Ideally, you will start preparing to buy a home about six to 12 months before actually doing so. This is because there are some steps that need to be completed that may take several months or longer to complete. Let’s take a look at how you can put yourself in the best position to get the home that you want.
The first step in the process of buying a house is to determine how much a lender will give you. If a lender says that you qualify for a $100,000 mortgage, you can narrow your search to homes that are $100,000 or less. Alternatively, it may be possible to work on improving your credit score or reducing your debt-to-income ratio to increase the amount a lender will give.
It is generally not a good idea to base what you can afford based on what a lender is willing to give. This should be determined by looking at your current debt payments and what you would like your monthly mortgage payment to be. Ideally, a mortgage payment will be no more than 30 percent of your monthly income.
Generally, closing costs are roughly 3 to 6 percent of the home’s purchase price. Examples of closing costs include the down payment, document fees, and property taxes for the next year. The first homeowner’s insurance payment may also be due at closing.
You never want to buy a home at the top of the current market. This is because the home’s value may plummet just months or years after the purchase closes. Instead, buy when there is more supply of available homes than demand for those properties.
You need a good credit score to get approved for a mortgage at the best interest rate. Most lenders consider a good score to be 700 or higher, but you can get a mortgage with a credit score of 640 or higher. If you have a score of under 640, it may be necessary to apply for an FHA or USDA loan. If you would rather not apply for one of these loans, there are ways to improve your credit score.
If you are ready to buy a home, call a lender and a real estate agent to schedule a consultation. These conversations may help you determine if you are ready to buy a home or if it should be put off for another year or two.
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