Black Lion Realty
Lacey Lawrence, Black Lion RealtyPhone: (615) 516-8317
Email: [email protected]

FAQ for First-Time Luxury Home Buyer

by Lacey Lawrence 06/17/2020

Photo by Jonathan Borba from Pexels

Many home buyers have lots of questions as they go through the buying process, especially first-time buyers. Whether you’re looking for a $50,000 house or a multi-million dollar luxury home, the questions are often the same.

How Much House Can I Afford?

Lenders use several factors in determining whether to loan you money, including your credit score, loan-to-value and debt-to-income. If you are self-employed, you could make $400,000 per year and still not afford a $150,000 home. Lenders look at your income, and if you are self-employed like many luxury home buyers, you use tax deductions and expenses to your benefit. However, doing that lowers your adjusted net income. If your adjusted net income plus depreciation doesn’t meet the debt-to-income bar for the lender, you won’t qualify for the loan. People in this situation need to find a lender who will lend based on bank statements instead of tax returns.

How Convenient Is This Location?

Luxury home buyers often have location concerns. You travel more and have more people — friends and relatives — visit. That means you need a home location that is convenient for travel. If travel convenience is a concern, ask your real estate agent about the distance to the airport, the ability to rent limos, and other travel concerns.

How Much Down Payment Do I Need?

Most loans require 20 percent down if you do not want to pay private mortgage insurance (PMI). However, if you are buying a multi-million dollar luxury home, that might be difficult if you don’t have liquid assets. Before you start looking, get a pre-approval from a jumbo lender, including the amount the lender requires with and without PMI. You can adjust the amount you are willing to spend or take the time to liquidate assets to get the down payment if you have your heart set on a home that requires a high down payment.

What Does My Credit Score Need to Be?

Conventional loans have a cap, which changes depending on your location and whether the Federal Housing Finance Agency (FHFA) increases that cap. If your mortgage is going to be higher than that cap, you will need to take out a jumbo loan unless you put enough down so that you are financing an amount below the cap. When you take out a jumbo loan, you are at a higher risk to the lender, so you have to jump through more hoops, including having a higher credit score.

If you are applying for a conventional loan, especially a loan backed by the VA, Fannie Mae or Freddy Mac, your credit score could be as low as 500. However, with a jumbo loan, your score must be at least 680. Some jumbo lenders require scores as high as 720.

About the Author
Author

Lacey Lawrence

Hello!
I am Lacey Lawrence, Affiliate Broker with Black Lion Realty in the Nashville area.
I've lived in Nashville and it's surrounding areas for about 23 years. I grew up in the quiet hills of Franklin, TN and have lived in the city of Nashville for 9 years.
One thing I truly love about Nashville is having the best of both worlds. Our city offers an endless number of restaurants, music, sports, festivals and more. And when you need a breath of fresh air, the beautiful, open land with rolling hills are just a short drive away.
I've been here through Nashville's biggest changes, and it is continuing to grow everyday. But nothing has changed when it comes to the friendliness of the city, which has so many great, close knit communities.
I got into the Real Estate business because I know and love this city so much and want others to experience the same! Selling or buying a home can seem overwhelming for some people, and I want to be someone you can fully trust to listen to your wants and needs to make the process more enjoyable and successful for you.
I want all of my clients to know that they are a top priority to me. Whether you are buying or selling a $150,000 home or an $800,000 home, I promise to treat each of my clients with the equal time, respect and quality that you deserve.
Nashville is full of so many great people and places. I want my clients to love where they live! A home in Nashville is an investment for your future and I want to be a part in in helping you find that.