Are you tired of paying rent? Are you ready to make the leap and become a first time home buyer? Here are some tips to help you get started.
Assess Your Debt
You should consider paying off or at least significantly reducing your installment loans, such as car payments. Try to pay down your credit cards. Try to use no more than 30% of your available credit. The more debt you pay off before applying for a mortgage, the less stress you will have when it comes to monthly mortgage payments.
Check Your Credit
Check your credit score. Paying down credit card debt will boost your score. Most lenders expect a score of 620 to 680 to consider your application.
Know What You Can Afford
It is important to know what you can afford before you start shopping for your first home. Make sure your monthly housing costs are gong to be no more than 25% of your monthly take-home pay. Remember to include additional costs like property taxes, insurance premiums, homeowners insurance and HOA dues if applicable.
Get Preapproved For a Loan
A preapproval letter in hand shows sellers that you are serious about buying their home. A lender will thoroughly examine your finances and confirm in writing how much they are willing to lend you. This will help with securing a home quickly in a competitive market.
Determine Your Down Payment
A typical mortgage down payment ranges from 3.5% to 20%, depending on the type of mortgage you receive. The higher your down payment, the lower risk you are to a lender. If you put down less than 20%, lenders may charge private mortgage insurance. Explore possible loan options with your lender.
Research Where You Want to Live
Think about schools when researching places to live. Top-rated schools typically impact home prices. Look to see what is within walking distance. Can you walk to the playground with your kids? Are there hiking trails or stores nearby that are easily accessible? Think about property taxes. Different neighborhoods can have different property taxes. Ask your real estate agent! They can help you find the neighborhood you are looking for.
