Buying a home is likely the biggest purchase of your life. While getting approved for a home loan is often the biggest obstacle to home ownership, many people (especially first time buyers) fail to recognize the importance of adequately preparing themselves to jump that hurdle and position themselves for sustainable home ownership. It all starts with a little education, and we’re here to help. We’ve put together three tips to help better prepare you for sustainable home ownership.
Tip 1. Navigate Mortgage Loans
Mortgage loan products have changed drastically over the last five years, and continue to change at a staggering rate as the housing market attempts a rebuild. You must take it upon yourself to learn as much as possible about your mortgage loan options. Doing so will help you apply for the loan that best matches your needs and financial situation. You simply can’t sit back and compare interest rates, you need to dig deep into each loan option and investigate the overall cost of the loan. The good news is there are a lot of innovative programs out there these days. It’s a good idea to check with your local HUD counselor too, as your area might offer a special buyer program. Understanding your mortgage loan options and selecting the best mortgage fit is an essential step to sustainable home ownership.
Tip 2. Come to Terms with your Finances
You’re probably aware that your credit score is a major factor used to determine your mortgage interest rate. The better your credit score, the lower your interest rate. Likewise, if your credit score comes in especially low (anything below the 650 mark) be prepared to pay a higher interest rate. If this is the case, don’t be discouraged. Instead, consider taking a year or so to pay down credit cards, pay off vehicle loans, and close credit accounts that offer you high spending limits. Track your monthly expenses over the year and make a realistic budget. Being honest about how much house you can afford is vital to sustainable home ownership. Remember, you can always ‘upgrade’ to a more expensive home, but getting in over your head is a recipe for financial disaster.
Tip 3. Balance your Mortgage against your Income
There are a few tried and true percentages that are used to calculate how much mortgage you can afford. Generally, a mortgage payment should not constitute more than 30 percent of your gross income. If you have other debts (and who doesn’t?) such as a college loan or a car payment, the total amount of your debt should not be more than 40 percent of your monthly gross income. Scrutinizing (and improving) your debt to income ratio prior to loan application will not only increase your chances of getting a lender’s stamp of approval, but you’ll likely be rewarded with a better interest rate. Most importantly, you’ll have a clear picture of what you can afford. –All of which sets you up perfectly for sustainable home ownership.
These days, lenders want to be confident that you can really afford your home. After all, dishing out unrealistically high mortgages played a huge role in the recent demise of the housing market. That said, there are a lot of great deals out there to be had, and the market is pumped full of opportunities for sustainable home ownership. But unless you have the luxury of paying cash, you’ll need to educate yourself on a multitude of mortgage products, successfully wrestle your finances, and take hold of your savings before you pick up the phone to contact a lender. The result? You’ll transform into an educated consumer who’s plenty prepared for sustainable home ownership. What are you waiting for?
Guest contributor: Show Appeal Realty, an Arizona real estate brokerage selling Scottsdale Homes and Gilbert real estate.
Related Resources:
piedmont real estate – Get more information about homeowner resources and local neighborhood expertise to help you purchase real estate in Oakland, Berkeley and Piedmont.