Tag: good credit

Real Estate

5 Steps To Prepare For Your First Home

Lupe Ruiz, REALTOR®/Broker

You would like to buy your first home but don’t know where to start? Here are five things you can start working on:

  1. Establish good credit – You can open a credit card and use it for small purchases you can afford to pay off at the end of the cycle. Or, get a secured credit card at your bank. With this type of credit card, you deposit your own money and only charge up to that amount. You can also ask someone with good credit to add you as an authorized user on one of their credit cards— but, most importantly, pay on time and do not max your cards (tip: use no more than 30% of your credit limit).
  2. Prepare to afford a house – As a general rule, your total housing expenses should not be more than 28% of your gross monthly income; and ALL monthly debt (including housing expenses) should not exceed 36% of your gross monthly income. Housing expenses include, the monthly principal and interest, property tax, homeowner’s insurance, and homeowner’s association (if applicable).
  3. Save, save, save – Down payments can be as low as 3%. In addition, you will have closing costs of around 2-3%. For example, if the price is $500,000, your down payment could be as low as $15,000 and your closing costs between $10,000-$15,000. You could potentially need around $30,000. You can also receive gifts to help with these costs and, depending on your credit, you may qualify for other down payment assistance programs. However, keep in mind that the higher your down payment, the lower your monthly mortgage payment will be.
  4. Crate an emergency fund – Have a separate account with funds you will not use unless it’s for unplanned expenses or other major emergencies. Ideally, this would be three to six months your monthly expenses.
  5. Plan a budget – Budget when you are saving to buy your house and when you buy your house. A budget will help you track bills and pay on time. Also, keep in mind that when you own a house you also have additional utility and maintenance expenses.

Buying a home for the first time can be scary. You might not know where to start. This is why it is so important that you work with a real estate professional who will guide you through the process. When you are ready to buy, get in touch with a real estate agent. They will refer you to someone who can pre-approve your loan and will get you started on your home search.

Real Estate

How Can Parents Help Their Adult Children Purchase Their First Home?

Lupe Ruiz, REALTOR®/Broker

Have you wondered how you can help your adult child purchase his or her first home?  Well, here are 4 ways you can help them:

  1. Gift them a portion of their down payment
  2. Co-sign as a non-occupant
  3. Give them a gift of equity
  4. Guide them on establishing good credit

Gift a portion of their down payment – You can gift your children a portion or all of their down payment.  However, please note, gift tax may be applicable after certain amount (consult your CPA for more information).  Also, consult with your loan officer on the guidelines for gift funds to learn up to how much money you are able to gift.  It is also a good idea to have “seasoned” funds.  This means the money has been in the bank account for a couple of months already when the loan officer runs the credit report.

Co-sign as a non-occupant – If you trust your children enough to have your name on the loan, 🙂 this is another option.  The lender will use your credit score and debt to income ratio along with your child’s for the loan qualification. When you co-sign as a non-occupant, you are signing off on the mortgage loan and taking responsibility if your child defaults.

Give them a gift of equity – Equity is the difference between the value of your home and how much you owe on your mortgage loan.  If you were to choose to sell your home to your child for less than what it is worth, the difference would serve as part of or their down payment (depending on the amount).  This would mainly benefit your child, but it could save you some time and money if you were already thinking of putting your home on the market and you will be helping your child.

Guide them on establishing good credit – From a young age, teach them the importance of staying out of debt but at the same time, help them establish their credit.  Guide them into opening a bank account and applying for a secured credit card.  Teach them to stay organized and pay their bills and student loans on time.  You can also let your child become an authorized user on your credit card so your good credit can benefit him or her.  Depending on how responsible your child is, he or she might want to apply for a student credit card; but remind them to always pay on time, pay off the balance, and keep the utilization ratio under 30%.  Their cell phone and utility bills may also help in establishing credit.

These are just a few ways you can help your children purchase their first home.  Their credit, income, and debt will still be taken into account when a lender is considering giving them a loan, but your support could make a difference in getting them approved for a better type of loan or interest rate.

As always, I am here to answer any of your real estate questions. Click below to schedule your online session to chat about how you can help your adult children purchase their first home.