Taking the plunge into homeownership can be scary, but is often a great choice. When interest rates are low, you may find homes are more affordable than you expected. Depending on the market where you live, your mortgage may be lower than rent. Combine that with the fact that as a homeowner you are building equity, and increasing your net worth, and you realize buying a home can be a great choice. Get your finances in order before taking the plunge into homeownership. Having a low debt to income ratio and a solid credit score allows you to qualify for a mortgage with the best possible interest rate. There are several steps to take before you start shopping for a mortgage.
You should have a solid employment history before applying for a mortgage. The lender will want to see that you have been on the job for at least a year, and longer is better. You should also feel that your job history is relatively stable before applying for a mortgage. The lender may be happy to loan you money, but if you know your company is facing cutbacks or you may need to move shortly, buying may not be the best choice.
If you have existing student loans, consolidating and refinancing can improve your credit-worthiness. Refinancing at a lower rate allows you to pay less over the lifetime of your loan. A lower interest rate will also allow you to pay down the balance on your student loans faster, as more funds will open up due to having a new lower payment, in which the additional savings can be applied to the balance. Eventually paying off will ultimately improve your debt to income ratio.
There are many sites on the internet that allow you to look at your credit history. Checking this history before applying for a mortgage makes sense. You can make sure there are no issues and clean up any accounts that may have slipped your notice. If you have open collections, you should pay those before applying for a mortgage.
If you are considering purchasing a home, you have probably been putting aside money for a down payment. You should also have dedicated savings for expenses that crop up during the home buying process. You will be responsible for paying for home inspections, and while you hope to find the perfect fit on your first inspection, that doesn’t always happen. Don’t be tempted to skimp on the inspection process to save money.
You can start looking at houses even as you are getting your finances in order. You probably don’t want to get in touch with a real estate agent just yet, but scrolling through listing on the internet and visiting open houses can tell you a lot about the area where you plan to buy. The more homes you look at, the better of an idea you will get about what prices to expect and how quickly homes move on and off the market. In a hot real estate market, you need to be prepared to make an offer quickly. By making yourself familiar with the real estate market in your area, you are in a better place to make decisions when the time comes.