November 14th, 2017 6:55 AM by Jackie A. Graves
a home is a huge investment. Before you jump into the wonderful world of
homeownership, make sure you are prepared with these six steps. Learn about
credit score requirements, mortgage options and other must-do’s.
higher your credit score, the lower your
660 or 680, you’re either going to have to pay sizable fees or a higher down
payment,” says Barry Zigas, housing policy director for the Consumer Federation
the other end, a score of 700 to 720 will get you a good deal, and 750 and
above will garner the best rates on the market.
Improve your chances by: pulling
your credit reports and ensuring you’re not being unfairly penalized for old,
paid or settled debts. Get your credit report and score today,
free and with no obligation, at myBankrate.
applying for new credit a year before you apply for financing. And keep the
moratorium in place until after you close on your home.
buyer’s mantra: Get a home that’s financially comfortable.
are various rules of thumb that will help you get an idea of how much home you
can afford. If you’re using FHA financing, your home payment can’t exceed 31
percent of your monthly income. But with some mitigating factors, the FHA will
let you go higher.
conventional loans, a safe formula is that home expenses should not exceed 28
percent of your gross monthly income, says Susan Tiffany, retired director of
personal finance publications for adults for the Credit Union National
a rough assessment of how much house you can afford, check out Bankrate’s new house
Improve your chances by: trying
on that financial obligation long before you sign the mortgage papers. Before
you shop for a home, calculate the
mortgage payment for the home in your intended price range,
along with the increased expenses (such as taxes, insurance and utilities).
Then bank the difference between that and what you’re paying now.
on your credit and financing, you’ll typically need to save enough money for a
down payment — somewhere between 3 and 20 percent of the home’s price.
get an FHA loan, you need a credit score of 580 or higher.
exception: Veterans Affairs loans, which require no down payment.
Comparison shop for a VA loan today
cash expense: closing costs. Whatever your loan source, you’ll also need money
to pay closing costs. For a $200,000 mortgage, closing costs run (depending on
where you live) from $2,300 to $4,000. Get the average closing costs in your
state at Bankrate’s
closing costs map.
Improve your chances by: banking
your own money and seeking down payment assistance. Often, it’s location-based
or tagged to a certain type of buyer, like first-timers. Search online with the
city name, then the county name, along with word combinations such as “down
payment assistance,” “first-time homebuyers” and “homebuyer’s assistance.”
a buyer’s market, you can also negotiate to have the seller pay a portion of
the closing costs.
your savings is something you should do over and above saving money for the
down payment and closing. Your lender wants to see that you’re not living
paycheck to paycheck. If you have three to five months’ worth of mortgage
payments set aside, that makes you a much better loan candidate. And some
lenders and backers, like the FHA, will give you a little more latitude on
other factors if they see that you have a cash cushion.
money will also help cover maintenance and repair issues that come up when you
own a home. While repairs are sporadic, items such as a new roof, water heater
or other big-ticket items can hit suddenly and hard.
Improve your chances by: setting
aside money every month. A good rule of thumb: On average, you’ll spend 2.5 to
3 percent of your home’s value annually on upkeep, repairs and maintenance. If
you’re buying a $250,000 home, aim to save $520 to $625 per month.
some interest on your savings today by shopping savings accounts.
serious home shoppers, “the No. 1 thing is they better have everything in
order,” says Dick Gaylord, broker with Re/Max Real Estate Specialists in Long
Beach, California, and former president of the National Association of
Realtors. That means that, before the real home shopping begins, you want to get financing in place, he says.
Improve your chances by: getting
financing in place “before you walk through the first house,” Gaylord says.
Otherwise, he asks, “How do you know how much you can
you’re buying today for yourself and your family, you want a home that will
make you happy for the next few years.
can’t always count on a quick sale. And depending on how much you put down, and
how much you have to shell out to sell and relocate, short-term ownership can
be a pretty expensive proposition.
Improve your chances by: stepping
back and making certain you like the house.
you find the right house, shop for a mortgage on Bankrate.com.
Dana Dratch – To view the original article click here