Buying a home, especially for the first time, is both hugely exciting and nerve-wracking. Picking out the house of your dreams is only part of the process, as you will need to take certain steps to ensure you can afford it in the long-run. Before jumping into the thrilling world of homeownership, take some time to get your financial life in order.
Here is what needs to be done before purchasing a new home:
- Fix your credit score. The higher your credit score, the lower your mortgage payments will be each month. According to housing market experts, having a credit score below the 660-680 range will result in sizable fees or a larger down payment. Potential homebuyers will get a good deal if their score is between 700 and 720, with the best rates on the market for those with scores above 750.
- Set a strict budget. One of the main aspects you should keep in mind is the cost of the house itself. You need to find a place that is financially comfortable and will not lead to money problems down the line. For conventional loans, a good rule of thumb is to not let housing expenses cost more than 28 percent of your gross monthly income. Any more than this and you risk stretching yourself too thin fiscally.
- Build up your savings. Having a healthy savings account will help you make the initial payments, as well as provide you with an emergency plan if you run into trouble down the line. This is especially true in the beginning, as banks and realtors want to know that you are not living from paycheck to paycheck. If you have three to five months’ worth of mortgage payments set aside, you will be a more attractive candidate.
- Save for upfront costs. Depending on the financing you receive and your credit score, you will likely need to save up for a down payment, which is somewhere in the range of three to 20 percent of the home’s total price. No matter the source of your loan, you will also be on the hook for closing costs, which will typically be a few thousand dollars. Have enough money in the bank to pay for these upfront expenses.
Contact our realty company today for help finding a home in North Reading or surrounding areas!