Home Buyer Readiness
Are You Ready To Buy A
Habitat Home?
Buying a home is often a very big step that can bring with it a lot of
responsibilities. Purchasing a Habitat home has other considerations as well.
We recommend you take the time to closely examine your financial and
emotional readiness for this decision. Buying a home has many benefits, but it
can have some pressures that go along with it.
Financial Readiness
Buying a first home does come with its share of financial responsibility.
Homeowners not only have to pay a mortgage, but they also have insurance
costs, property taxes, routine maintenance expenses and also repair costs for
anything that goes wrong in a home. So, being ready to buy can mean a whole
lot more than having the financial ability to pay a monthly mortgage bill.
Some of the financial matters you will want to consider
include:
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Your credit-worthiness for obtaining a mortgage loan
Your personal monthly budget and how much can be safely dedicated to
home-related expenses
With a conventional home loan: your ability to come up with a down
payment of 5 to 20 percent if required by the terms of a home loan. This is
not required for Habitat home buyers. You will however, need to save for
closing costs.
DID YOU KNOW…
You can get a free credit report once a year at
https://www.annualcreditreport.com/index.action
Review this report with the credit coaches (no charge) at
NeighborImpact by calling 541-318-7506.
These same coaches can also help you prepare a budget
Questions you will want to ask yourself include:
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How good is my credit? (Do I have accounts in
collections? If so, how much?)
Do I know what my Debt-to-Income ratio is? Do
I know what this needs to be in order to qualify
for a home loan? What does Bend Area Habitat
for Humanity (BAHFH) like to see for a DTI
ratio? (see side bar)
What will my monthly payments look like with
taxes, insurance and other incidentals
included? (Typically, you do not want to pay
more than 30-35% of your monthly income to
your mortgage payment)
Determining your Debt-toIncome (DTI) Ratio:
Your debt-to-income ratio compares
the amount of your debt (excluding
your rent payment) to your income.
The ratio is best figured on a monthly
basis. For example, if your monthly
take-home pay is $2,000 and you
pay $400 per month in debt payment
for loans and credit cards, your debtto-income ratio is 20% ($400 divided
by $2,000 = .20).
What is included in monthly debt?
Credit card payments, medical bills,
other loans, car payments, even
deferred school loans (usually
estimated at 1-1.5% of total amount)
For most lenders, the term
“creditworthy” means keeping your
DTI below 20%. A higher percentage
means a higher risk (of credit
trouble).
BAHFH prefers a DTI ratio of about
10-12%. This is because we are
typically working with applicants in a
lower income range. When we
estimate your mortgage payment to
be 30% of your income, then add
your debt of 10% = 40%. This leaves
you with 60% of your income for
other life expenses.
Emotional Readiness
Choosing to buy a home really shouldn't be a split-second decision. This
purchase is a long-term investment that can place demands on a buyer that go
well beyond standard rental situations. Would-be buyers may want to ask
themselves such question as:
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Am I willing to put the time and effort into the maintenance of a home? Or
am I ready to learn the skills it takes to do this maintenance?
Am I willing to make the commitment that goes into making a purchase and
maintaining the investment?
Do I plan on staying in this area for an extended period of time?
Is everyone in my family supportive of this decision?
Wants vs. needs: Am I willing to give up something to purchase a home?
With a Habitat home: are you willing to accept the neighborhood and home
that is offered to you?
Homebuyer Checklist
To help you determine if buying a home is right for you, or if this is the right
time, there are some things you can do to explore and/or prepare yourself:
Check into your personal credit standing – Take the time to pull credit
reports from the three major bureaus and look for any issues that may
need to be addressed. Generally, the better your credit ranking, the more likely
it is you will be able to secure a loan with favorable terms.
Repair damage to your credit – If there are errors on the credit reports,
get them fixed. Each credit bureau has its own process to follow. Should
issues be valid, take steps in advance of attempting to secure a home loan to
fix trouble spots such as old, unpaid bills or maxed out credit cards.
Examine your personal motivations for buying – Just because it is
"expected" or your peers are doing it doesn't mean you are necessarily
ready. Be honest with yourself and you will make the right decision.
Consider taking homeownership or finance classes though
NeighborImpact or Housing Works. They also have other resources and
would be a good connection for you to explore and to learn about other
services that can support you.
Consider all your options for housing. For example, if you are interested
in living outside Bend city limits or in a rural community (even Redmond
is considered rural) look into the United States Department of Agriculture
(USDA) Direct Home Loan Program. For more information, contact Renee'
Robinson, Area Loan Technician, 200 SE Hailey Ave., Ste. 105, Pendleton,
Oregon 97801, (541)278-8049 ext. 4. www.rurdev.usda.gov
Get your paperwork ready. Most lenders, including BAHFH, will require
3-6 months of rent payment verification, identification, previous year’s tax
return, w2’s, 3-6 months utility statements, and bank statements. Usually there
are other documents as well.
With BAHFH, fill out and return a Preliminary Housing Questionnaire.
This will help you determine if you meet the basic guidelines. Attend the
next Housing Information Session* (offered 3 times per year) and then decide if
you want to apply for the Habitat Homeownership Housing Program.
*By returning your Preliminary Questionnaire we will keep your contact information and notify
you of the upcoming housing information session. We will also post the details on our website
and through all media sources.
Let us know if you need more information on any of
these items.