Lenders use two ratios to assess risk of default, they are
1. Your total monthly costs to your monthly gross income
2. Your total debts compared to your gross income 

Ideally, your costs-to-income ratio should be less than 28% but some lenders will allow up to 33%. And your debt-to-income ratio (your total monthly debt, including housing costs plus loans and credit cards) shouldn’t exceed 38% of your gross income.

Don’t be house poor

A word of caution, realize that you don’t have to borrow the maximum amount a lender allows. Remember, you have other financial goals such as saving for retirement, college, vacations, etc. And you should have money left over each month for routine maintenance and emergency repairs. Even new construction may need to be repaired; there’s no such thing as a perfect house.

Closing costs typically are two to five percent of the price of the home. This covers such expenses as inspections, discount points, lawyer’s fees, etc.

If you put less than 20% down, your lender may require you to take out PMI to protect them against default.

In calculating your monthly payments, consider the costs to heat and cool your home and factor in all expenses you’ll incur such as water bills, garbage collection fees, phone expenses, etc.

When you’re ready, we will assist with your Peoria home purchase

So you can see there are significant costs associated with owning a home but with it comes pride of ownership.

If you’re ready for your share of the American Dream, contact us today. We’re experts in the Peoria real estate market and we’ll help you find the best home for you and your family.

Why not search for homes now?