To buy a home in today's market, you need to know what type of property you want and what area you want to live in as well as qualify for a mortgage loan. With all the necessary steps and upcoming requirements, here are some tips to implement as you prepare to buy a home.
Consider Your Credit
As a home buyer, you should have a good idea of what is on your credit before you set out to look at homes. Your credit is elemental in making the purchase, and the better it is the better your chances at a lower interest rate and good loan terms. Review how much debt you owe and look at some ways you can pay it down. A home is a big purchase and your lender is going to look carefully at your debt, what kind of debt it is, and how much it makes up of your monthly payment obligations.
If you have all revolving credit card debt, this is going to hurt your credit and therefore your chances to buy the home you want. A large amount of revolving debt can hurt your credit score, but if you have some installment loans included, it can help your score.
Look at Financing
Once you have your credit in good shape and cleaned up, you can shop for a mortgage loan. It is a good idea to start the application process before you head out to look at houses with your real estate agent. Otherwise, you will be wasting your time going out on the real estate market and viewing homes for sale when you don't know how much you can afford.
As part of your financing qualifications, you should have a down payment or funds set aside to help you pay for your home's upfront costs. Depending on the loan you qualify for, you may need to put a down payment of up to twenty percent on the home. Some mortgage loans require less, such as five or three percent, and in some situations no down payment requirements, but you will still need to pay for the home's closing costs.
Closing costs go to pay for expenses and fees, such as loan processing and origination fee, an appraisal and home inspection fee, the cost for your mortgage broker to request your credit report, and title insurance and transfer fees. When all of these costs are added together, it can be anywhere from three to five percent of the home's price. So, if you are not aware of how much you need, talk to a real estate agent about getting a good estimate of these fees so you'll know whether you're ready to close your home.