Finances FYI Presented by JPMorgan Chase
By Aaron Allen, The Portland Medium
Homeownership has long been associated with the idea of the American Dream. For many, owning a home represents stability, financial success, and the opportunity to contribute to the community, as well as leaving a financial legacy for future generations.
The benefits of homeownership have directly resulted in a steady rise of homeowners in the United States starting in the 1900s.
Idris Mohamed, Senior Home Lending Advisor for Chase, says that prospective homebuyers should concentrate on three areas that directly affect them: building/improving their credit, down payments, and finding the best mortgage options.
Building and improving your credit
According to Mohamed, it is important to know where you stand with regard to your credit score so you can make a plan to maintain, improve, or build your credit. Generally, a higher credit score means you’ll be able to qualify for the most competitive interest rates, which could help you save money on your mortgage premiums. You can get a copy of your credit report for free at annualcreditreport.com or check your score through your financial institution.
“When it comes to homeownership, the first step is credit,” says Mohamed. “Talking about my journey as an immigrant coming to America, the only thing we learned in school was English. They didn’t teach us about financial literacy and becoming homeowners. So, when I decided I wanted to achieve the American dream of becoming a homeowner, I realized the importance of credit.”
“So when it comes to credit and our clients looking to buy a home, one of the things I advise is to learn about Chase’s credit journey. It’s a free service that allows you to monitor your credit score. It helps to know where you’re at, and it’s also a good opportunity to leverage a service that offers free credit scores through different companies to see the areas where you may need to improve,” Mohamed continued.
If you have a low credit score, you can work on raising it by paying down credit card and loan balances and making bill payments on time. Avoid opening or looking for any new credit cards or loans while in the process of buying a home, as the credit checks required will lower your score and increase your debt-to-income ratio.
“When you do apply for a loan, your chances of getting a loan are greater with a higher credit score,” says Mohamed. “A lot of clients don’t realize that the higher the score, the better the rates, the higher the likelihood of getting a loan.”
“Everybody wants to buy a house, but when you start talking about credit, people get nervous,” he continued. “So, I love talking about credit because once you get your credit right, it definitely opens up doors to financial freedom and also achieving that homeownership goal.”
Saving for a down payment and looking for financial resources
“When it comes to down payments, I tell my clients to start saving up early,” says Mohamed. “A lot of clients think that when buying a house, you must put down 20 percent of the home price, and that’s not entirely true. What I recommend is to talk to a home lending advisor and learn about what options are available. For example, we do offer programs such as Chase’s DreaMaker mortgage, where you can put down as little as three percent. I also recommend taking advantage of Chase’s Autosave and start saving toward your down payment.”
Mohamed advises taking the time to research financial resources that may be available to you. Many state and local governments provide first-time homebuyer programs, which encourage community members to buy within their home state, with incentives that can include covering a down payment or lower interest rates. Lender-backed financial resources may be available too. For example, the Urban League of Metropolitan Seattle offers classes and down payment assistance programs that are available for first-time homebuyers.
“If outside resources are available, we recommend you take full advantage,” says Mohamed. “If an organization is going to provide down payment assistance to help you become a homeowner, we want to support you.”
Find a mortgage option that works for you
When it comes to mortgage loan packages, Mohamed advises that one mortgage doesn’t fit all, and there are many options that can suit the different budgets and lifestyles of potential homebuyers. A 30-year conventional mortgage is most common, but you can also get a loan term of 10, 15, or 20 years.
“When it comes to mortgage options, it is important to know what terms make sense for you and your family,” says Mohamed. “Once you understand the type of terms that make sense, we will work with you to make sure you understand all your options.”
According to home lending advisors, some mortgages have a fixed interest rate, which means it doesn’t change over the life of the loan. There are also adjustable-rate mortgages, which usually offer lower interest rates in the beginning but adjust at certain intervals over time, typically increasing your overall payment. Get in touch with a lending professional who can help you understand your options.
The bottom line is starting the homeownership process can feel overwhelming, but you don’t have to do it alone. There are many tools, resources, and professionals dedicated to helping you achieve the goal of homeownership.
Finances FYI is presented by JPMorgan Chase. JPMorgan Chase is making a $30 billion commitment over the next five years to address some of the largest drivers of the racial wealth divide.
