While HousePacket.com is a great place to start, there are many factors to consider in beginning the process of buying a house.
Assess Your Credit
The first step to becoming a homeowner is checking your credit report and score. Most home loans require a credit score of at least 620, although certain FHA loans will accept scores as low as 580. Checking your credit for free (See link below) will give you a good idea of the types of loans you may qualify for, as well as how much home you can afford.
Determine What You Can Afford
Many people believe looking for a nice house is the most important step in the home buying process. But actually getting financed for your home is critical. If you go out and look at homes without your financing in place you will be wasting you and your realtor’s time. Before looking for a home, make sure you get pre-approved for a loan.
To get pre-approved apply for a home loan with mortgage lender. Contact your current bank or you can use HousePacket.com to connect with reputable mortgage lenders in your area. Remember to apply with more than one mortgage lender because they offer different loan packages and fees that can either save or cost you more money in the long run. After you get pre-approved you will know your exact price range for a house. You will also be able to make an serious offer on the house you desire.
What do mortgage lenders want from you?
Mortgage lenders use the debt-to-income ratio to evaluate your creditworthiness and how much house you can afford. It represents the percentage of your monthly gross income that goes to monthly debt payments, including all your monthly bills such as mortgage, student loans, car payments and minimum credit card payments.
Generally, lenders want a ratio of 36% or lower, but it is still possible to get a mortgage with a debt-to-income ratio as high as 43%. To calculate your debt-to-income ratio, add up your monthly debt obligations, such as your minimum credit card payments, student loan payments, car payments, mortgage payment, etc. Divide this number by your monthly pre-tax income. For example if your total bills are $1,900 and you earn $4,500 per month then your debt to income ratio is 42% ($1,900 / $4,500). But remember your monthly income is the total combined amount of income for whomever is applying on the loan. If two people are working in a household that makes it easier to meet debt to income requirements.
If your debt to income ratio is over 43% you will need to work on boosting your income or pay off debts.
Calculate Your Down Payment
A down payment can be anywhere from 3.5% to 20% of your overall home cost. However, there are many mortgage programs that will accept 3.5% or less when buying your home. Down payments can come from many different places, such as savings accounts or 401ks, and gift funds from friends and family. Also ask your employer if any home buyer assistance programs are available. It’s important to know your financial capabilities as you get started searching for the perfect house.
Identify Different Loan Options
When buying a house, the amount of loan options may seem overwhelming. From FHA Loans, to USDA Loans, to Conventional Loans, it’s important to familiarize yourself with all of the options available to you. Visiting HousePacket.com can be a great way to connect with a professional that can help you find the loan that works best for you.
Know Your Home Owner Expenses
Before you commit to buying a home, make sure you understand the projected overall cost of your mortgage payment, home insurance, property taxes, and other fees. Prior to closing on your home purchase you will receive a Closing Disclosure that covers all your expenses. Read it carefully! If you don’t understand something get it clarified right away.
Buying a house involves a lot more than just your monthly mortgage payment and it’s important to consider all of the financial obligations involved in being a homeowner!
Work with a Reliable Agent
One of the most important aspects of successfully buying a home is working with a trustworthy agent. HousePacket.com is great place to start in connecting with the perfect realtor to assist you in purchasing your home. (Click here to contact a licensed realtor now!)
Why should you buy a house?
The steps to buying a house can be a long process and having reservations is normal. But homeownership has a lot of benefits and your diligence will result in the peace of mind that comes with owning your own home. No worrying about crazy landlords or paying someone rent!
Additional Resources:
Check your credit for free at experian.com