Buying a house is not a small investment. It may require the major percentage of your savings plus additional finance options such as loans as well. So, it is always wise to go for an own home only when you are ready by all means. Here are some important points which you have to ensure before deciding to buy a home.
You must have a good credit score!
A strong credit score is a first and foremost requirement. What’s considered a good credit score? The opinions may vary, but in general, a score between 700 and 720 is considered good enough to get you a fair deal. As per www.nerdwallet.com, anything below 660 or 640 is considered minimum and if your credit score falls in the minimum range, you will have to pay greater values every month and the down payment will also be high. So make sure you have a decent credit score so that your monthly payments are not much.
Be sure of what you can afford!
The home you buy should not leave you financially uncomfortable. So proper analysis of your debt to income ratio is a must before buying a home. For the majority of the traditional loans, the monthly payment should not be more than 28% of your total monthly income. This restriction makes sense as anything beyond that may put you under financial pressure. But there are relaxations in this area and certain financing solutions allow 31% or more.
You should have enough funds for down payments and loan fees
You would have to pay a down payment which is somewhere between 3% and 20% of the price of the home. Make sure that you have enough money to make the payment. In addition to the down payment, you should also have money to pay the closing costs of the loan which would also be a significant sum depending on the total loan amount and the place where you live.
Is there a healthy balance in your savings account? If not, start saving!
The down payment and the loan fees are not the only requirements for which you have to save money for. A healthy savings account increases your chances of being considered for a loan. If you have savings worth 3 to 4 times of the monthly payment, then there are high chances that your lender will give you a loan.
Get all the approvals ready!
It is always better to be ready with finance options before starting the real home hunting. Finance institutions require a lot of documents and details for issuing a loan. Make sure that you have them ready.
Choose the best home for you!
Once you have a clear idea of how much you can afford, choose the best one that stays within your budget. A house is a long-term ownership, so you need not settle for something which you do not like. Changing houses within very short terms is not a wise idea. So take your own time and find out the best one for you. All the best for your home shopping!