Are you looking to finally buy your dream home in 2020? Now is an excellent time to take advantage of some of the lowest mortgage rates in history. If you’re ready to start the exciting journey of homeownership and achieve an important milestone, here are a few tips shared by Devin McCrossan:
1. Is Buying a Home Something You’re Prepared to Do?
Buying a home is a big commitment. Decide whether or not you’re prepared to become a homeowner, especially because there are a few crucial factors your lender will consider while analyzing your loan application.
Consider the following points before searching for a property:
● Income & Employment Status: Lenders want to learn more about your income and your income history. During this early stage, you need to appear dependable and stable. Prepare this by pulling the correct documentation together to show steady employment.
● Debt-to-Income Ratio: Your DTI lets your lender see how much of your monthly income is going to debt. This enables them to evaluate the amount of debt you can borrow. Make sure you review your DTI before applying for a loan. In most cases, you’ll need a DTI of 43% or less to qualify depending on the loan type, your lender, and a few other factors.
● Liquid Assets: Cash for a down payment is a must, so start saving up! However, many first-time homebuyers think they need at least a 20% down payment to close, but this is a misconception. You can buy a new house with as little as3% downfor those who qualify.Without 20% on a conventional loan, this translates into private mortgage insurance, or PMI, which is an additional ost for those putting down less than 20%.
● Credit: Depending on your credit score, you will qualify for specific loans and interest rates. Ensure taking the necessary steps to improve it and reduce your debt as you prepare to get a mortgage. Your credit score depends on factors such as payment history, current debt, credit history length, types of used credit, and more.
2. Where Do You Want To Live?
Mortgages are oftentimes issued for 30 years. In many instances, buyers don’t actually live in a home this long. However, one should consider how long they’re planning to live somewhere and the transaction costs. When taking the steps to buy your home, ensure you’re eager to live in the area for several years to come. Consider obligations, career goals, and more.
3. Calculate Your Budget
Once you’ve decided to buy a home, you need to determine a budget. You can start by calculating your DTI ratio. While renting, there are a number of costs you never pay, but with homeownership, you will. For instance, there are property taxes, lawn and snow maintenance, and other expenses that will need to be considered when determining a budget.
4. Save Up for a Down Payment & Closing Costs
When purchasing a home, buyers will need money for a down payment, closing costs, and reserves. Down payments are a considerable payment made upfront, and the larger the down payment, the lower the monthly payment.
Putting more down will mean smaller monthly payments with lower interest rates, and vice versa, so start saving!
5. Get Preapproved for a Mortgage
Before you start looking for a house, you’ll need a mortgage preapproval. A preapproval letter will detail how much you can buy, or what you’re approved for. This will depend on your assets, income, and overall credit score.
Once you receive this letter, you can provide it to your real estate agent, and they’ll help you find homes within your budget.
6. Find A Real Estate Agent
Real estate agents are your representatives in the transaction. Not only that, but your agent will assist you in finding homes as per your requirements, help you write and negotiate offers, and provide guidance throughout the homebuying process.
Buying a home for the first time is a complex and emotional process. Having someone help guide you will allow you to make intelligent and informed decisions.
7. House Hunting How-To
Once you’ve matched with a real estate agent, start looking for properties that meet your unique needs and within your budget. Make a list to consider the following:
● Budget
● Square footage
● Overall condition of the property and possible repairs in the future
● Public transportation access
● Bedroom amount
● Backyard/exterior space/swimming pool
● Local social options
● Value trends
Supplying this to your real estate agent will provide them clarity on your needs and wants, and help you throughout the home buying process.
You’re One Step Closer to Owning a Home!
Searching for the right home takes time and energy, so don’t get discouraged if the process takes longer than you expected. At MXN Real Estate, we’re prepared to help you throughout the homebuying process. Get in touch today With Devin McCrossan.
Devin McCrossan is an experienced business and real estate professional with an entrepreneurial spirit and a passion for real estate