When you make the decision to buy your first home, it is a commitment that you are going to have to stick to for many years. Many people take out a 30-year home mortgage loan in order to purchase a new home; if you plan on taking out a mortgage, it’s important to be prepared for the ongoing financial responsibility it will require.
There is a lot of preparation that is involved with purchasing a new home. You have to first save up enough money to provide a reasonable down payment. Second, it is better to have a good credit score if you want to get the best interest rate on your loan. Having steady work is also a big factor, since lenders do not like to give out loans to someone that may not be able to pay it back.
You have to take all of that into consideration in addition to searching for a house to move into. Buying a home is not an easy process, but if you do it correctly then you will be very happy with your decision.
The Importance of Good Credit
Credit is a big factor as to whether or not you will be able to purchase a particular home. A good credit score will allow you to be able to finance a more valuable house with lower interest. Before you attempt to apply for a home loan you should try and increase your credit score as much as possible. Pay down all of your lines of credit including any outstanding loans, credit card bills, and any other debts that you may owe.
A person should not try to apply for a home loan with a credit score less than 650. To be considered for a good home loan you should get your score up to at 750 or above. 800 is an ideal range, but it may take years to establish credit like this. Pay all of your bills on time and reduce your overall debt to credit line ratio to 30% and you should see credit score improvement.
Buying with Another Person
Buying a home with a spouse can either help or hurt you. A spouse with a low credit score and big amount of debt can hold you back from being able to finance a dream home. If your partner spends a lot of money then it may be hard to get him or her to break out of bad habits. Try to get both the credit score of you and your spouse in the best standing possible. You may just want to apply on your own to see if you are able to finance a home without your spouse. Speak with a lender to learn about the options available to you.
Saving is Key
The more money you have to put down on a home the better position you’ll be in to finance the home of your dreams. Try and save to put a 20% down payment on the home you’re interested in moving into.
If this is not possible, then save as much as you can. A down payment of 15% or even 10% is better than nothing. Putting down a significant down payment will automatically add equity to the house and lead to lower mortgage payments down the road. Budget your money wisely to figure out how to save enough for a good-sized down payment.
This article was provided by Mike Gordon, recent business school grad, on the hunt for his first house.. If you are looking to buy your first home on the East Coast, Mike recommends getting in touch with Avenue Realty, a Northern Virginia Realtor.
Once you’ve found the home of your dreams, you may need to do some home remodeling to make it truly your dream home. Contact us for all your home improvement, remodeling and renovation needs! We’ll come out and give you a FREE in home estimate. -Gary B.
