Buying a home is one of the biggest financial decisions any of us will make in life. When you’re ready to buy a home, finding a real estate agent with the right experience to guide you through the process is critical — as is working with a lender who has your best interests in mind.
There’s no shortage of agents vying for your business. With so many professionals to choose from, finding the right one can feel overwhelming.
The nonprofit Minnesota Homeownership Center offers free expert help so you can feel confident in the many decisions involved with buying a home. The Center’s network of nonprofit homeownership advisors offers unbiased, expert free advice tailored to your unique situation.
Homeownership advisors are certified by the U.S. Department of Housing and Urban Development (HUD), and their services are paid for through a variety of federal, state and local grants. The Minnesota Homeownership Center serves as a HUD Intermediary, overseeing a network of HUD-approved advisors embedded in community-based organizations across the state.
If you’re seeking a homeownership advisor who speaks your language, shares your background, and has an office nearby, you can use the Center’s search tool to find a great fit. Here are some of the steps homeownership advisors can help you with:
Strengthening your credit score
A strong credit score helps you secure a mortgage with a lower interest rate and more favorable terms. If your score could use some work, an advisor will outline the steps for you to take to improve your score for more sustainable homeownership.
Determining your household budget
Lenders decide how much to give you based on your income, outstanding loans, and revolving debt. They don’t consider other monthly bills, like utility, day care, and health insurance costs. As a result, you could prequalify for a loan that would max out your budget, leaving no room for unexpected expenses or even expected ones, leaving you “house poor.”
Housing costs ideally should not exceed 28% of your monthly gross income. An advisor will help you gather the details of your income, existing debt, savings, and potential property taxes and insurance costs to stay within a comfortable range.
Knowing your mortgage options
Mortgages come in various forms, with options regarding the loan term, interest rate type, and loan type. Common loan terms are for 15 and 30 years, with longer terms generally resulting in lower monthly payments but higher total interest costs.
Interest rates can be fixed — meaning the monthly payments stay the same — or adjustable, meaning the rate may start lower but can change over time based on financial markets. Understanding how these factors impact your monthly payment is important to consider before signing loan papers.
Comparing loan rates and terms
Mortgage lenders — banks, credit unions, and online sources — offer different rates, terms, closing costs, and other lending fees, so finding the best deal is important. An advisor will help you compare loan estimates from different lenders, focusing not just on the interest rate but also the annual percentage rate (APR), which includes both interest rate and various fees and charges.
Differences in these expenses impact the overall cost of the loan, sometimes accounting for large swings in monthly mortgage amounts. Shopping around for the best loan won’t significantly lower your credit score, given multiple mortgage inquiries within a 45-day period count as one inquiry on your credit report.
Mortgage preapproval
Getting preapproved for a mortgage educates you on the maximum amount you can borrow and identifies potential issues early in the process. This helps you understand which homes are in the right price range for you, so you don’t waste time looking at listings beyond your reach. In competitive markets, buyers might need a preapproval letter for sellers to even consider their offer.
Finding a real estate agent
All real estate agents are licensed to help people buy and sell property. “Realtor” is a trademarked term that refers to a real estate agent who is a member of the National Association of Realtors and agrees to abide by its standards for conduct. Some agents specialize in certain types of housing, neighborhoods, and price points.
Your homeownership advisor will help you find an agent with in-depth knowledge of your desired neighborhood and current market trends, including pricing and inventory levels, so you can find the right home for you.
For more information on the Minnesota Homeownership Center’s advisor program, go to www.hocmn.org.
Cynthia Moothart welcomes reader responses to cmoothart@spokesman-recorder.com.