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6 Things you must do before buying a home
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| Step 1. Improve your credit score
A high credit score snags you the best deals. A score of 700 to 720 will get you a good deal, and 750 and above will garner the best rates on the market.Pull your credit reports and make sure you’re not penalized for old, paid or settled debts.Stop applying for new credit a year before you apply for a mortgage.
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Step 2. Figure out what you can afford
Figure out how much house you can afford. Add to that other housing expenses, such as taxes, insurance and utilities. Then, bank the difference between that total and what you’re paying now.For conventional loans, home expenses should not exceed 28 percent of your gross monthly income.If you’re using an FHA loan, your monthly payment can’t exceed 31 percent of your monthly income. |
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| Step 3. Save for down payment, closing costs
You’ll need to save between 3 percent and 20 percent of the house price for a down payment. Your credit history and loan terms help determine how much you’ll need to come up with.
If a big down payment is a hardship, look for down-payment assistance. Down-payment assistance often is based on location or for particular buyers, such as first-time buyers.
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| Step 4. Build a healthy savings account
Building up your savings, not just for a home, is very important.If you have three to five months’ worth of mortgage payments set aside, you’re a much better loan candidate.
That money will also help pay for maintenance and repairs of the home. A good rule of thumb is to assume that you’ll spend 2.5 to 3 percent of your home’s value each year on upkeep and repair.
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| Step 5. Get preapproved for a mortgage
Before you start house shopping, you should get your financing in place.
“The No. 1 thing is (homebuyers) better have everything in order,”.
You should get a mortgage preapproval “before you walk through the first house.”
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| Step 6. Buy a house you like
To get a home that will make you happy, don’t count on a quick purchase. Step back and make certain the house you’re considering is one that will fit the needs of you and your family.
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