Tips for Buying a HomePosted on October 20, 2009
Home buying can be complicated and stressful, but if you plan carefully, buying your dream home can become more fun and less work for the entire family. Following these steps can help make your dream a reality.
When mortgage lenders review your credit report, they evaluate how much you already owe, how much unused credit you have available, how prompt you are in paying your debts and whether you’ve recently applied for new credit.
They may ask you to explain any late payments, recent inquiries on your credit report or new accounts. If you have no credit accounts, they may ask you to show that you pay your rent, telephone bills or utility payments on time.
Count your savings
Have you saved enough money? You generally need a down payment of at least five percent of your new home’s purchase price. You also need money for closing costs.
But that’s not all. Be sure to set aside extra funds for emergencies. If you spend every dime on your down payment, you’re statistically more likely to lose your new home to foreclosure some time in the future.
Touring homes you can’t afford makes homes in your price range pale in comparison. Asking a mortgage lender to pre-qualify (or pre-approve) you for a specific loan amount narrows your search, helps you avoid disappointment, improves your bargaining power and speeds the sales process.
Know your options
Ask the lender to give you details on the cost differences of various mortgage plans. Then select the one that’s best for you. Options include:
- Fixed-rate mortgages for 15, 20 or 30 years
- Adjustable-rate mortgages
- Balloon mortgages
- Government-insured loans or special loan programs
Remember, besides your mortgage payment and property taxes, your monthly housing costs can include mortgage insurance, home insurance, special assessments and homeowners fees.
As a general rule, your housing costs should total no more than 28-32 percent of your monthly income before taxes. Add other long-term debts such as car and student loans, and your total should take no more than 36-41 percent of your monthly income before taxes.
Narrow your choices
This is not just a house, it’s your home. It’s where you live. More than that, your home gives you pride of ownership, freedom from landlords and a sense of security. That’s why it’s a good idea to consider more than finances before buying. Think, too, about your needs and preferences for:
- Schools and transportation
- Recreational opportunities
- Commute to work
- Housing styles and lot sizes
Make your payments
How much you borrow, how much you owe and when you pay become a part of your credit history. When you apply for new loans or credit cards, other lenders will review this history.
Late payments can stay on your credit report for up to seven years, can keep you from buying another house or can make it more expensive to buy a car. A good credit history proves you manage your finances well. It lets you enjoy using credit at your convenience and at a lower cost.
If you are interested in buying a home, but have some bumps and bruises on your credit, give Trinity Credit Services a call at 1-888-669-7372. We helped R. Wiffler buy a home and we can help you too!