The home-buying process requires an immense amount of attention to be paid to your finances before, during, and after the purchase of your brand-new home. Many elements will influence your financial circumstances, including your credit score, debt-to-income ratio, and the total value of your assets, especially. This must all be organized before you even consider beginning the search for a home. To get these elements in line and progress in your home buying experience, follow the brief guide below, provided by Rex Homes, on what to do as you prepare to purchase a brand-new home.
- Regularly Check Your Credit Report
The credit score lies at the center of your ability to qualify for a mortgage loan, and therefore, your ability to purchase a home. If your score is too low, you will not be eligible to borrow the necessary funds, and your home buying experience will be cut short before it even begins. Check your credit score and report at least a full year before you start house-hunting. This will give you enough time to pay down debts and dispute any errors that may be present in your report.
Keep in mind that traditional mortgage lenders tend to gravitate toward applicants with a credit score of 650 or higher. If you have not quite reached this score, don’t worry. Focus your repayment efforts on the most prominent, volatile debts, such as revolving debt like credit cards.
- Determine an Effective Yet Realistic Budget
Plan for your mortgage to comprise no more than 25% of your gross monthly income. (This percentage includes payments to the principal balance and interest of the loan, along with relatedtaxes and insurance.) If you plan to borrow from the FHA (Federal Housing Authority), be aware that they allow borrowers to raise this limit to 29% instead.
- Get a Pre-Approval Letter
So far, you have an idea of what your finances will look like upon the inclusion of home expenses into your monthly budget. Although this estimate should be based on extensive research at this point, you cannot entirely rely on it without an accompanying pre-approval letter. Of course, a pre-approval is not set in stone, and in no way reflects the final loan amount to be offered to you. However, it will bring you a step closer to determining the final budget for the purchase of a brand-new home.
Do not seek pre-approval until you’re sure that you’re ready to progress toward making a purchase. This letter from the lender is conditional, and only lasts for 90 days, so you do not want to waste it.
- See What’s Available on the Market
Once you have completed all the necessary research, visit your preferred neighborhoods, and see what types of homes are available to you within your budget. This will allow you to narrow your preferences in terms of the style and location of the house, bringing you closer to making the final purchase with full confidence.
When you’re ready to commit to jumping into the home-buying process, contact an experienced mortgage professional to help you along. They will advise you on how to create the best budget for your circumstances and how to purchase your dream home with ease. Contact an expert today to get started.