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Perspectives
January 30, 2018

Are You Mortgage-Ready? We Are.

Christina Boyle
By
Christina Boyle, SVP and Head of Single-Family Sales & Relationship Management

For the first time in five years, the Federal Housing Finance Agency (FHFA) significantly increased the Conforming Mortgage Loan Limits to keep pace with home price appreciation. In a nutshell, this increase means more buying power for consumers.

The loan limit increases will help all buyers save money when getting a mortgage, especially those in high-cost areas, because a conforming mortgage generally has lower down payment requirements and offers a lower mortgage rate than a jumbo loan. With the spring homebuying season just around the corner, this improves the opportunity for everyone, especially first-time homebuyers, to get into that new home.

So, if you’re in the market to buy that first or second home this year, take a few hours to get your financial house in order. If you can answer these five questions, you’ll be ready to make a potentially life-changing decision about your living arrangement by the time the spring thaw comes.

1.  Are you ready for homeownership? The decision to rent or buy is a personal one that depends on your financial situation, future plans and lifestyle. Buying may make sense if you plan to stay in your home for at least five to seven years and you’re interested in building long-term equity. MyHome by Freddie Mac® provides a wealth of information to help you get started. And if you prefer a more personal touch, reach out to a HUD-approved housing counselor in your area.

2. How’s your credit? A decent credit score is important whether you’re renting or buying. Landlords and lenders look at your credit score in deciding whether you’re likely to pay on time. Generally, the better your score, the lower your mortgage interest rate is likely to be. That means a good credit score saves you money in the long run. Don’t fret if you don’t have a score. We’ve armed our lenders with technology that automates scoring for borrowers without them.

If your score isn’t as good as you’d like it to be, you can improve it by paying your bills on time, especially car payments and credit cards. If you want to make even more headway, start paying down your long-term debts. If it’s possible, put any extra cash toward the debts with the highest interest rates first.

3. How much can you afford? While it's not nearly as fun as house hunting, fully understanding your finances is critical when making an offer. It will not only help you determine your price limit, but it will also help you understand if your budget can cover a major repair such as a new roof or furnace in the home you may be considering. You also need to understand whether you are financially prepared to cover monthly expenses for general upkeep and utilities, which can run hundreds of dollars per month.

4. Do you have enough saved for a down payment? Ignore anyone who says you "must" put down 20 percent of the purchase price to obtain a mortgage. For the mortgages Freddie Mac buys, most homebuyers today put down between 5 and 10 percent. And some products, such as our Home Possible® mortgage, allow a down payment as low as 3 percent.  A bit short?  There are a variety of sources you can turn to for assistance for first-time buyers, including working with housing finance agencies, as well as state, local and municipal governments.

5. Are you pre-approved? It’s a good idea to get pre-approved for a mortgage before you begin house hunting. This will allow you to negotiate with confidence – and close the deal faster so you can make your dream of homeownership a reality. The first step is to research lenders and find one that you’re comfortable with.

Last year, nearly 90 percent of homebuyers obtained a mortgage and the good news is nearly two-thirds found the mortgage approval process to be easier than they expected. By working closely with our lender clients, housing counselors and other housing industry professionals, Freddie Mac is Reimagining the Mortgage ExperienceSM in continued support of responsible homeownership.

Rest assured, when you’re ready to buy that new home this spring homebuying season, we’ll be ready, too.

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