Buying your first home is a huge milestone in your life. You’ve looked around at neighborhoods and homes, and finally have a few in mind. However, before you think seriously about buying, there is a lot to consider.
We’ve created this checklist to keep in mind as you think about your first home purchase.
Consider your credit
How’s your credit looking? You want to make sure you have the best credit possible when financing your first home. This will help you negotiate a favorable interest rate on a mortgage. Ideally, a credit score of 740 or above is favorable. A lower credit score doesn’t mean you won’t be able to get a mortage, but it can mean a higher rate.
If your credit isn’t where you want it to be, consider Ovation for your credit repair needs. We have various program choices that can help you work on your credit now so that you may save money over the years of your mortgage.
Deciding on a Downpayment
Assess your finances and your current credit load and think carefully about how much you can put down towards a payment on your house. That amount will depend on your financial situation, but consider somewhere between 10% and 20%. If you can afford to put 20% down, you can avoid paying private mortgage insurance.
This should be a lesson that doesn’t need too much reiterating, since our economy is still reeling from the collapse of the housing market in 2008, but here it is: Be realistic about your finances. Take a long look at what you’ll be able to afford and stay within your means. When you’re looking at your future finances, think about what may happen if unexpected expenses come up or if you are without a job for a period of time.
Beware of “Bait Rates”
A “bait rate” is a mortgage rate that is misleadingly formulated to attract buyers. A bait rate is typically a low rate with no contingencies for people with extraordinary credit. The rate will be affected by factors like your credit, the size of the loan, and your debt-to-income ratio. Your rate won’t be locked in until you accept the loan, so you may find that the rate is higher than you thought it would be.
Take a look at websites that let you find and get loans in real time. You can get access to mortgage quotes and information, along with tips on how to get your finances in order. This is not a decision to rush into, so take some time to do research.
If you go through this list and decide that now isn’t the right time to buy a house, start planning and setting goals so you will be able to buy a house sooner rather than later. Work on improving your credit and paying down debt. After you do that, calculate how much you can afford. While you’re working on getting your finances in order, try to avoid making large purchases or applying for new credit.
If you need help improving your credit score to purchase your dream home, we’re here to help. Contact us at Ovation for a free consultation today!