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Getting a home loan in Papillion NE
Are you looking for a home loan in Papillion NE? There are a few things to consider before getting into the loan process. Buying a home is a long term investment and we need to know a bit more about your long term goals to figure out which program is best for you and how best to structure your loan.
If you would like to know the steps to start the home loan process go HERE.
What are your goals for home ownership and a home loan in Papillion NE?
Buying a home is not just a place to live or a financial transaction it is a life change. Before you start shopping for homes we need to really dig into the “why” of your new home purchase. Once we know why you are purchasing a new home and get a better idea of your overall life plan, we can start to look at options that best suit your current and future goals.
Are you buying a home because of a life change?
Often buying a home goes hand in hand with other life events. Newlyweds or growing families are looking for a home. If this is the case, home buying is a great time to review all of your finances. A mortgage is basically a full audit of your credit and finances. Why not use all of that information to build a whole financial plan?
Newlyweds
If you are a newlywed couple, the home buying process is a great opportunity to review both credit histories. We will want to make sure you are on the same page with debt management and credit score. If one partner has a lower credit score or worse credit history, we can look into how to improve it and make sure your shared credit history starts to match going forward.
Since we will also be reviewing all income and assets, the home buying process is a great time to consolidate retirement accounts. If you have old 401k accounts, we can get in touch with a local financial adviser to move those into a higher yielding joint retirement account. We can also discuss options to create joint bank accounts.
I’ve met many couples who do not know their partners financial history or retirement plan. Maybe that is by design, but this information is going to come out in the home buying process. Getting in touch with a local lender early will allow you time to organize everything before the home purchase.
Growing families
Moving into a home, or into a larger home, because of an expanding family is very common. Bedrooms can only hold so many bunk beds and growing kids eventually need their own room. If you are upgrading your home and selling your current smaller home, we can take this time to explore setting up family financial planning. Most people want to take the equity from their current home and apply it entirely towards the new home. But want if we took some of that money and looked into life insurance? Maybe we could look at college fund options. The point here is the equity in your home can be used to achieve other life goals besides the down payment on a new home.
A mortgage is “cheap money”. For every extra $1000 you put down on a home, you are only going to lower your payment about $5 a month. Let’s consider that the $1000 could have another place in your finances that has a larger affect on your life.
Is your new home going to play a part in your retirement?
This is an area I am passionate about. When buying a home the most important thing is that it is a great place to live. For any home buyer there are many things to consider besides the financial benefits of home ownership. However, for 87% of Americans their home equity is the largest single retirement asset. The average home value in Papillion NE has increased 3.61% a year for the last 10 years. You will also pay off about 20% of your loan in the first 10 years on a 30 year fixed. Depending on the size of your home, you can quickly build a good amount of equity. We will monitor your mortgage and send you monthly home reports with home value estimates and loan balances. We will manage your home and mortgage the same way a financial adviser monitors your investments.
If you currently own a home you can sign up for our monthly home report here:
A few things to consider before getting a home loan in Papillion NE
The first home loan I ever did was in Papillion NE. My aunt was buying her first house is 2002. She easily qualified for the loan, but after a year of home ownership she had some expenses that she did not consider.
Budget for utilities and maintenance
Unlike an apartment, you are responsible for all utilities. It is important to factor these in to your expenses when budgeting for new home. As a homeowner you are also responsible for any repairs to the house. Even a new house will require upkeep and annual maintenance. It is important to budget for these items as well.
How long do you plan to own the house?
This is an important discussion to have with your mortgage loan officer. The type of financing that is best for you will depend on your time in the house. When a young single buyer comes to me I will ask how long they plan to live in the home. Chances are it is going to be a much shorter time frame than a family that is done growing. There are different loan programs and different ways to structure a loan based on how long you will live in the home. Someone that plans to live in the home for just a few years might benefit from a higher rate with much lower loan fees. If a family has found their “forever house” it might be a good idea to “buy the rate down”. The fees will be higher, but they will make that up with a lower payment over 30 years.
Do you buy a “fixer upper” or a “move in ready” home?
This I believe is more of a personality thing. Some buyers just like the idea of fixing up a home and others (me for example) want a house ready that is ready to go. There are few things to consider. First, unless it is new construction, no house is completely move in ready. Don’t pass up a great house because you don’t like the paint color (my mother did this 30 years ago and still regrets it). Make sure to work with a good agent that will show you what are simple fixes and want could become money pits. Second, there are few “steals” out there. Many buyers come in with to much of an investor mindset and are looking to find that house selling for way less than it is worth. They rarely find it. Any under priced house will quickly get bid up by other buyers. Look for a reasonable value and a house you love…Or will love after a few minor renovations.
Once we have established your goals we can start making a home loan plan
Each home loan program has unique advantages and disadvantages. The program that is best for you depends not only on your credit, income, and assets, but on your long term home ownership goals. We can also structure each program differently depending on your goals.
Reviewing your credit, income, and assets
The biggest factor to deciding on a loan program is still going to be your credit scores, income, and assets available. For more information on these check out our other articles on INCOME, CREDIT, and ASSETS. Once we have established what program best fits your current financial situation we can figure out how to structure the loan.
How much do you want to put down?
Buyers usually come in with an amount in mind for their down payment. For second time home buyers with a lot of cash from the sale of their previous home, they often want to put down as much as they can on the new house. However, this is not always a good idea. Your home loan is almost always going to have a much lower rate than your other debts. Instead of putting down a large payment we should first look to see if you would be better off with a smaller down payment and paying off some of your consumer debt. A slightly higher house payment will be more than offset by paying off credit cards, installment loans, and auto loans.
Even if you have little or no debt to pay off, putting down less might be the better option. You could take the extra money and look for better investment opportunities. If mortgage rates are low it might be better to take the additional funds and invest them in a higher yielding investment instead of putting the extra down on a house. If you are selling your first home and looking to buy your second it could be a good time to look at purchasing an investment property. I have had buyers put the minimum down on their new house and use the remaining funds for a down payment on their first rental property.
How long you plan to be in the house can effect the program
I mentioned this earlier in the article, but knowing how long you plan to live in the house can make a difference in how we structure your loan. If you are fairly confident that this will not be your last house we can look at options that save you more money early in the loan. If this is your forever home we can look at options that cost more upfront but are going to save you more over the long run.
Planning for a refinance
Often buyers will come in and only qualify for one program due to lower credit, income, or assets. In these cases it might be a good idea to structure the first loan in a way that plans for a refinance in the near future. For example, if you are just starting your career and have limited credit and income an FHA loan might be right for you. However, we ultimately want to get you into a conventional loan in the long term. Sitting down with a loan officer and going over ways to get your credit up over the next few years or discussing your career future can help plan for a refinance. We can get you into an FHA loan now, put all of the loan savings as early as possible in the loan, and set a date to refinance it to a conventional in the near future.
Getting a home loan is not just about current rate and fees
The purpose of this article is to help new buyers understand that there can be a lot more that goes into your home loan than just the rate and fees. Ideally a new buyer would sit down with a local loan officer just like they would a financial planner and go over all aspects of their real estate future. For over 80% of Americans their home equity is their biggest single asset at retirement. It is important to manage it in a way that puts you in the best position possible now and in the future.
We are a local home lender located in Papillion NE and we will be your consultant before you buy your home and for the many years after. Please check out our other home buying articles and reach out when you are ready for a free consultation. – Michael Petrovich
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