In preparation for the new year, most people have the desire to make changes for the better. A lot begin with resolutions that don't quite make it through to the year's end. However, some make financial commitments or vows to make financial life changes (especially if there was a particularly high amount of holiday spending regret). During this financial analysis, there will be those who decide that they need a better quality of life and want to make the move from renting to owning. I've prepared a list of things that a person should do to prepare for home purchase:
1. If you haven't already...START SAVING! The more $ you have saved, the better options you have for purchasing power. In order to avoid the added cost of mortgage insurance, the ideal amount down is 20% of the purchase price. However, you may obtain financing with as little as 3.5% down. Keep in mind you may use IRA funds for home purchase and gifts are allowed as well.
2. What can you afford? Generally, the amount you look to spend when buying a home should be between 2 or 3 times your annual salary.
3. What do you like? Find out what items are must-haves for your new home. Are there certain appliances and features that you cannot live without.
4. Clean Your Credit! Obtain a copy of your credit report and clear up any negative reporting items. Payoff any judgements and/or collection accounts. Pay down any credit cards to a balance within 30% of the credit card limit (ie. $1,000 limit, $300 balance or less).
5. Get Pre-approved! Contact your local mortgage professional...preferably me :)... to assist with the pre-approval process. Regardless of who you choose to assist you in this part of the process, be sure that the loan officer is knowledgable and reputable. A good loan officer can be the difference to make you purchase experience great or nightmarish.
6. Consider all the costs. When deciding how much you can afford monthly, please consider that a regular mortgage payment has several components to be paid:
PRINCIPAL--the amount borrowed
INTEREST--the amount you are charged to borrow the funds for the purchase
TAXES--property taxes
HOME INSURANCE--dwelling coverage in the event of damage or loss
MORTGAGE INSURANCE--if financing more than 80%, or putting down less than 20%
Association dues--(CONDO FEES)
Not to mention, you will be required to maintain any regular monthly bills and debts that you have.
7. Finally, contact a local realtor. If you do not have one that you're familiar with, your loan officer may have someone to refer to you. This is the fun part! Your realtor should be experienced and good at listening to your needs. He or she should also be accessible to you.
Be aware that home purchase is one of the most important transitions of an adult human's life and being prepared can mean the difference between happiness and disaster. I hope these tips help; however, these are only general guidelines. If you have more specific needs or are truly considering home ownership, than you should contact a mortgage professional to discuss your unique needs in detail. HAPPY HUNTING and God's best!!!
