Are You Prepared to Buy?
Once you decide you’re ready to buy a home, it’s time to set a budget. A good place to begin is by calculating your Debt To Income (DTI) ratio. Take a look at your current debts and income and consider how much money you can reasonably afford to spend each month on a mortgage.
Remember that homeownership comes with a number of hidden costs you don’t need to worry about while renting. For example, you’ll need to pay property taxes, pay for maintenance and repairs, and maintain some form of homeowner’s insurance. Make sure you factor these expenses into your household budget when you decide how much home you can afford.
BONUS TIP: I can help you determine your Debt to Income Ratio and also put you in touch with terrific Lenders who can walk you through the Pre-Approval process and help you to discover what amount you are COMFORTABLE spending each month.
Save For A Down Payment And Closing Costs
In most cases, you won’t be able to get a loan for 100% of the purchase price of the home (Veterans are the exception here). That’s why you make a down payment. A down payment is a large payment you make when you buy your home.
A larger down payment typically means you have more mortgage options. Putting more down usually means you’ll get a smaller monthly payment and a lower interest rate.
You’ll also need to save money to cover closing costs – the fees you pay to get the loan. There are many variables that go into determining how much you’ll pay for closing costs, and will depend on your loan type, your lender, and where you live. Almost all homeowners will pay for things like appraisal fees and title insurance. If you take out a government-backed loan, you’ll typically need to pay an insurance premium or funding fee upfront.
There are many ways to save for your home purchase, including through investments and savings accounts. If you have relatives who are willing to contribute money, you may be able to use gift money toward your down payment, but a letter confirming it’s a gift and not a loan will be required.
Get Preapproved For A Mortgage
When you’re ready to start house hunting, it’s time to get preapproved for a mortgage. To get preapproved, you need to apply with your lender. The preapproval process typically involves answering some questions about your income, your assets, and the home you want to buy. It will also involve a credit check.
When you apply, your lender will give you a preapproval letter that states how much you’re approved for based on your credit, assets, and income. You will give your preapproval letter to your real estate agent so they can help you find homes within your budget. Now it’s time to shop for homes!