Today’s reality shows give the impression that you can find true love with one rose, one kiss or a 90-day fiancé. And while some whirlwind romances work out, most long-term relationships require significant thought and preparation.
Similarly, as you think about buying a home and choosing a mortgage, it’s wise to invest time and preparation into the process. These 7 tips will help you plan ahead and put you on the right path to homeownership.
1. Give your credit a check-up and repair any problems.
This is critical because your credit history helps determine which loan products you’ll qualify for, as well as the mortgage rate. Start by requesting a free credit report at AnnualCreditReport.com
– you’re entitled to receive one per year from each credit reporting company.
- When reviewing your credit history, look for any signs of identity theft or errors – and resolve them as soon as possible.
- Learn how various factors affect your credit score at the Consumer Financial Protection Bureau.
2. Start saving for a down payment.
If possible, aim for a 20% down payment
when buying a home. This provides you with access to more favorable mortgage options.
3. Stash some cash.
In addition to setting aside money for a down payment, having additional savings will come in handy for home improvements, furnishing your new digs or other unanticipated expenses.
4. Assess (or revisit) your life goals and lifestyle.
If you’re buying a home with a spouse, partner or friend, this should be a discussion you have together. Things to consider:
- Am I a city person or do I want to live in a quieter, more open area?
- Are vacations important to me? If so, be sure to include travel in your household budget.
- Are children in my future? Choosing a good school district and safe neighborhood may be important factors.
5. Determine your monthly budget.
Experts recommend spending no more than 28% of your income on housing. These expenses include principal, interest, and escrow for real estate taxes and private mortgage insurance (PMI). If you make a 20% down payment, then you won’t be required to purchase PMI.
6. Get pre-approved for a mortgage before you start house-hunting.
This ensures that you’re looking at properties you can afford, while also giving you a power position when negotiating a purchase price.
7. Choose a quality mortgage provider.
A reputable lender will answer your questions honestly, walk you through pre-approval and recommend the best financing option for your needs. When you’re ready to move from these planning steps to “let’s do this,” download our free comprehensive Guide to Home Ownership
- By The Compass Hawaii Team,
May 22, 2019