Are you a first-time home buyer preparing for the tough road ahead?
Buying your first home is likely going to be the biggest financial move of your life. Trust me. Nothing else costs more than a home in a metropolitan city. And you have made a great decision to research this subject before making your first move. Mistakes made before and during the home buying process always turn out to be expensive.
Here are a few steps you need to take to prepare to be a first-time homeowner.
1. Set a budget
According to Investopedia, your mortgage should not be more than 25 percent of your total monthly income. They call it the 25 percent rule. But there is a catch here. What if you are carrying other debts as well?
You should add all your monthly debt repayments and make sure they are below 25 percent. This will allow you to maintain your standard of living once you move into your new home. Moreover, setting a budget for a home also involves making a list of all the potential expenses.
2. Have your down payment ready
Whether to keep your down payment ready depends on what kind of a mortgage you have. FHA and Conventional loans need just 3.5% down payment at the time of buying a home. While VA loans quire zero down payment. Down payments are generally considered good as the buyer gets a chance to negotiate on the interest rates.
3. Choose a suitable mortgage lender
When it comes to choosing a mortgage lender, your credit score and credit history plays a major role. People with a good credit score are more likely to get their loan approved; that too at a low-interest rate. Secondly, it is also important to seek lenders who offer government-backed home loans.
According to NerdWallet, loans offered by government organizations like the U.S. Department of Agriculture, U.S. Department of Veterans Affairs and the Federal Housing Administration have become a bit lenient in the past few years.
4. Check your credit report
As already stated above, your credit score plays a vital role in getting your mortgage approved at a lower interest rate. A low credit score is not considered good. It is best to delay buying a house if you are someone who has a low credit score. Work on your credit score buy purchasing secured credit cards and paying your bills on time. This is one thing you can do today to raise your credit score to a respectable level.
5. Complete a first time home buyers online course
There are many lenders out there who give preference to buyers who have completed a first-time home buyers course. Meaning, the certificate you get after completing the course will help you apply for low-interest federal mortgages.
Along with the above benefit, you also get to learn about real estate jargons and commonly used terms. At the end of the course, you get transformed from a novice home buyer to someone who understands every single aspect of the home buying process.
Don’t panic or make a snap decision if things don’t go as planned. Home buying is not as easy as it seems. It can take a few months for you to finally be able to make the biggest financial decision of your life.