From the vibrant greens of Central Kentucky’s rolling hills to the extensive cave systems of Mammoth State Park, the state is a stunning and fascinating place to call home, with a lot of to offer potential home buyers.
Over 20 percent of the population resides in or near the state’s two largest urban centers - Louisville and Lexington. Lexington in particular is a great place to start your home search - no bias there.
But, an important first step on the journey to home ownership for many of us is the mortgage. It’s a common word that gets thrown around in casual conversation often, but what does it really mean and how to do you go about getting one.
Well, you’ve come to the right place. Grab a coffee and join us for our guide to getting a Kentucky mortgage in 2020.
I mean why else would you be reading an article about getting a mortgage?
Nevertheless, it leads to important questions that you need to ask yourself. Before you even begin the process of qualifying for a mortgage, ask yourself - is home ownership the right thing for me?
Don’t get us wrong, home ownership is a great option for the vast majority - it’s a solid investment that consistently appreciates in value while offering stability and a great way to start building wealth.
It does however bring with it a pretty major investment and a commitment you pay into each month. Aside from the actual mortgage payment, home owners will also have to pay out for things like property maintenance and insurance, in addition to utilities, of course.
So, start by taking a close look at yourself and ask yourself a few key questions:
Do I have enough saved up for a down payment, as well as closing costs? Do I plan to live in this home for at least 5 years? Do I bring in enough on a monthly basis to handle a mortgage as well as other bills?
Most have heard of the down payment. This term has become ubiquitous with home ownership and mortgages.
In the vast majority of home purchases involving financing, a down payment in some amount will be required, but that isn’t the only upfront payment that will be required. There are several other payments that aren’t quite so well known.
The first notable one is the earnest or good faith deposit. This is essentially a way a buyer can demonstrate that their intention to buy the property from a seller is legitimate. The exact amount of the earnest money can vary, but they typically amount to several hundred dollars. This amount can then be put toward the down payment.
Also as part of closing, there are various other payments that will be required, such as lawyer fees, notaries, title transfers and others. All in, these closing fees can amount to up to 5% of the total cost of the property.
For most of us, the first step in the home buying process is obtaining financing. Few of us will be able to purchase a home with cash and it’s good to know how much home you can afford before you start looking.
Obtaining financing for a home, in the form of a mortgage, is a pretty involved process. To qualify, you’ll have to get in touch with a lender and demonstrate that you can handle the monthly payments.
The lender’s assessment will take into account the whole financial picture to decide if you are a good credit risk. A key term to understand is the debt to income ratio. This figure takes into account the amount of debt that you are currently carrying versus the amount of income you bring in.
Our biggest advice is to shop around, just like you ultimately will when searching for a home. Don’t feel like you have to take the first offer that comes around. Talk to different banks and lenders to find the rate and term that will work best for you.
If that weren’t enough, there are also several different types of mortgage for you to consider. You’ll hear terms thrown around surrounding fixed or variably rates, from a variety of different providers. Basically, a variable rate mortgage changes as the market does, so it’s a riskier type of mortgage that could pay off.
A more stable and common type of mortgage is the fixed-rate mortgage. They typically run for 25 or 30 years and you’re locked into a set rate for a five year period. This is the safer and more common type because even if the market takes a down turn, you’re locked into the rate you agreed to.
Don’t Go It Alone
Kentucky has many great resources available to de-mystify the entire process of buying a home.
Take some time to do your research, there may be several government programs and tax breaks available to you, especially if you're a first-time home buyer. Remember that in Kentucky, you're considered a first-time home buyer if you haven't owned any property in 3 years.