Buying a home can be exciting and nerve-wracking at the same time, but it’s difficult to decide what to feel when you don’t even know where to start. Generally speaking, owning a home will pay off financially if you live in it for at least five years, but sometimes there’s nothing wrong with renting until then.
Follow these 4 steps and use it as your financial homework to cut your learning curve down significantly:
Step 1: How much house can you afford?
The first step is making sure its the right time for you – Only buy a house that you can afford today.
Next, consider keeping your total housing payment under 30% of your monthly gross income. Although it may not be feasible in an expensive real estate market, but you don’t want to end up living in a beautiful home yet find it difficult to save or even cover other monthly expenses.
Step 2: Are finances prepared for the mortgage process?
To guarantee you’ll be financially qualified to buy your dream home when find it, you’’ have to check a few things off your list:
- Check your credit
- Save cash for a down payment and other expenses
- Get your documentation together; pay stubs, W-2’s, bank statements
Step 3: Go shopping for a mortgage
Choosing between two mortgages can be confusing, but you can ease that decision by knowing that there are fixed-rates and adjustable rates, or ARMs, which are priced very differently. You can take out a mortgage up to 30 years or for as little as five years – yet, it’s important to note the longer the term of the loan, the higher the interest rates.
Another piece of advice, you may want to run some scenarios through a mortgage calculator to see how your monthly payment will be affected by different terms and rates.
Step 4: Where can you get mortgage rates and pre-approvals?
To diversify your options, compare rates with any number of leading online mortgage lenders. If you’d rather not be left up to that decision on your own, find a local mortgage broker who will shop your application to multiple lenders on your behalf.