4 Tips for LGBTQ+ Homebuyers
As Rates Rise, Do Opportunities Remain?
According to 2022 housing market predictions, mortgage rates are likely to continue to rise for the rest of this year. The bad news is that 30-year fixed mortgage rates could reach 7.0%, with 15-year mortgages rising as high as 6%. The good news, if you could call it that, is that these rates may fall back a bit before the end of the year.
We could enter 2023 with rates around 4.8% and 3.9% respectively. While those rates are significantly higher than the 2.7- 3% rates in 2020, it is still possible to buy a home and do so wisely. Let’s take a look at the top 4 tips for getting a new home before the end of the year.
Improve Your Credit Score and Debt-to-Income Ratio
If you’re looking to buy a new home, it’s critical to know how much you can afford.
One of the first things lenders will look at is your credit score. They want to know how you’re handling debt, and having a good credit score is a signal that you’re ready for a long-term credit commitment. A credit score of 620 and above is recommended for a conventional loan. FHA (Federal Housing Administration) loans can work with a minimum score of 580.
When you apply for a mortgage, lenders get your credit score from each of the three major credit rating agencies and use the middle or median score to qualify you.
Having a low debt-to-income ratio is also important. This is the amount of your monthly debt obligations as a percentage of your monthly gross income. It’s a key factor when shopping around for mortgage loans. The lower your DTI ratio, the more likely you’ll be able to qualify with the best mortgage lenders.
You’ll want the lowest debt-to-income ratio possible, not just to qualify with the best mortgage lenders and buy the home you want, but also to ensure you’re able to pay your debts and live comfortably at the same time.
Prepare for Your Down Payment
Many first-time home buyers think they need 20% or more as a down payment. This is usually not the case, and down payment requirements vary significantly by age and type of loan.
In 2022, The National Association of Realtors (NAR) examined home purchase trends and found that the median down payment for all home buyers was 13%. For buyers aged 23 to 41, the average down payment drops to just 8-10%, but for younger, first-time home buyers, the average down payment on a conventional mortgage was just 7%.
Down payments also vary by loan programs. VA loans can be had 0% down, and FHA loans are 3.5%.
20% down payment requirements do exist, but these often occur for older borrowers (50 and above), and when the home being purchased has a higher-than-average price tag.
As you develop your down payment strategy, check with your state’s government agencies, non-profits, foundations, and even your employer for down payment assistance programs. It’s also not uncommon for first-time home buyers to turn to family for down payment gifts and loans. (Family gifts will require specific documentation and may affect your debt-to-income ratio).
Pre-Approval vs. Pre-Qualification
Many first-time home buyers don’t realize that there is a difference between Pre-Qualification and Pre-Approval.
is an early step in your homebuying journey. When you prequalify for a home loan, you’re getting an estimate of what you might be able to borrow, based on information you provide about your finances, as well as a credit check to see if you meet your lender’s credit guidelines. You’ll be able to use that number later when applying for a mortgage.
It does not mean you have been pre-approved for a loan.
Even if this is your second home buying experience, you’ll find solid information in our “First Time Homebuyer Guide
.” This 40+ page guide delivers a range of critical information from Understanding the Mortgage Process and Types of Loans to Avoiding Discrimination and which states have no LGBTDQ+ Housing Protections.
Find the Help You Need
The LGBTQ+ Real Estate Alliance
, a 501(c)6 organization, was launched in June 2020 by leading members of the real estate industry. The mission of the Alliance is to Advocate, Elevate, and Celebrate. The Alliance advocates for fair housing for all and promotes LGBTQ+ homeownership.