Abby Badach Doyle
Appearances
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
Closing costs are those miscellaneous fees that complete the transfer of ownership of the property. That's something that you pay at the very end of the line on closing day when you're handing over the keys. And they run 2% to 6% of the loan amount. So you typically pay for those in cash or a wire transfer or a cashier's check.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
So the important thing to keep in mind when you're budgeting for a house is it's not just the down payment. You do want to have some wiggle room for the closing costs. as well as all of those cash expenses that you'll pay along the way, like a home inspection, things like that, moving costs. So it's not just the down payment.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
Definitely account for a wiggle room for closing costs and other miscellaneous expenses, too.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
To tackle those larger questions about loans and financing, I know Nikki asked about a first-time homebuyer loan. But there's not just one type of loan for first-time homebuyers. There's definitely a lot of options. This is where someone like a mortgage broker can really be helpful in explaining your options and helping you shop around.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
So common options for first-time homebuyers include conventional loans. As the name suggests, that's the most common type. Conventional loans allow for lower down payments, that 3% figure that I mentioned before. Another popular option for first-time homebuyers is FHA loans, which are guaranteed by the Federal Housing Administration.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
Those can be easier to qualify for if you've had credit challenges, if you're building your credit, if you have a lower credit score. So typically, conventional and FHA loans are the most common options for first-time homebuyers.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
For credit score in general, just like everything else, the higher the better. You're going to have a more competitive interest rate. You're going to have more options if you have a stronger credit score. Most borrowers have scores in the high 600s to low 700s, and each lender is going to set their own minimum credit score. score by loan type.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
I love that you brought that up because that can be such a useful first step and that can really make a difference if you're able to get a lower interest rate with a better credit score. Building that credit as a first step in home buying readiness overall is a really smart place to start.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
That's an option if you don't have a lot of cash saved up, but it is risky and I'd consider that to be a last resort. And Sean, I know you have some thoughts and experience on this topic too.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
If the issue is that you don't have a lot of cash saved up, I'd recommend looking into down payment and closing cost assistance instead of tapping your 401k.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
So most down payment assistance programs, also closing cost assistance programs, most options are available to first-time buyers with low to moderate incomes. But there are some options out there that include higher income or repeat buyers. Down payment assistance, it can come in the form of a grant. So that's free money that you don't have to pay back. A forgivable loan.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
So if you stay in the house for five or 10 years, then the loan is forgiven. or a low-interest loan with good repayment terms. So sources for down payment assistance, the big one is state housing finance agencies, but you can also find grants and assistance through local nonprofits, local governments, so your city, your county, and different mortgage lenders.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
So credit unions, banks, a non-bank mortgage lender, even some employers have first-time homebuyer assistance to incentivize employees to buy in their HQ city.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
Definitely assemble your home buying squad so you don't have to go all of this alone. Find a good buyer's agent who's experienced working with down payment and closing cost assistance programs. Again, a good mortgage broker, a loan officer, someone who's really experienced and like does this day in, day out for a living.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
It can be really overwhelming to like run an online search and just be inundated with information. So, you know, assemble your squad, surround yourself with people who are experienced and that you trust and can steer you in the right direction of stuff that works for you.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
Before you can receive down payment assistance, some loans and programs require you to complete a first-time homebuyer class. But honestly, even if it's not a requirement, it's a great first step to learn and understand the process and feel really confident about what you're getting into. So A first-time homebuyer class covers all the basics, all the stuff that we're talking about now.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
Many are available for free online at a self-study pace. You can also find a class online or in real life if that's your speed. But there's a lot of options to just kind of like check all the boxes, understand the steps, and it's a really good place to start if you're feeling a little overwhelmed.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
You're giving me flashbacks, Sean. Yes, that's very true.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
I love our house, but I do miss the simplicity of renting sometimes. Like in the first year of homeownership, we're fixing toilets, we're painting, we are redoing drywall, we are replacing ceiling fans. I had no idea there were so many different types of ceiling fans. I've spent so much time and money at the local hardware store.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
And no regrets because it's really worthwhile and there's a sense of pride and ownership and, you know, making things exactly the way that we want them to be. But it is a lot of work and you have to be like up for that. And what they say is true, that owning a home is a lot of work.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
You don't need to own a home to be an adult.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
I know that there's a lot that feels scary in today's housing market. There's high prices and mortgage rates are really unpredictable. But at the end of the day, if you are ready to settle down and you're ready to to put some roots down and create a space and design a space that facilitates the life that's meaningful to you, it is still totally possible to buy a house.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
And it might sound simple, but having that positive attitude and planning ahead can really be a power move to help you reach that goal.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
Happy to be here.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
Thank you for having me.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
The very first step is to understand what monthly mortgage payment you can afford. And NerdWallet's Home Affordability Calculator is a really helpful first step here. So another general rule of thumb is the 2836 rule. That says to spend no more than 28% of your pre-tax income on housing costs. and then no more than 36% on all debts.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
So that includes your mortgage, your car payment, student loans, things like that. So once you have that comfortable monthly payment, you can play with different down payment amounts to see which home prices would be affordable, which prices are a stretch, and what's out of your price range entirely.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
So there's two kind of prongs to this, right? First is the financial readiness, but then there's also, you know, the emotional readiness of are you ready to settle down? Are you ready to stay in the same place for a while? So that 28-36 rule is a really useful percentage guideline because
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
You can back into your budget based on like what your household budget and the numbers that you're working with right now. So you definitely don't want to stretch your budget more than what's comfortably affordable. You know that term house poor. But if you're able to make the numbers work with what you know about your cash flow, it is possible even with home prices being what they are.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
That is such a myth, Sean, that it's like the most popular home buying myth that we encounter on the team. So you don't need to put 20% down to buy a house. And actually, the median down payment for first-time homebuyers, according to the National Association of Realtors, is only 9%.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
And even below that, some loans have a minimum of 3% for conventional loans, 3.5% is the minimum for FHA loans, and some loans like USDA and VA mortgages don't require a down payment at all. So definitely don't need 20% down to buy a house. To share a personal story, when we bought our house last year,
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
We expected to make a larger down payment, but we bought a house that we wanted to do some renovations right away. So we only put down 5% so that we would have more money in the bank for those renovations. So we tackled a minor kitchen remodel. We remediated some knob and tube wiring and having that cash in the bank was super helpful. So
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
The rule of thumb with down payments is larger down payment means a smaller monthly payment, but a smaller down payment leaves more cash in the bank for other stuff. So it's really about what's most comfortable for you.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
For sure. And then you're in there, your foot's in the door, and you're building that equity.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
PMI or private mortgage insurance is what protects the lender if you make a down payment less than 20%. So that is a real thing. But it's an additional fee that's tacked onto your loan, and it drops off once you hit that 20% equity. So your mortgage broker or your loan officer can help run the numbers at different down payment amounts.
NerdWallet's Smart Money Podcast
How to Keep Your Credit Strong During Economic Shifts and Know If You’re Ready to Buy a Home
so that you're able to understand how much PMI you would be paying and how that would impact your monthly payment.