12 Tips to consider before buying a new house
If you are a first time home buyer then good for you. This is a very exciting time! Prior to buying a home, you want to be sure that you’re prepared, and that you understand the advantages of owning your home as opposed to renting. The main advantage is, of course, that you’ll have a place of your own, something that you can call yours, and something that will help you to build your net worth.
Taking out a mortgage is likely going to be the hugest financial commitment you’re ever going to make, so you want to make sure that you get the best deal. Before you buy your new home, you also want to be sure that you’re sufficiently stable in financial terms in order to support this huge investment i.e. new house buying. So here’s what you need to do, follow these tips:
The more money you can put down in terms of a deposit, the more choice you’ll have when it comes to getting a mortgage before buying a home. Make sure you save up for a down payment as well as a minimum of 6 months reserve.
KEEP YOUR JOB
Most lenders want to know that you’re stable. So if you’re working in a call center, and you’re saying “I can’t handle this for one more minute!” think carefully before you take off your headset and run for the door. New home buying is certainly not a fool’s game. Most lenders want to see you in a job for a long period of time before they’ll consider giving you a mortgage. Usually, they want to see you in the same job for at least six months, so this may not be the time to bail. So it’s better if you stick to your job to turn your wish of buying a home into a reality.
CONSIDER YOUR FINANCES
Look at your existing financial obligations – credit cards, student loans, car payments, and even what you have to pay in the run of a typical month for things like electricity and groceries. All these factors play an important role in new home buying financial process. Finally, total them all up, and then subtract that total from our monthly income to find out how much you can reasonably expect to be able to put toward your mortgage payments.
CLEAR YOUR DEBT
If you’re applying for a mortgage, you don’t want to be owing a lot of money on student loans, car loans, or credit cards. You should take all reasonable procedures to reduce your debt before you approach a lender for a mortgage lenders want to see that you’re responsible when it comes to managing your money in regard to buying a home.
CONSIDER YOUR CREDIT SCORE
Before you even consider applying for a mortgage, obtain a copy of your credit report. This will show you exactly what a lender will see when reviewing your application for new house buying. If it doesn’t look all that good, you can take measures to improve it.
THINK ABOUT WHAT YOU HAVE
Work out a budget for new home buying in advance to mortgage application. You want to be sure that you’re able to cover the market price of the house, and that you’ll also have enough left over to cover fees and costs. Your monthly payments will depend on what you borrow, the term, and the interest rate.
ASK YOURSELF HOW MUCH YOU CAN AFFORD TO CARRY IN DEBT
If you can afford to new home buying without carrying a mortgage, then congratulations, Bill Gates!
If you’re like most people, you’re going to have a mortgage. And even if you’re financially secure, you don’t want to tie up more in your mortgage in reality. In fact you’re probably going to be financing at least 80% of your home buying price, and possibly as much as 90%. Worst case scenario, up to 95%. If you’re signed on for a 15 year mortgage, your interest rate will be lower than it will with a 30 year term. Most people, though, simply can’t do it over 15 years, so a 30 year mortgage is more common.
CONSIDER WHAT TO ASK FOR
How much of a loan you request for new house buying will depend on your individual circumstances. You’re going to have to assess your gross monthly income, and keep in mind that when you go to your lender, they’re only going to consider what you can prove over the last couple of years. This includes your gross salary, dividends, bonuses, pension, and child support. Add up all these expenses, and then divide them by 12 to determine what your gross monthly income is. Now add up your expenses, including your car loans, credit cards, student loans, etc. and then think of buying a home.
Your lender will compare your income and your expenses to determine whether you qualify for house buying. If your debts don’t amount to more than 28% of your total income, then you’ll almost certainly qualify. Most lenders expect a debt to income ratio of at least 37%.
If you’re up over 36%, then you should take measures to reduce your debt to income ration before you approach a lender for new home buying. So stop buying stuff! If you think you need a new car, wait – just leaving this off your expense sheet can make a big difference.
This can be a bit tricky when question of buying a home -a new home is vocalized. Lenders are going to want to see proof that your self-employment is as good as a regular job when it comes to your ability to pay your debts. Usually, they’re going to ask you to show income for at least the past three years before they’ll consider giving you a mortgage, and if you can’t provide this documentation, then forget the new house buying process.
GET YOUR PAPERWORK IN ORDER
You’re going to have to prove your income if you’re applying for a mortgage and run towards buying a home. So make sure that you can provide your lender with current pay stubs. You may also need a P60 form – you get this every year from your employer. It shows a summary of what you’ve earned, and what your deductions are. Your lender may also want to see your bank statements.
MAKE A BIG DEPOSIT
The more you can put down in terms of a down payment, the better choice of mortgages you’re going to have. The best mortgage interest rates go to people who can make big down payments. New housing buying, undoubtedly, required big chunks of money.
If you’re having trouble getting a mortgage, you can enlist help from a mortgage broker. They have access to all sorts of lenders, and they can help you get a mortgage if you’re at borderline. They can also help you find the best rates for the purpose of new home buying.
Buying a home is a huge financial investment. And realistically, you need to be sure that you can afford it. If you’re carrying a lot of other debts, new house buying can bury you financially, and many lenders won’t consider you if you’re already carrying significant debt. Moving into your own home should be a course of action that helps you to build your wealth, not something that you’re pouring money that you don’t have into. So make sure you’re in a good position, before placing a deal on new home buying and if you’re not stable money-wise, then take measures to become financially strong first.
You can fund your mortgage, usually even if you have issues. It pays to shop around and consult the pros and cons before house buying. Don’t be afraid to ask for advice. Arbor can help you get the home you want at the mortgage interest rate you can afford. In other words, we can make new home buying easier for you.