Buying your first home is a huge step. How can you really know that you’re ready?
There are thousands and thousands of individuals out there that are contemplating buying a house. This is partly because of low rates of interest over the past few decades, and with a real push on the part of the housing industry to demonstrate the advantages of homeownership.
You’ve been saving your money and have enough for a down payment and your closing costs. The down payment will have to be between 3% and 20% of the purchase price or property value, whichever is cheapest. Always aim to have this 20%. If you do not place at least 20% down, then you’ll need to buy private mortgage insurance, which will raise your monthly payment.
Closing costs usually run you 3% to 7% of the purchase price. You should get a Good Faith Estimate of those costs within three days of applying for a mortgage. Bear in mind that this is just an estimate, rather than the real costs. But it ought to be close. Plan to pay the 7%, and then maybe you’ll have any left over. It’s much better to have more than you require.
You know you’re ready once you understand how much house you can afford, and you’re ready to stay with this. Your monthly mortgage payment should be less than 25 percent of your gross monthly income. There are lenders who will tell you that you are able to afford more, but do not listen to them. Stick with what your budget says you can spend.
You’re also aware that there are far more dollars in a house than just the mortgage payment. You’ll need homeowners insurance, cash for utilities, maintenance costs and property taxes. Owning a house is a whole lot of responsibility. You can not just pick up and move at 30-days detect anymore.
It’s important to take some time to look at your credit report for any errors and inaccuracies. Nearly 90% of consumers are going to get an error on their credit sooner or later. These mistakes can cost you thousands in increased interest rates. Don’t ever visit a creditor unprepared and uninformed. Know your credit rating.
Should you look early enough, you might have time to repair mistakes or build your credit back up. Plan on at least six months for this, just in case.
You are also prepared if you’re prepared to hold off any other credit or loans until you close on the property. The same is true for changing your own jobs. You will need to maintain your life”as-is” from now until the final. No new automobiles, no credit cards and no new jobs. Show that you’re stable.
Component of being prepared is just feeling prepared. If you know what houses sale for in your region, you’re definitely ready. If you don’t understand the above things, then take some time to figure them out. There’s more to buying a house than just moving and shopping.