All across the country, including right here in our Reno community, we are seeing more and more Millennials entering the home buying market. Rents are beginning to creep up. When you couple that with 30 year FRM rates hovering just below 4%, it makes sense to look at purchasing property rather than renting. Buying a Reno home can feel overwhelming, especially when you have never done it before. Here is what a first time Reno home buyer needs to know.
Downpayments – The bigger your downpayment, the lower your monthly mortgage payment will be. That is because you won’t have to borrow as much to purchase your Reno home. If you have 20% or more of the purchase price to put down on your home, you will avoid having to pay PMI (Private Mortgage Insurance). This is a mandatory fee that loan companies charge you when you borrow more than 80% of the purchase price of a home. It is used as an insurance for them in case you default on your loan. However, don’t despair if you do not have that 20% saved up. Talk to your Reno REALTOR® about the programs available for those Buyers with a lower downpayment.
Credit Score – Learn it. Know it. Fix it, if necessary. Loan companies look to your FICO score to determine a) your creditworthiness and b) what interest rate they are going to charge you. Get a copy of your credit report right now at AnnualCreditReport.com. You are legally entitled to one free credit report from TransUnion, EquiFax and Experian every 12 months. Look for errors on your report. These could be dragging down your score and, consequently, driving up your interest rate. Send off a certified letter to the credit reporting agency/agencies that have the error(s) listed on their report. In your letter, you need to explain exactly what the error is and provide proof of your claim. This can take several weeks to resolve, so it must be done as soon as possible.
Get Approved – The loan process can take up a lot of valuable time. Secure financing before you start looking. This accomplishes two goals: 1) you know the limit of what you can spend and 2) you have much more negotiating power when it comes to making a deal than a Buyer who is waiting on financial approval first. Keep in mind that pre-qualification is not the same as pre-approval. Pre-qualifying just gives you a general idea of what you might be approved for. Pre-approval means you have a signed letter of credit in your hand.
Shop Around – This is true for both mortgage loans and Reno REALTORS®. Contact at least three different mortgage companies. Compare the interest rates and APR from each company. The APR will tell you what your true cost will be for the mortgage (including taxes and insurance). You also need to interview several REALTORS®. Find one who will talk to you in terms that you understand. You also want someone who has lots of experience under their belt. Remember, you will be working closely with this person for the next several weeks. You need to know that you feel comfortable with.
It is important to understand what a first time Reno home buyer needs to know. Purchasing a home can be one of the biggest financial decisions you can make in your entire lifetime. Follow these steps so that you can relieve as much stress as possible. Good luck!