May 5, 2022
If you’re considering an FHA home loan to purchase your first home, there are some issues you might not think about right away when planning and saving for your loan. Anticipating some of these issues can help you make smarter choices about your home, the home loan, and the features of the mortgage.
Think Like A Lender
That is advice commonly reserved for the credit check, and it’s good advice. Learning to think like a loan officer can help you better determine whether you are truly ready to apply for the loan. For this article, “think like a lender” also extends to things like the type of home you want to buy. What does this mean?
When a home is appraised, your lender’s review of the appraisal report will include the appraiser’s look at the home in question but also “comparables” or similar properties in the local area. You can do this too by noting the size and type of home you are looking for during the house hunt, and comparing that to similar models in terms of age, condition, price, and location.
That may sound fairly obvious to more experienced house hunters. The goal for a new borrower is to get an idea of the market overall–does the house you want have a price that isn’t in the same league as similar homes in that zip code? Maybe or maybe not.
By checking, you’ll get a better idea of which prices are more wishful thinking and which ones are closer to reality.
Check Local Housing Trends
Ask any real estate agent in your local area whether you’re operating in a buyer’s market where there is a lot of supply for the demand or a seller’s market where high demand for homes and a lower number of houses for sale could shift the negotiations into the seller’s favor.
It’s good to know what kind of negotiating environment you’ll be in when you are ready to start looking for a house.
Home Loan Timing Counts
If you are planning a major career change like starting your own business, separating from the military, or becoming a commissioned employee after an extended time on salary, the timing of your home loan application will become more critical.
Lateral job moves may or may not be an issue with some lenders, but a major shift (from salary to contractor, for example) may require the lender to certify a minimum amount of time in the new job (think 12 – 24 months depending on circumstances) and earning type before a loan can be approved.
Thinking About The Future
Buying a home you can grow into and not out of makes sense if you anticipate changes in family size or other issues that might require a larger home at some point down the line. Is it better to pay more for a larger home and avoid having to sell in a few years?
Or do your plans fit more with the notion of buying a starter home and moving on when the time is right? There’s no instruction manual for these choices, but they are important to consider when deciding how large or small to buy with an FHA loan.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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