Are you currently renting but ready to make your dreams of homeownership a reality? Are you prepared for this big step? If you are considering purchasing a home, here are a few things you should consider.
Are You Prepared to Do the Research?
Buyers generally have the advantage in a down market, but you shouldn’t go into the transaction blindly. Before you start searching the Internet for your dream home, there are a few things you should do. Find a real estate professional that will guide you through the home-buying process. Make sure to familiarize yourself with real estate lingo. Do you know what an offer is? Do you know what type of mortgage you should get? Buying a home is an exciting process, but it requires a lot of work too.
What’s Your 5-Year Plan?
Do you plan on staying in your new home for at least five to seven years? You answer to this question will help you decide whether renting or buying is right for you. If you plan on moving in the next year or so, then buying a home does not make financial sense. You typically shouldn’t buy a home unless you’re comfortable staying there for at least 5-7 years. This allows you the time to build up equity and make up for the costs of buying, selling and moving.
Are You Aware of the Costs Associated?
Today’s minimum down payment requirements range from 3.5 percent on an FHA loan to 10 or even 20 percent for conventional loans. That means coming up with anywhere from $10,500 to $60,000 on a typical $300,000 house. If you are not able to meet certain down payment criteria, you will also have to pay mortgage insurance or PMI, which helps cover the bank in case you default on payments. Besides a down payment, there are also closing costs associated with the home-buying process that you may have to pay in cash, which can run as high as 3-4% of your total purchase price. Add that to the cost of moving and any sort of improvements your home may need and it quickly adds up.
What Is My Credit Score and How Can I Improve It?
Want to reduce your monthly mortgage? Improving your credit score before the home-buying process actually begins is important. In addition to paying your bills on time, be sure to reduce your debts (especially those with high interest rates) and keep unused lines of credit open. All of these strategies can improve your score and allow you to qualify for the best mortgage interest rates available. You can check your credit score on sites like FreeCreditScore.com to keep track of any improvements or any areas for improvement.
Do I Have the Right Real Estate Professional Guiding Me?
Finding a real estate professional that can guide you through your home buying process and provide you with insights on your local real estate market is very important. They are your partner in the home buying process and can make the experience less stressful. They will help you navigate all the paperwork, your financing options, offer process and more.