The process of buying a home can seem overwhelming. There’s a lot to research and consider as you decide what you can afford, and how to move though the loan process.
It’s important to know your numbers when considering your options. Understanding your budget and affordability options, whether you’ll make a down payment and how your credit score and current debts can influence what you qualify for are all part of the process. We’re here to help walk you through it with some important things to know before buying a home.
Why should you consider buying a home?
It’s important to understand if you’re ready to buy. There are many benefits to owning versus renting and knowing your numbers when it comes to budgets and credit scores will be very helpful. Understanding the “dos and don’ts” of homebuying will make the process easier and help you make informed decisions.
Understand debt-to-income ratio (DTI)
The percentage of your gross monthly income that goes towards your monthly debt payments is your debt-to-income ratio. Examples of common types of debt include credit card payments, car payments and student loans. It’s important to understand that most homebuyers have debt and that’s not something that should stop you from purchasing. Understanding how your debt impacts what you’re qualified for when it comes to a loan is important. All this together comes into consideration when looking at what you can afford and the amount a mortgage company will lend you. This is an important piece of qualifying for a loan.
Check your credit score
Your credit score is calculated based on the information in your credit report. Credit scores range from 300 to 850 and understanding your score is a critical step in the homebuying process.
Costs to expect with a mortgage
There are various types of costs and fees included with buying a home for items such as appraisals, inspections, title, closing and more. The most important to know about in the beginning is down payment and closing costs.
Save up for the down payment
If you don’t have a down payment saved up, you may still be able to purchase a house. Down payment options vary and we’ll work with you to figure out the best loan for your situation.
Be prepared for closing costs
Closing costs and fees vary depending on a number of factors involved with your loan. Often, they can be wrapped into the total amount of your loan.
Understand interest rates
Your mortgage rate reflects the cost you’ll pay to take out a home loan. As a percentage of the overall loan amount, it represents the annual interest you’ll owe.
Calculate how much house you can afford
An income calculator helps you determine what you can afford by reviewing your annual income and the size of the mortgage, monthly debt payments, interest rates, loan terms and the related expenses to buying a home.
Now that you’ve learned about important things to know before buying a home let’s break down some of the steps involved, from finding out what you can afford to closing the sale.
