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Just like anything in this world, the more prepared you are in handling a situation, the better you come out of it. The process of buying a home is not only one of the largest purchases a person will make in their lifetime, but it can also be one of the most emotional. You’ll be doing yourself, the people close to you, and your finances a big favor by being as prepared as you possibly can before attempting to buy real estate. Here are some big tips for a big purchase.
Know your Credit Score
Many factors go into being qualified for a home loan (savings, job security, current debt, etc.). Today your credit score is one of the most important and scrutinized factors to financial lenders. The interest rate you pay on your home loan (and often, your chances of getting a loan at all) is almost directly associated with your credit score. The best rates will go to buyers with a score of 720 and up, and most lenders will not consider a buyer with a credit score of 620 and lower.
Find a Lender
Once you find out your credit score try and get pre-qualified for a loan before you start looking at houses. You don’t want to fall in love with a house that you can’t afford. However, because of the lower interest rates being offered today, you could actually afford a higher price range than you previously thought. Make sure to ask a lot of questions with your lender, they will be able to give you a good idea how much cash you will need for a down payment and closing costs.
Set your Budget
Take into account your income verses your monthly expenses and determine how much you can realistically afford a month on a home. Most financial experts say that about 30% of a home buyer’s monthly income should go to paying your principal, interest, homeowners insurance and taxes. Don’t forget to include things like homeowner association fees and maintenance costs when coming up with a budget range for your home.
Start Saving your Added Cost
Once you have set the price you are comfortable spending monthly on a home, start saving that amount every month and cut unneeded expenses in the process. If you are renting, save the difference between your rent and your estimated home cost. In addition to building your savings, this allows you to get comfortable with a higher housing payment.
Your real estate agent will be your greatest ally through this process, so find someone you are comfortable with, who is knowledgeable, and has a familiarity with the areas you are looking to move into. Every step from this point on will be taken with your real estate agent by your side so find an agent who works well with you.