With the economy on the upswing and the real estate market improving, those who have been gunshy about buying a house may be thinking about taking the plunge.
However, before you give your landlord 30 days’ notice and run to the nearest real estate office with a list of houses you want to see, take a minute and consider whether or not you’re ready to be a homeowner.
The first thing to do when you consider buying a home is to sit down with a lender and figure out how big of a mortgage you can qualify for and what type of loan you’re looking at, said Kristin Murray, mortgage loan originator with Valley Bank in Helena.
“It is best to get prequalified with a bank before you go and talk with a Realtor,” Murray said.
However, in preparing to sit down with a lender, it’s good for people to really think about their credit, what they can afford for a house payment and how it will impact their budget, she said.
If you have bad or questionable credit, then you may need to take some time to get your score up.
“Credit is a huge thing these days,” Murray said.
The other thing a lender will look at is your debt-to-income ratio. If you’re serving more debt than you should based on your income then you may not qualify for a loan, she said. However, just because you have a good debt-to-income ratio doesn’t mean you can afford the house payment you qualify for.
Lenders look at your gross income and your debt, but they don’t analyze what you spend each month for recreation, gas or utilities. These are important pieces of everyone’s budget and it is good to have them itemized when you see a lender so together you can figure out just exactly how big of a house payment you can really afford.
“That’s why I always ask people what do you feel comfortable with,” Murray said.
But the most important thing is to come in and talk to a lender. There are many options for home loans and a good lender can walk potential buyers through several scenarios, she said.
“It’s really important, especially for a first time homebuyer, to come into the bank first,” Murray said.
This sentiment is echoed by Alice Santos, broker/owner at Keller Williams Realty in Helena.
Getting prequalified for a loan allows buyers to move quickly when they find a house, Santos said. And that’s important in the Helena market now.
The housing market is hitting its peak season in Helena and well-priced homes in good neighborhoods are going fast, she said.
Once her clients have been prequalified, the next thing she wants them to think about before jumping into a new home is their job stability and amount of time they’re planning on staying in the home.
The average homeowner lives in their house between five and eight years, Santos said. The longer you own a home the better you are able to weather the ups and downs of the housing market. Ultimately, it’s a personal consideration that’s different with everyone, but it’s something she wants her clients to think about.
Other things to consider are lifestyle — how far do you want to commute to work, do you want to be within walking distance of trails or parks, or do you want more space between you and your neighbors.
Once those basic questions are answered, it’s time to start looking at houses, Santos said.
And for those in the market, this is a good time to buy. Mortgage rates are still very low — about3 to 3.875 percent depending on whether it’s a 15 or 30 year loan.
Additionally, some of the federal loan programs have more money in them this year, giving people different opportunities for mortgages, she said.