Asking for Help is Hard! So is Buying a Home. Help is Out There, Go Ahead and Ask.

I've often found in my experience that I'd rather beat my head against a wall trying to find a solution than asking for help. It's not that I dislike asking or feel that it demeans me in anyway, I just want to be able to figure things out on my own. Now, in a lot of ways this desire to learn and to grow on my own can be laudable. But, yet, in other ways it can be inefficient and in some circumstances detract from the goal.

I know that we are all individuals, but we tend to experience things pretty close to the same way, so I believe that a lot of people have the same reluctance to seek help that I do. This way of thinking can bleed into all aspects of our life being both helpful and a detriment at the same time. One of the times in life we probably know the least and have the most room to grow is when we are looking at buying a home. It's stressful, mainly because there are so many unknowns. How much home can you afford? How much money do I need to have for a down payment? Do I need to have a down payment? What are closing cost, and do I need to have money for those? These are a few questions that may come up for first time home buyers. For the rest of this article I'll try to shed some light in those dark places and make it easier to for you to understand what it takes to become a home owner.

First thing first, in today's world credit score is king. You need to know what your credit scores are and what is in your credit report that makes up your score. There are three credit bureaus; Experian, Equifax and Transunion. You can pull a credit report from all three of the credit bureaus once a year, here is the website that you can do that at: www.annualcreditreport.com. You can pull them all at once or one at a time throughout the year. Plus, sites like creditkarma and the like are a good way to keep up on your credit in between. As far as home buying is concerned, while you can go lower in some cases a lot of lenders won't lend money unless you have at least a 620 credit score. I would recommend shooting for a 680 credit score just to help you avoid unnecessary headaches.

Second on my list is the down payment. There are a lot of information and offers floating out there about down payments and if you need to have one. I'm going to keep it simple right now and just tell you what is required for the different loan types out there. For mortgages there are government insured and conventional loans. For government loans there are three different loan types. The most recognizable and most used is the FHA, the purpose of this loan is to help those that wouldn't normally be able to qualify for a conventional loan get a home. It requires a 3.5% down payment. That is 3.5% of the purchase price of the home. The VA loan is for veterans and active military members and doesn't require a down payment. The third government loan is a USDA loan for certain rural areas and also does not require a down payment. Conventional loans require down payments vary from 20% down to 3% of the purchase price with equally varying requirements to qualify for them. So in short, unless you live in a designated rural area or are a member of the military you are likely going to need a down payment.

Mortgage insurance is tied to the size of the down payment as well. Mortgage insurance is paid monthly as part of your mortgage payment and is in place to help the lender if you for some reason are unable to pay your mortgage and default on the loan. For government loans both FHA and USDA have mortgage insurance, VA loans do not. On conventional loans it depends on how much you put down on the home, mortgage insurance is not needed if you can have 20%.

Closing costs are based on the loan amount and the home's value. They include any lender fees such as fees for underwriting and processing, title fees and escrow fees. Escrow is money set aside for the taxes and homeowners insurance. An escrow account is set up and part of the closing costs is to set up that account and create a reserve of money for those payments. Part of your monthly mortgage payment goes into that account so that when the time comes your lender will have enough money in that account to pay your property taxes and homeowners insurance. Closing costs can vary quite a bit, but are usually between 3% to 4% of the loan amount. Real estate agents will, a lot of the time, write into the purchase contract for a home that the sellers will help pay for a portion or all of the closing costs associated wit the loan. But still, having some money set aside for this is very beneficial.

The best way to find out how much home you can afford is to talk to a lender and get pre-qualified. Here are a few other items that you will need to have on hand for that:

2 years of tax returns

2 years of W-2's

2 most current pay stubs

2 most current months of bank statements

It seems daunting, and in a lot of cases, doing it by yourself can be. But like I said in the title, there is help out there. These can come in the form of Down Payment Assistance programs (DPA), knowledgeable real estate agents and lenders who know how to find the right programs for you.

As an example of the help that I can offer. I have grant money available to help first time home buyers with the down payment on a home. It's a grant, and it doesn't have to be paid back. Also there is a program that I have available that will pay for the appraisal cost for you, saving you some where around $500. I'm including two flyers that go into a little more detail on these two helps. Take advantage of the help that is out there, there is no reason to try and do this all on your own.