Tips On Home Buying
1. IMPROVE YOUR CREDIT SCORE
A high credit score gets you the best deals. A credit score below 650, may cause you to pay sizable fees or a higher down payment. You will want to have a credit score of 700 to 720, this will get you a good deal, and 750 and above will garner the best rates on the market.
2. FIND THE RIGHT HOME FOR YOU
Before a homeowner can begin the search towards purchasing a home, there are many factors to consider, most of which are determined by some basic facts and assumptions. How big is your family? What neighborhoods are you willing to consider? Are schools a factor? Is a single-family home a requirement or is a condo an option? Based on your income and assets, what kind of home can you afford?
What type of neighborhood are you looking for, does it really matter, is the home more important, or the neighborhood above all else at the price you can afford. Make a list of the features you want in a home–number of bedrooms, a fenced yard, granite countertops, a garage, etc.–and then priorities them. Decide whether the house or the neighborhood matters more to you, or whether you’re willing to make a longer commute in order to own a home with a larger lot. These kinds of decisions need to be made before beginning the search for your new home.
3. Save for a Down Payment
Mortgage lenders will require some amount of cash as a down payment. The amount you have saved for this will determine the kind of mortgage you qualify for. It will also impact how much you can afford to borrow for a home. If you’re searching for “how to buy a house” you probably have already put away some saving.
4. CALCULATE WHAT YOU CAN AFFORD
Consider Your Income.
Many banks will require that your monthly costs can’t exceed a percentage of your income (for example 28%). That means if you earn $50,000 per year, your total monthly housing costs should not exceed $1,400.00 (28% of your monthly income). Using a mortgage calculator, you can figure out how much you can afford.
Consider Your Debts
In addition to your income, if you have recurring debts, the total monthly payments on existing debt plus new payments for your mortgage may not be allowed to exceed a certain threshold (for example 41%). Using the example above, if your monthly debt payments are more than $541 per month (bringing your total debt of $541 + $1,400 = $1948 or 41% in total)
Consider the Down Payment
Most lenders prefer a down payment of 20% or higher to qualify for a conventional loan, but there are loan options where you can put down less. However, you should be aware that with a smaller down payment, you’ll likely be required to pay for mortgage insurance, and more requirement with your loan application.
5. GET PRE-QUALIFIED
By this point, you should have a pretty good idea about what kind of home you’re looking for, and the neighborhood you’d like to live in. You also know how much you’ve saved for a down payment, will let you know the type of loan you should pursue. If you’ve compared a few rates you should request a pre-qualification letter. Getting pre-qualified for a mortgage loan requires that you select a mortgage lender to work with and obtain your loan. Essentially, mortgage pre-qualification is a promise from the lender that you’re qualified to borrow up to a certain amount of money at a specific interest rate, subject to a property appraisal and other documentation. In today’s competitive housing market, it is not uncommon for a seller to receive multiple offers on their home. Having a pre-qualification letter in hand could be the difference in your ability to purchase the house you desire. This proves to the seller that you are serious, and provides you with bargaining power which is likely to give you an advantage over other buyers.