Home Buying Tips: Finances

Home Buying Tips: Getting your finances in order

Now is currently a great time for able buyers to take advantage of record low interest rates, but what steps can you take to ensure you are one of those buyers? The following post offers some valuable suggestions to getting your finances in order to make that big purchase:

1)      Credit Report: Having a clean credit record will help you attain a lower interest rate and better mortgage. Get a copy of your credit report; evaluate it and make any necessary corrections and resolve any problems.

2)      Rule of Thumb: Most buyers can realistically purchase a home worth 2.5 times the amount of their salary. There are online calculators including one here.

Utilize this calculator to understand what you can afford according to the overall scope of your finances including income, debts and expenses.

3)      Down Payment: Generally, you want to strive to put down 20 percent. If you are not able to do so, you may still be able to get a loan from private and public lenders who offer low-interest mortgages as little as a three percent down payment.

4)      Think Potential Worth: You should keep in mind what future buyers of the home will value when buying yours. Even if you don’t have children, it is a smart choice to pick a house near a good school district as this is a top priority for most home buyers.

5)      Get Representation: While you can look for a home and process the transaction on your own, using an agent is your best bet. There are resources online, but a professional agent will focus on your needs and strategies in the bidding process.

6)      Points vs. Rates: At closing, you will have the option to pay additional points (a portion of the interest rate) in exchange for a lower interest rate. Opting for the points is beneficial if you plan on staying in your home for 3-5 years or more.

7)      Are You Pre-Approved?: Ensuring that you are pre-approved on a loan indicates to the seller that you are a more serious buyer and will allow you to put in an offer and stay within a reasonable budget. Note: prequalification is based on a cursory review of your finances while a pre-approval from a lender is based on your actual income, debt and credit history.

8)      Assess Comps: Consider similar homes sold in the last three months in the area of your desired home. If these homes sold at five percent less, than your bid should be eight to ten percent lower than the seller’s asking price.

9)      Inspection: It is wise to get your own home inspector with engineering experience to assess the potential cost of repairs in the future

With a solid financial foundation and preparedness, your home purchase will go more smoothly and often times result in a better deal. Keep these tips in mind when looking to purchase your next home. Thoughts? Leave your comments below or drop us a line on Facebook!