They put in an offer on a $225,000, 800-square-foot home. But, after the home inspection, they realized that it needed $20,000 to $30,000 in renovations and repairs and that they’d quickly outgrow it. They walked away during the state-mandated rescission period (during which a buyer can back out for any reason and get back any earnest money deposited).
Ariane Corcoran identified their next prospect within an hour after the listing appeared online. It was a newly built, 1,600-square-foot home with three bedrooms, 2.5 bathrooms, and a yard for the dogs. The builder asked $270,000. The couple offered $260,000, the builder countered and the couple paid $268,000. They put down 20% to avoid private mortgage insurance and snagged a 30-year fixed rate of 3.75% from a credit union. Their monthly mortgage payment is $1,524.
For the Corcorans, it was the right time to become homeowners. But before you take the plunge, consider the answers to questions often posed by first-time buyers:
Will I qualify for a mortgage?
Lenders will scrutinize your “three C’s” — credit history (your credit score as well as a deeper dive into your record of debt repayment), capacity (income, savings and investments) and collateral (your down payment and the value of the property you want to purchase, as determined by an appraisal). Lenders will verify your employment (job, school or military) for the past two years and try to predict how likely it is that you will keep your job. If you’re weak in one area, strength in the other two areas or in a spouse’s bona fides may compensate. Or you may need to beef up your credit score, establish a more stable income history or save for a bigger down payment.