Everything You Need to Know About Buying Your First Home

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Are You Eligible to Buy a Home? When beginning the home buying process, it’s crucial to get a copy of your credit reports and scores. If you’re buying with a spouse, or someone else, they’ll need to run their credit too. You’ll want the highest score possible, before you apply for a mortgage. A score of 740 or higher is considered to be excellent credit. Typically, anything below 700 is not considered excellent credit. However, this doesn’t mean you can’t get a mortgage. If you have bad credit, don’t panic, as there are different ways to improve your credit. One of the best ways to improve your credit is to try to stay below 30% of your total credit limits. If you have past due payments, deal with them. Add all your due dates to your calendar to make sure your bills are up to date and paid on time. Remember don’t open new credit cards if you don’t need them, and use your credit responsibly at all times. According to industry standards, you should not spend more than 30% of your monthly income on your monthly expenditures. Remember credit utilization and effective budgeting are key, and creating a budget that you can stick to is easier than you think. The best way to do this is by determining all your sources of income and then tally up your monthly expenses. For expenses, make two specific columns, one for fixed expenses such as rent, mortgage, insurance, car payments, etc. and another for variable expenses such as entertainment, travel, food and other expenditures. Generally, variable expenses are easier to control. Then, analyze all of your expenses — especially the variable ones — and see what you can cut out.
Finding a Mortgage Lender From this point, it’s important to meet with a mortgage broker, who generally works for a lender to determine how much you can afford. A mortgage lender is generally a financial institution that loans you money to purchase a home, which is called a mortgage. Most people think that you need a down payment of at least 20%. If you do not meet these requirements, your mortgage broker can educate you on programs, which require less. Lenders will want to see that you currently have multiple lines of credit available, which you pay off regularly. Lines of credit include the following: credit cards, student loans, automobile loans or any other types of loans. Lenders generally want to see activity on these lines of credit from the previous twelve months. Financial institutions will analyze your debt-to-income ratio to determine what exactly you will qualify for. During this process, ask your mortgage broker to get a pre-approval letter, for the amount that your financial institution will lend you. Now that you know what you can afford, it will help the seller have confidence in your offer when you find the home you wish to purchase. During this process, you should make sure you have enough to cover closing costs. Closing costs generally consist of loan origination fees, appraisal fees, title insurance, title search fees and taxes. You might also encounter deed-recording fees, discount points and credit report charges. A good rule of thumb is to set aside 2–3% of the purchase price.
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Everything You Need to Know About Buying Your First Home

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