6 Things You Must Do Before You Buy A Home
When you are stepping in the world of homeownerships, you are going to make one of your biggest investments in life. However, before making the final purchase you need to prepare yourself for buying a home. Here are 6 necessary steps one must do before buying a home.
- Strengthen your credit score
Before buying your home, it should be your utmost aim to keep your credit score higher so that you can keep your monthly payment lower. If the credit score will remain below 660 or 680, you may have to pay sizeable amount of fees or higher amount of down payment. At present, you may find many qualified borrowers within the range of 580; however, it is desirable to keep the score 640 to 660 at a minimum.
In contrast, keeping the score within 700 to 720 range means you will bag a big deal whereas 750 and above will big you the best market rates.
Expert’s advice is when you are aiming to buy home you must stop applying for new credit at least one year before. And try to maintain this moratorium until you close the deal of your home.
- Understand how much you can afford
Remember that you should only proceed for that home that seems financially affordable to you. If you manage to get FHA-insured loans for your home, your payment should not exceed 31% of the monthly income. For other conventional loans, you must maintain realistic debt-to-income ratio without exceeding 28% of the gross monthly income.
- Save for future down payments and closing costs
Based on your financing and credit, you should save enough money for the down payment, at least between 3% and 20% of the price of your home. Another important cash expense is the closing costs. Usually, for a $200,000 mortgage, you need to pay closing costs from $2,300 to $4,000. You may get the chance to bank your own money and look for down payment assistance.
- Maintain a healthy savings account
You need to maintain a handsome amount of saving long before for the down payment and closing costs. You must not live paycheck to paycheck to satisfy the lender. If you manage to keep behind 3 to 5 months’ worth of mortgage payments, it certainly brightens your chance to become a good loan candidate. In fact, if your lender finds out that you have a cash cushion, chances are there that you may get a little more freedom on certain factors.
- Get mortgage preapproval
For the serious home shoppers, the priority should be given to arrange financing in place before beginning the real home shopping. And it is definite that the preapproval is now more extensive than it was few years ago. Hence, you need to manage the documentation process around your income and assets in the right ways.
- Buy your dream house
Now, the final step comes – buying your new home for yourself and for your family that can make your happy for the upcoming years. Here you must remember that it is not always possible to arrange a quick sale. Moreover, it has been seen that short-term ownership may lead to a pretty expensive affair.