About the Expert
Nicole Carpenter is a senior loan officer with Fairway Independent Mortgage Corporation. Since 2005, Nicole has helped educate clients about building long-term wealth. “Most people don’t realize what a big nest egg you can create through homeownership,” she says. “Home values consistently increase year over year. There is no loss in it — only gain.”
How do I know how much I can realistically spend on a house?
I like to ask each of my clients 5 questions to help determine how much they are going to spending on a new home. The first question is the most important. What is the monthly payment they have budgeted for a new home (including property taxes and homeowner’s insurance)? If you are not comfortable with the monthly payment, the rest is irrelevant. The other questions are based on the money saved for down payment and closing costs and location of the home they want to purchase. However, 30-35% of your gross monthly income (before taxes) is a good monthly payment target for a house.
What are down payment assistance programs?
Down payment assistance programs help homebuyers by providing grants or low-interest loans that reduce the amount they need to save for a down payment. Most programs have strict requirements, such as all parties must not have owned a property in the last three years — or at all. Some programs are considered true grants while others require repayment at the end of the note.
However, very few down payment assistance programs offer totally free money. To compensate for the money they provide, these programs often increase the interest rate by a certain percentage. This could mean greater long-term interest costs.
How can I make my offer more appealing to sellers?
This is not an easy task, but there are some ways to stand out. First, make sure you are pre-approved through a lender. This strengthens your case to the seller. Keep in mind that it’s hard to beat a cash offer. If you need financing, make sure all your documentation is approved and that you have funds available to close. Also, make sure you are willing to have a shorter time period in regard to third-party financing addendums.
Some other ways to stand out and make your offer more attractive include offering more than one percent in earnest money and being willing to go over the list price by a certain percentage. Also, it’s important to work with a local lender and let their reputation work for you. Who you choose as a lender can weigh heavily in the process.
How long until my loan closes?
I use an analytics program that allows me to monitor each neighborhood and/or area. Once you’re under contract, it typically takes 30-45 days. Right now, the longest part is finding a property. Depending on the area, it may take 60 days for a home to go under contract.
Does it make sense to refinance my home now?
Yes, now is a great time to refinance your home because interest rates are so low. Generally, a mortgage refinance is a good idea if it will save you money. If you can lower the term or reset your escrow account where you don’t have to pay extra into your loan for shortages, it’s a smart move. Or, if you can get extra money to pay down credit cards with high interest rates or you want to make updates in your home to accommodate for post-pandemic lifestyles, a refinance makes sense.