Q&A WITH MARK SPRAGUE
Mark Sprague is a noted and respected expert on the real estate industry and the Austin market, in particular. He is also the Director of Business Development for Mission Mortgage and we are fortunate to have access to his expertise and opinions. Mark receives numerous questions each week and he’s put together a group of them to address today. His goal is to provide the knowledge you need to make responsible financial decisions and to provide answer to the questions he hears most often. Today’s post focuses on questions typical of first-time homebuyers.
QUESTION: My wife and I want to buy our first home. We do not have a lot of money for a down payment however we both have stable jobs and good income. Is there any type of mortgage that we can get where we do not need a large down payment?
ANSWER: FHA mortgages allow you to put 3.5% down and are designed for people in your situation. FHA (Federal Housing Administration) loans are guaranteed by the FHA, a US government organization for the purpose of supporting home ownership in the United States. In Rural areas (Kyle, Liberty Hill, Hutto, email Mission Mortgage for a complete list by clicking here) there is a 100% financing program called USDA. Please contact Mission Mortgage and ask to speak to a loan officer to understand these programs better.
QUESTION: My wife and I are looking to purchase our first home. We have decent credit, but it has definitely declined over the past few years. What are some tips to improve our score before we begin to search for a home?
ANSWER: Maintaining a good credit score is important and keeping it above 700 will benefit you when applying for a mortgage. Based on how credit scores are calculated, here is my advice:
- Do not let just anyone run your credit. Each time this occurs it’s an “inquiry” on your profile and will decrease your score. You may get your score free once a year from any one of the credit reporting agencies.
- Do not close any accounts since that also can lower your score.
- Do not charge over 50% of your available credit limits.
- Do NOT open new credit accounts.
- Keep in mind the older a credit account is the better for your credit profile.
- Always pay your bills on time. A late payment will drop your score substantially.
QUESTION: I am looking to buy a home; however, I have been renting for years so this is a big step. I am unsure how to know what price range I should be looking in. How do I know how much house I can afford after taxes, insurance, mortgage, etc?
ANSWER: Generally mortgage lenders require that the mortgage payment, including monthly taxes and home insurance, does not exceed 30% of your gross income for the month. They also allow another 10-15% for other debt. So if you make $6,000 a month you would be qualified for a $2000 a month payment, approximately. Email Mission Mortgage and ask to be pre-qualified for a loan amount by clicking here. This is the first step in finding out what you can afford, after which you can begin to look at what type of homes you can afford. You may be pleasantly surprised to find that owning is not much more than renting, and may even be the same after the tax deduction benefits. Our loan officers at Mission Mortgage are trained to explain to you all of the benefits of homeownership and helping you to determine how much you can comfortably afford.
QUESTION: My wife and I are looking to buy our first home. I have excellent credit but she has horrible credit and I know she will hinder our chances of getting a mortgage. She is working on fixing her score, but she had some problem making payments in the past. I have a very secure job and I make a very decent living- do you suggest I just put the home in my name to ensure we get financing? Or is there something she can do to rectify her score before we purchase a home?
ANSWER: You can certainly increase her credit score over time by reducing debt and always paying on time. In many cases it can improve significantly over a few months if there are no judgments or serious delinquencies. Most lenders require a minimum credit score of 640 assuming that job stability, income, down payment, and cash reserves after closing are strong. You can pursue a home purchase without your wife if you can qualify on your own and have the monies in your name. The best thing to do is contact us at Mission Mortgage for a pre-qualification for both of you so you can best understand your options or what you need to plan for so you can make a home purchase together in the future.
QUESTION: My husband and I are going to start to look for our first home- we are just confused as to how much home we can afford. What are some steps we can take before we begin the search to know what our budget is?
ANSWER: Before you begin looking for a home it is best to speak with a Mortgage lender and have yourself pre-qualified. Mission Mortgage would be happy to have one of our highly trained loan officers speak with you about your specific situation. They will review your financial information and credit history to determine the amount of home you can afford. In addition you will learn about the various types of mortgages available to you. Click here to have a Mission Mortgage loan officer contact you about your next home purchase.