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Preparing to Buy a Home
You can never start too early to buy your first home. In fact, as early as high school is a great time to start. So, how does a high schooler start preparing to buy a home. Well, for starters, if the parents allow it, having a cell phone in his or her name and making on time payments can be a great way to boost his or her credit score. But, what about you? Are you already out of high school? If so, don’t fret. You can still start preparing to buy a home too. No matter your age, keep in mind, the best time to start preparing is today. Let’s take an in-depth look at the things you can do to adequately prepare yourself for purchasing your first house.
Preparation Tip 1. Understanding Mortgage Rates
When it comes to buying a home, you need to realize that there are several types of mortgage loans for you to obtain. The two most common include adjustable rate mortgages and fixed mortgages. Adjustable rate mortgages often appeal to home buyers because they start out with extremely low payments; however, over time, the payments increase. Unfortunately, if you don’t adequately prepare yourself financially, when the bigger payments come around, you may have to end up foreclosing on your home. On the other hand, if you obtain a fixed rate mortgage, you don’t have to worry about your payments going up or down. Instead, you can rest assured your payments will stay the same throughout the life of the loan.
Preparation Tip 2. Have Patience
Purchasing a home is huge investment. You should never rush through the process. You most definitely should not feel pressured by a real estate agent or broker to make a purchase. Instead, take your time, and never feel like you have to make purchase just because mortgage rates are low.
Preparation Tip 3. Know How Much You Can Afford
If you don’t know how much you can afford, you won’t have a realistic idea as to the home that you should purchase. To effectively determine how much you can afford, you need to sit down and develop a budget, including all expenses that you are paying. Furthermore, you need to make sure that your sources of income are steady, meaning if there is a good chance you won’t keep your job for the next ten to thirty years, don’t count your income as steady. Also, once you determine how much you can afford, it’s best to deduct ten to twenty thousand dollars off of this amount. For example, if you determine you can afford a $160,000 mortgage loan set up on a 20 year repayment schedule, don’t spend more than $140,000 on a house just to be on the safe side.
Preparation Tip 4. Think About Condos
Remember, buying a home doesn’t always mean you have to buy an actual home. Condos have many advantages, including not having to worry about yard work and much more.
Preparation Tip 5. Get Your Credit in Shape
Without decent credit, you probably won’t qualify for a home loan; this doesn’t mean your credit score has to be 800 or above, but you most likely will need a credit score of 620 or higher. If you have a cosigner, make sure his or her credit is also good. When it comes to getting your credit in good shape, you can never start too early. With less than decent credit, you need to prepare yourself for the fact that it will take at least one to five years to get it in good shape.
Preparation Tip 6. Save for a Down Payment
Your credit score will play a large role in the type of down payment that you will need to have to qualify for a mortgage loan. Of course with a higher credit score, the lower the down payment will have to be. With a great credit score, you may even luck out without having to put any money down. Nonetheless, a down payment is advantageous because you won’t have to pay interest on it. Generally, your down payment should be somewhere around six months worth of the mortgage payments that you will be making. For example, if your monthly payments are to be $650, you should have a down payment of $3,900.
Preparation Tip 7. Get Pre-Approved
Before you go about shopping for your dream home, you need to get pre-approved for a mortgage loan. In doing this, you can determine the amount of money that you will have to spend on a home, which will narrow down your list of potential homes to buy. When you go to get pre-approved, check with two or more lenders so that you can obtain the best rate possible.