Don’t know the first thing about becoming a homeowner? As part of USA TODAY’s partnership with the National Foundation for Credit Counseling, the second of six weekly Twitter chats addressed issues for first-time homeowners. USA TODAY’s Hadley Malcolm moderated, while John Berry, an education specialist at consumer credit agency Money Management International, answered participants’ questions. Here is a summary of the chat.
Q: What is the first step to purchasing a home?
A: Making sure homeownership is right for you and fits into your family goals and budget. Then you can start talking to lenders about whether you qualify for a mortgage.
Q: Should you look at more than one lender? How do you choose a lender?
A: Yes, you want to compare rates and terms to make sure you are getting the best deal. A good place to start is your local bank where you already have a relationship.
Q: Can my credit score affect the interest rate on the loan for my home?
A: Absolutely. You want your score as high as possible to qualify for the best rates.
Q: Is working on your credit the hardest part of buying a home?
A: It can be, but you also need to build up savings for a down payment and closing costs.
Q: Are there still ways to buy a home with no money down?
A: Conventional and FHA loans always need money down, but VA loans can sometimes require no money down.
Q: What does someone need to take with them when they apply for a mortgage?
A: You can apply for a mortgage with just your information (name, date, Social Security number, place of employment). To get pre-approved, you may need more, such as proof of income, pay stubs, tax returns and proof of down payment.
Q: At what point do you “lock in” your mortgage rate?
A: Locking your rate allows you a certain amount of time to find a home without fear of increased rates. Rates are typically locked for periods of 30 or 90 days, but determined by the lender.
Q: How do you account for a new home purchase on your tax return? How does it affect your tax situation?
A: The interest you pay on your mortgage is tax deductible, so owning a home can sometimes yield tax benefits.
Courtesy of USA Today