June is Homeownership Month
Penquis/MaineStream Finance and several hundred NeighborWorks agencies across the country are celebrating Homeownership Month this month of June, and the buying season has definitely kicked in. If you are thinking about owning a home, here are the key things to think about to get started:
• How much of a home/loan can I afford? HUD's rule of thumb is that most of us, in general, can afford a home that is about 3x our annual household income. Another rule of thumb is that housing-related expenses should not be more than 30% of your income (including utilities and your mortgage). Another way to look at is total debt payments (including mortgage, credit cards and student loans) should not be more than 50% of your income. You can get a more precise figure by using a free online Mortgage Calculator through sites likeBankRate.com or NerdWallet.com.
• How much are mortgage rates (and fees) now? Rates are still lower than the historical average but have been going up lately. They will also determine how much house you can afford. BankRate and NerdWallet and other sites can give you a sense of what average rates (and fees) are. For example, BankRate reports as of 6/13/19 a 30-year mortgage is 3.97%. There are programs out there that may offer lower rates such as through USDA or VA programs.
• What is my credit score? Most banks and credit unions are looking for scores of 650 and above (700-800 being really good). USDA can allow scores as low as 640, and FHA can go as low as 580. MaineStream Finance does not have a minimum score, but we do ask clients to work on the issues that brought the scores lower. Unfortunately you cannot always get your score for free–it often costs $15 extra from the credit reporting agencies. You can use free services likeCreditKarma.com that provide an estimate but understand it may not be precise. You may want to check the websites of your existing bank/credit union or credit card company – many now are offering free credit scores.
• Is my credit report correct? You should still check your credit report and not just the credit score to make sure there are no errors. You can get your credit report for free once a year from the three reporting agencies (Equifax, Experian, and Transunion) fromAnnualCreditReport.com. If you have any collections or delinquencies – tackle as many of them as you can over 3-4 months by paying them off or calling the creditor to get into a payment plan – this will help boost your credit score. Also during this period of preparing, avoid adding too much new credit or even having companies, like store credit cards, run a credit check on you often – this will lower your score.
• How much do I have for closing costs and down payment?Saving for closing costs and down payment is ideal – even if it is just a few thousand dollars – these days many loan programs at banks and credit unions require 5% down - sometimes 10%. USDA, VA, FHA, and MaineStream Finance can allow much less. There are also down payment programs throughMaineHousing or even through cities like Bangor. Penquis/MaineStream also manages the Family Development Account (FDA) program that is a matched savings program.
You can learn all of this and more at one of Penquis/MaineStream's Home Buyer Education Classes in Bangor, Rockland and other locations – the schedule can be found at www.mainestreamfinance.org.
The certificates are good for two years and provide access to many of the MaineHousing programs mentioned above. Contact Heather Massow (firstname.lastname@example.org) about our housing classes and counseling and Roberta Teeto (email@example.com) about our home loan programs.
(adapted fromNeighborWorks Do you Know your Homeownership Numbers?-Homebuyer Tips)