When you work with Homewise, we are here to support you in every step of your journey to homeownership. The first step is to meet with one of our Home Purchase Advisors (HPAs) who are here to be your free coach to get you pre-approved for a mortgage and ready to buy a home. When you meet with your HPA, they will work with you to build an action plan designed just for you to help you achieve financial stability and homeownership. Whether you are already financially ready to buy when you meet us or need to work on your finances before reaching pre-approval, an action plan will guide you through the process to getting across the finish line. But what exactly goes into an action plan?
Assessing Your Unique Situation and Goals
Every person’s situation is different, so the first step of working with an HPA is getting to know you. We will learn about your goals, household size, income, debt, and savings. This information will be important for figuring out your purchasing power, or how much you can afford to spend on a home. Learning about your goals will help us build a plan that is designed to achieve what success means to you.
Once we have this information, we can start working together to turn your dream of homeownership into reality!
Getting Your Credit Ready
One of the most important factors in getting a mortgage is your credit score. A higher score can help you get a lower interest rate, which saves you money on your monthly payments and makes more homes available in your budget. Your HPA will look at your credit history and teach you about how your score is calculated and what impact it has on your purchasing power. If needed, they will work with you on a strategy to improve your credit and get you ready to buy a home. Last year, our clients who became ready to buy a home that started working with us with a credit score below 640 saw their score increase by an average of 79 points!
No matter what your score is when you start working with us, our HPAs are determined to help you maintain your great credit or improve your credit and take a big step towards owning a home of your own.
Reducing Monthly Debt
Debt to income ratio (DTI) is another key factor in determining what kind of mortgage you qualify for and what price of home you can afford. This number is calculated by dividing your total monthly debts by your monthly income before tax. The lower your monthly debt, the more your purchasing power increases. If you have a lot of debt, reducing it will be a significant priority when making an action plan with your HPA. Last year, our clients who became ready to buy a home after starting with a DTI greater than a 10% reduced their monthly debt payments by $262.
If debt reduction is one of the keys to homeownership for you, your HPA will help you make an action plan that will reduce your debt and stress and increase your purchasing power for when you are ready to buy a home!
Building a Savings Plan
Another important element in purchasing a home is savings. The more you have in savings, the more you can maximize your purchasing power or add to your own financial security. Most other lenders will ask for 20% of the price of the home as a down payment, in addition to closing costs. Buyers who put down less than 20% will usually be required to pay monthly mortgage insurance, which protects the lender in case the borrower cannot make payments. We know that these costs can be a major barrier to homeownership, which is why we offer down payments as low as 2-5%, roll closing costs into the mortgage, and remove the added monthly cost of mortgage insurance. Plus, the median savings increase of clients who worked with an HPA to become ready to buy a home that had less than $5,000 in savings when they started was $3,400!
Our team will work with you to figure out how much you need to save for a down payment and talk about strategies to help you reach your savings goals, whether that means building your savings up or keeping them high.
Mapping Out Next Steps
Once you have a plan for improving or maintaining your credit, debt, and savings, you have a great start in the process of buying a home. For the next steps, your HPA will keep you informed on what documents you need to provide as you progress towards homeownership and provide any guidance you need along the way to keep you on track with your goals. They will help you register for free classes on financial fitness and homebuyer education that can help you learn even more about how to get your finances ready to buy a home and how the process works.
Your HPA will support you throughout your progress on your action plan and will stay focused on getting you closer to your goal of buying a home every step of the way! Get started on creating your action plan and take the first step to owning a home of your own today!