Almost everyone has a model of the perfect dream home in their mind. And being human our dreams often change and lead us to wanting to upgrade our resources and belongings. Sometimes it’s because our family is growing and sometimes it’s just because we want a bigger house. Meaning a bigger kitchen or a more open floor plan. When you do make the decision to buy a home, there are a few things you should keep in mind. We’re providing a home buying preparation checklist which will, hopefully, assist you in making this major purchase.
Pay off your previous debts
Before you plan to buy a house, pay off all your previous debts and have a high credit score. If your score is not good you have 750 or above or 720 at the lowest. This means you may end up paying a higher interest rate for the same loan amount. Allow for a good six months and pay off all your debts before applying for a new home. And keep in mind that, in some cases, defaulters of other loans may be denied a loan completely.
Experts suggest that you should have at least 20% of your total mortgage amount in your bank account before applying for a loan
People seeking VA loans, however, need not follow such advice because veterans have an advantage over normal citizens. They have a better chance of getting a loan and also at lower interest rates. Even if you do not have the money in your account, you may still be able to buy the house but real estate experts do not recommend it. If you do have some money in your account and you are planning to buy a house in a year or two, then hold on and save some money putting your other wishes on hold for a while.
Before buying your new home, it’s important to sit down and plan your budget
You need to fine tune your spending and savings as the mortgage you plan to take will stick with you for at least a decade or two. This is a crucial home buying preparation strategy. It is a long-term investment and you need to be vigil with your budget. Plan a budget where you still save some part of your income even after paying off monthly mortgage amounts. Do not plan a budget which would increase financial strain on you.
Think about the mortgage plans and how you will pay for the house
You may take a fixed-rate mortgage or an adjustable-rate mortgage (ARM). Both have their pros and cons, however, property agents will almost always press you for an adjustable-rate mortgage because they can make more money from an ARM. Even though there is not much effect of these rates on veterans who take VA loans, it totally depends on the buyer as to what he wants out of the deal.
Consider the duration of your home
Normally people take a loan for 30 years but if you take a loan for 15 years, you need to pay at an average rate of 3.25 percent which amounts to around 4.14 percent for a 30-year term.
Apart from planning for funds and mortgages, start looking at the paperwork with numbers on it
Gather all your income tax records for past couple of years, your recent paychecks, rent and utility bill payments, student loan information, etc.
Check out the neighborhood and locality where you want to buy your home
Not every locality would match you and your standard of living. So instead of first buying your home and then readjusting to the locality, prefer a place which suits you the best.
Any home buying preparation tips you want to share? Feel free to share with us!