Health & Fitness
CCCS OF MD AND DE OFFERS FOUR WAYS TO SAVE WHEN YOU BUY A HOME
Housing counselors Matt Gregory and Mary Rammel from national nonprofit Consumer Credit Counseling Service of MD and DE offer homebuyers practical advice on ways to save when they purchase a home.
We often hear it’s harder to purchase a home now than it used to be. This is no surprise given home prices are rising faster than wages and mortgage lenders generally require buyers to meet stricter standards than they did before the housing crisis. However, here’s the good news: It’s still possible to acquire a home, and you can save thousands of dollars when you do. Consumer Credit Counseling Service of Maryland and Delaware housing counselor Mary Rammel says, “Becoming a homeowner just takes forethought and education. If you want to succeed, have a financial plan.”
Do you yearn to experience the joys of homeownership? Here are four strategies to help you achieve your dream and even save on your investment along the way:
Improve Your Credit
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Rammel says, “When you go to buy a home, having good credit can save you money, because it helps dictate if you qualify for most mortgages and how much interest you’ll pay on a loan. Months before you hope to buy, request and review copies of your credit report and credit score from each of the three major credit reporting companies -- Equifax, Experian, and TransUnion. That’s the only way you’ll know where you stand and what needs to be improved.” U.S. citizens are entitled to one free credit report from each of these three companies every 12 months. To obtain free credit report copies from all three, go to www.annualcreditreport.com. You can also get a copy of your credit score from each of the companies or at www.myfico.com. Copies of credit scores run about $19.95 each or less.
Once you acquire copies of your credit reports, review them carefully. If you find errors, such as accounts that aren’t yours or bills you’ve already paid, take the time to dispute these inaccuracies. Rammel cautions, “It generally takes time for credit reporting to correct these mistakes. To expedite the process, you may want to contact both the credit reporting company and the creditor associated with the error. Provide them both with documentation to help prove your case. If you owe money on small overdue accounts, you may also want to pay these off. Changes in your credit rating won’t happen overnight. You have to work at it.”
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CCCS housing counselor Matt Gregory says consumers who want to become homeowners should also consider their credit scores. “Guidelines vary from lender-to-lender, but if you don’t have a credit score of at least 640, you may lose out on many mortgage products. You can probably improve your credit score if you regularly pay your bills on time, work to reduce the amount you owe, and avoid taking on any new debt, because 65 percent of your credit core is based on your credit payment history and the amount of balance you carry versus your maximum credit limit.”
Build a Down Payment
Saving toward a down payment is often a challenge for first-time homebuyers, but Rammel says it can be done. It just takes thinking outside the box. “Go over all of your monthly expenses. Where can you cut back so you have money to save? Consider downsizing your phone plan and cable service. Try car pooling to save on transportation. If you’re already living on a very limited budget, look for ways to come up with additional income. Get a part-time job or make extra money doing odd jobs like mowing lawns or shoveling snow in your neighborhood.”
Gregory says the more you save toward your home purchase, the better. “The more you put down, the less you’ll have to finance, and the lower your monthly loan payments will be. Putting down at least 20 percent is great, because it means you probably won’t have to pay private mortgage insurance.” Private mortgage insurance or “PMI” protects the lender against default by the homebuyer. This can represent a substantial savings. How much? That depends on how much you put down and the terms of your loan. For example, if you take out a 30-year, fixed-rate loan on a $100,000 home and put down five percent, you can expect to pay an annual PMI premium of $740 a year ($65 per month).
Take Advantage of Community Programs
If your funds are limited, take hope: There are financial loan programs and incentives available for first-time homebuyers. Rammel recommends taking a close look at FHA and VA loans. Because FHA loans are insured against default by the Federal Housing Administration, they may only require a small down payment. These loans do not have income restrictions and are available to almost any homebuyer who has good credit. VA loans are only open to qualified veterans. Nevertheless, they don’t require a down payment and only involve limited closing costs.
Gregory says that state, county, and community grants may also be available to help first-time homebuyers cover the down payment and/or closing costs. “Some of these grants require you to buy within a specific zip code or purchase a property that’s part of a neighborhood revitalization program. To find out what’s available in your area, check with your state or local housing authority or your local community bankcredit core is based on your credit payment history and the amount of balance you carry versus your.”
Get Educated
Purchasing a home can be a complicated, sometimes frustrating process where one ill-informed decision may lead to costly results. Fortunately education can reduce this risk and also save on stress. CCCS of Maryland and Delaware offers an online Pre-Purchase Homebuyers course to help clients gain the knowledge and skills they need to shop for a home, secure a mortgage, and make better choices once they become homeowners. It costs $75 per person to enroll and includes a printable certificate that can be used upon completion to satisfy grant program requirements. Clients can receive advice from a trained and certified CCCS housing counselor at no additional charge. CCCS also provides homeownership workshops.
Rammel says, “The homebuyers I’ve talked with who’ve taken the course love the fact that it’s available 24/7. They can learn at their own pace and even go back and review if they have questions.” If you’d like to know more about the CCCS online course, visit the agency website or call 1-866-731-8486 for further details. By learning as much as possible, you’ll save yourself time, money, and disappointment. You’ll have the information needed to succeed as a homebuyer and beyond!
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Consumer Credit Counseling Service of MD & DE, Inc. (CCCS) is an accredited 501(c)(3) nonprofit agency that helps stabilize communities by creating hope and promoting economic self-sufficiency to individuals and families through financial education and counseling. CCCS MD State License #14-01