Getting Ready to Buy a Home

I'm Chad Moorefield, and I help buyers across Anderson, Blount, Knox, Loudon, Roane and Sevier counties. Before we look at a single house, I like to spend time on the part that happens at your kitchen table: your budget, your credit and your financing. A little preparation here makes the rest of the process calmer.

This is Part 1 of a four-part guide for first-time buyers.

Start with your monthly budget

Begin with what you can comfortably pay each month, not with a price you saw online. The Consumer Financial Protection Bureau (CFPB) suggests tracking your spending so you know what monthly payment you can handle. Write down what you spend now on housing, debt, groceries, transportation and savings. Then think about the costs that come with owning: insurance, taxes, repairs and utilities. Those vary by home and by county, so I will help you look at the actual figures on any home you are considering.

Check your credit reports early

Your credit affects the loans you can get and the terms offered. The CFPB advises reviewing your credit reports early so you have time to correct mistakes. If you find an error, start the dispute process right away, because fixes take time. Do not open new credit accounts or make large purchases on credit while you are in the process, since lenders look at your credit again before closing.

Talk to lenders and get preapproved

A preapproval letter helps show sellers that you are a serious buyer, and according to the CFPB it does not commit you to a lender. I encourage you to speak with more than one lender. The CFPB recommends contacting multiple lenders to explore your choices, and shopping for a mortgage before you start looking at homes is a key step. This matters because once a seller accepts your offer, you may have as little as a couple of days to line up financing.

When you compare lenders, ask each for a Loan Estimate for the same type of loan. The CFPB explains that comparing Loan Estimates is a good way to tell whether an offer is competitive.

Think through your down payment

How much you put down depends on the loan type and on your goals. Some programs let you borrow a high percentage of the price. A lender can explain how your down payment affects your monthly payment and your loan options. Keep some cash in reserve beyond the down payment, because closing costs and moving expenses are real.

Tennessee first-time buyer help through THDA

The Tennessee Housing Development Agency (THDA) offers programs worth a look. These details come from THDA's own pages, and programs can change, so confirm current terms with THDA or a participating lender.

Great Choice Home Loan. THDA says the credit score of everyone on the loan application must be at least 640. Most of these loans are insured by FHA or USDA-RD, which lets you borrow up to 96.5 percent of the price of the home, or a 3.5 percent down payment minimum. Income and purchase price limits vary by county, and THDA publishes a chart.

Down payment assistance. Available only if you qualify for a Great Choice Home Loan, this is a second loan that can go toward your down payment and closing costs. THDA lists these options:

• A deferred, 0 percent option of up to $6,000 or up to $10,000, forgiven at the end of a 10-year term, due in full if you sell or refinance before then.
• An amortizing option of up to 5 percent of the sales price, with a maximum of $15,000, over 30 years at the same rate as your first mortgage.
• For newly built or proposed construction, up to $25,000 over 15 years at 0 percent.

THDA also notes that penalties, including immediate repayment, may apply if you do not follow the terms of both loans.

Homebuyer education. THDA requires homebuyers to complete a homebuyer education course, online or in a classroom through an approved agency. It recommends signing up early and finishing at least four weeks before closing. You receive a certificate to give to your loan officer, and THDA says certificates are valid for 12 months.

Where to start this week

1. Pull your credit reports and look for errors.
2. Track your spending and set a comfortable monthly range.
3. Contact more than one lender about preapproval.
4. Ask a lender whether a THDA program fits your situation.
5. Call me when you are ready to talk about the area and the timeline.

This guide is general information, not legal, tax or lending advice.

Questions about your situation? Call me at (865) 672-9009 or send a message.