8 Things You Should Know About Homebuying

It’s possible to obtain a mortgage with a credit score in the mid-500s. However, a good goal to have is 700 plus. Typically installment debt (personal loans, car loans) looks better than revolving debt (credit cards), but if you do have revolving debt, try to pay attention to the balance in relation to the limit.

Finding the right balance between saving money and paying debt will be different for everyone’s situation. Things to consider are:

• Minimum down payment required for the price point you are looking at.

• The amount of total debt that you currently have

• The minimum monthly payments required on these debts.

As a rule of thumb, if you are looking to buy a home, you shouldn’t switch from being a w2 employee to being self-employed. However, vice versa is okay. If you are self-employed, generally your income after all expenses within the past 2 years will be taken into account. Typically you must be self-employed for at least 2 years however it is possible to obtain a mortgage with only 1 year of self-employment income.

It's never too early to start! One of the biggest mistakes homebuyers make is waiting until they are about to make an offer before they decide to get pre-approved. Having a mortgage advisor review your credit and financials as early as possible is highly advised. Dedicating a small amount of time early on, will make things incredibly smoother during your homebuying process.

Tis the season for giving! Did you know relatives are allowed to gift you money for your down payment? That money does not necessarily need to come from their bank account. If they own a home, parents/relatives may be able to tap into their equity through a Home Equity Loan and gift that money to you for a down payment. Other options are co-signing and gifting of equity. 

Rising interest rates can have a direct impact on how much you qualify for. As a rule of thumb, every 1% rise in interest rates can reduce your buying power by 10%. Interest rates are expected to rise 1% within the next 12 months. For example if you qualify for a $600,000 home today, you may only be able to qualify for a $540,000 home 1 year from now. 

Planning to live in your property for at least one year? For Veterans, the VA home loan allows you to purchase a home up to $726,525 with no money down and no monthly mortgage insurance. For Non-Veterans with good to excellent credit, you can purchase a property up to a max purchase price of $748,994 for only $22,470 down with no monthly mortgage insurance.

Looking to buy a home? This may be your opportunity! The housing inventory for single-family and condos in Honolulu has increased by over 30% and over 13% respectively. At the same time the # of both closed sales and pending sales has dropped double digits in Oct 2018, compared to Oct 2017. What does this mean for you? There are more homes on the market to choose from and less active buyers for you to compete with. Interest rates although on the rise, are still historically extremely low. This may be the opportunity you've been waiting for!