Buying A New Home - Things To Consider Before Buying A House
Buying a new home is an exciting and tiring ordeal. However, the
thrill of moving into a new home can often overshadow the
frustration that comes with searching, negotiating, and being
out bided. The home buying process is very lengthy. Thus, you
should be prepared to devote a lot of time and energy to making
your dream a reality. Here are a few tips to help smooth the
home buying process.
Fix Credit Blemishes and Errors
Credit reports are critical to the home buying process. Sadly,
many young adults and first time homebuyers minimize the
importance of maintaining a good or fair credit rating. Although
various mortgage programs exist to help bad credit applicants
get approved for a home loan, these loans have higher interest
rates. To ensure a low rate mortgage, which will also lower your
mortgage payments, improve your credit rating.
If your credit score is at least 680, lenders consider you a
prime candidate. As a prime candidate, you qualify for a low
rate mortgage. On the other hand, those with credit scores below
600 can expect considerably higher rates.
Before applying for a home loan, check your own credit score. If
your score needs a little improvement, delay purchasing a home
for at least six months and raise your rating.
Choosing an Affordable Home
Naturally, pricier homes are more appealing. However, if buying
a new home, realistically determine what type of home will fit
into your budget. Many mistakenly purchase expensive homes, and
can barely afford the payments. Avoid becoming "house broke."
Ideally, mortgage payments should be no higher than 36% of our
total monthly income. This way, you can comfortably pay your
mortgage and care for other household expenses.
Get a Lower Interest Rate with a Down Payment
Although down payments are not mandatory when purchasing a home,
they will help you secure a low rate mortgage. Moreover, with a
20% down payment, you do not have to pay private mortgage
insurance. Planning for a down payment takes time and
discipline. It may require cutting expenses, or sticking to a
strict budget. However, the results are worth the sacrifice.