Preplaning Home Buyer Tips

You may already have it in your mind that you are ready to become a first time home buyer but, what you may not have done yet is some proactive things to make sure that your home buying dream becomes a reality. I think I remember reading once that they had compared doing your research in buying a home to doing a preflight checklist like they do with airplanes. Below we list some items that you may want to put on your checklist or just make sure that you have a good understanding of them.

Try to get a clear understanding of how much you can afford on a house
There are some formulas out there that can help you determine how much you can afford but, there are some general practices that can help you get a clearer picture. If you are going to get a FHA loan, which a lot of people get, the payment on your new home cannot go over thirty-one percent of your monthly income. As a general rule the FHA doesn’t allow you to borrow anymore than that but, there are some exceptions to the rule. For regular conventional loans the rule is around twenty-eight percent of the monthly gross income that your household brings home in a month.

Get your credit score as high and as strong as possible
It should not come as a surprise to anyone that the higher your credit score is the lower your monthly payments can be for you. The cutoff is usually around six hundred and sixty to six hundred and eighty. If you scores are seven hundred an above then you will be able to get the best financing terms available. Make sure to always get a copy of your credit reports on a pretty regular basis to make sure your score is what you think it is and there are no surprises that may or may not pop up because of an error. Also, try not to apply for any new credit about a year before you to try and secure a mortgage on your new home.

Try to build and maintain a very healthy savings account
This is something that you will not use for financing your new mortgage. This is only to make you look better on paper. Having a good and healthy savings account you make you look like a better mortgage candidate because you can show that you are not living paycheck to paycheck. A good rule to for this is to try and keep around three to five months of mortgage payments in your savings to make you look as attractive financially as you can. Also, you can use that money later if there are any unexpected maintenance costs you discover once you move in.

Start saving now for down payment and any closing costs
Now your credit and your financing will come into play here but, you will need to have enough money to put 3.5 to 20% down on your new home. If you credit is lower these numbers may shift a little bit depending on your rating. The only exception is if you are able to get a VA loan (there are very specific requirements to be eligible). Closing costs will also cost you. These numbers range from $2000 to $4100. Average closing costs will depend on where you live. If it is a buyer’s market while you are home shopping, then you might be able to persuade the seller to absorb some of the closing costs as well.
There are some assistance programs for these costs like first time home buyer loans and down payment assistance. Make sure you do your research on these because some of these programs have penalties that you may not be aware of.

Try and get preapproved for your new mortgage

If you are serious about either becoming a first time home buyer or any home buyer for that matter you will want to get your financing in order before you even think about beginning to seriously look at homes. The preapproval process is much more complex and extensive than it has ever been before. In order to really look at new homes than you will need to know how much you are going to be able to afford.

Remember to buy a property that you like

This has got to be one of the most important things to keep in mind. You are going to be spending a lot of your time and a lot of your money to buy this new home so you need to make sure that you and your family are going to be happy with your purchase. Even if you have to take a step back and catch your breath, it is ok. This is something that you do not want to rush into.

In closing, remember that buying a home can be a very stressful but fulfilling experience. It can be stressful even if you have purchased a home before and you are not a first time home buyer. As long as you plan and take the proper steps you can “take the edge off” of the home buying experience and make it an experience that you will always remember.

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