Much like the foundation of a house, home ownership provides support and stability for the American Dream. It exemplifies the ideal that every citizen has an equal opportunity to achieve success and prosperity with hard work and determination. In fact, for some, home ownership is, in and of itself, the American Dream. Yet, people across the country are struggling to turn this dream into a reality.
The challenges are plentiful and varied, coming together to form their own perfect storm. To start, low housing inventory is increasing demand, right along with price. According to the St. Louis Federal Reserve, the median sales price for a single-family home in the first quarter of 2022 was $428,700, 16% higher than it was in the first quarter of 2021. And while this may cause some eager buyers to look into building a home instead, the supply chain challenges are causing increased costs for materials and fewer new homes overall. Additionally, the Fed is raising interest rates in an effort to curb record inflation—to the tune of a 2% plus increase of the 30-year fixed rate since June of 2021.
However, as dire as these circumstances may appear, the American Dream demands we stay optimistic and keep pushing forward. To that end, there are some things you can do right now to get prepared to walk into your dream home, from the American Bankers Association and our lenders at FNBMD.
1) Do Your Homework
It’s important to know your numbers, including your income and debt (total and monthly payments), your savings, your credit score, and how much you can afford for a house. You should also know how much you have for the down payment and closing costs, as well as any other fees associated with the home like a Home Owners Association (HOA) fee. You should also understand the local market (or the market in which you are looking) by researching what similar homes have sold for in the past three to six months.
2) Clean Up Credit
If, after doing your homework, you find your credit score to be lower than you had hoped, work on cleaning up anything you can. This will take time, so the sooner you start, the better. Pay down debt, if possible, and clear up anything that is outstanding. The better your credit score, the better rate you will likely get when it’s time to secure that mortgage.
3) Get Pre-Qualified
Having all the information you gathered before coming into the bank will make the entire process of getting pre-qualified easier. To get pre-qualified, you typically need your current mortgage statement, paycheck stubs (to prove income), bank balance information for all your accounts, tax returns (if you are self-employed), and information on any debts.
4) Stick To Your Budget
Don’t let the skyrocketing prices of homes distort your vision. The American Dream is not to live in debt. Consider what you really need, not want you really want. Then, set a budget and stick with it.
5) Read the Fine Print
Sometimes you’ll see offers for no-closing-cost or other low-cost loans. Offers that seem too good to be true, typically are. Clarify the interest rate and make sure there is no prepayment penalty or other hidden fees that are common in these types of “deals.” Banks have to make their money somewhere, so make sure you are aware of all of the fine print.
Rest assured, the American Dream is still very much alive and well. And by preparing to purchase your dream home, you’re one step closer to it! If you’d like to start the process, call us at 352-383-2111 and ask for one of our residential loan officers.