By Matthew D. Hyde
Chilton
& Chadwick, Vice-President
Buying a home is an exciting and major step in anyone’s
life. Whether you are a first-time homebuyer or in the process of acquiring
numerous properties, preparation starts well before you find your dream
home.
It is highly recommended to follow these steps so your
home buying experience is as smooth as possible.
Find Your Budget: One-Year Out
You should have a number in mind of what you want and
can afford to spend. I highly recommend meeting with a local mortgage broker in
order to get pre-approved for a mortgage, to see what you are likely to be qualified
for. You will be in great shape if you are 1: Realistic with the number and 2:
Consider where you will be financially 9 months down the road when you will be
ready to buy. Be mindful of your debt-to-income ratio. According to lenders, it
is best if your debt does not exceed more than 40 percent of your gross monthly
income. Once you determine your debt to ratio number, establish a threshold you
will not cross so that when it comes time to actually apply for a mortgage this
crucial aspect of your financial picture will look good.
Credit Check: 10 Months Out
If there is one thing that can affect your ability to
purchase a home it is your credit score. Essentially, your credit score is the
deciding factor whether buying a home is even a possibility. For first time
homebuyers, The Federal Housing Administration (FHA) typically requires a
minimum credit score of 580 or better in order to acquire the maximum financing.
Those whose credit ranges between 500 and 579 are narrowed to 90 percent loan
to value, which means you are required to put 10 percent down even as a first
time buyer. In order to be prepared I recommend obtaining your credit report
from credit bureaus like TransUnion or Equifax. CreditKarma is a free app that will
give you an idea of where you stand and how you can take certain actions, if
need be, in preparation for purchasing your home.
Your Down Payment Plan: 9 Months Out
Considering where you are financially, there are
loan options that cover the entire spectrum of homebuyers. I personally
recommend, if attainable, to put 20 percent down on your home. Doing so would
significantly reduce the cost of your loan and the interest rate that comes
with it. But purchasing a home is still possible if you cannot put 20% down.
The Federal Housing Administration has a program for
first-time homebuyers that accept 3.5-5 percent down with a credit score of
580+. This method is very attractive to
many buyers, especially those who cannot qualify for a conventional loan. Now
that you know what you will be expected to put down on a home, you need to
start saving if you have not done so already. A suggestion before having to
deal with lenders is to have stability in your savings account. 90 days of
steady funds in your account before applying for a loan is recommended and will
show the lenders you are trustworthy and will be able to make payments. Of
course if you can attain this stable savings account even more than 90 days
before applying would only result in a more promising outcome.
Narrow your Search: 6 Months Out
At this stage in the
process, you start getting into the specifics of home buying. Time to put your budget plan into play and
narrow your search. This is when it gets fun! Are you looking to purchase a
home that fit the needs of your growing family? How many bedrooms and baths do
you desire? What towns have neighborhoods and school systems that fit your
needs? You will start picturing you and your family having dinner on the
gorgeous patio, or lounging in that basement you will soon turn into your
“man-cave.” Answering these questions will not only make the process that much
easier, but when it is time to put an offer in, you will be confident in your
decision.
I can’t stress how
important it is to have a knowledgeable real estate agent on your side. Not
only will a REALTOR® help you find your ideal home while giving private tours
of any property but will save you the headache of negotiations. Of course do
your own research on sites like Realtor.com and Zillow, but more often than
not, home values are not accurately represented. Ask your agent to make a
comparative-market analysis or CMA to give you the most accurate pricing a home
should sell for. If you follow these steps, I assure your experience will be a
pleasant one.
In areas like Fairfield
County, homebuyers do not pay their agent for the services therefore you have
nothing to lose.
I would be more than
happy to discuss any of the above with you or answer any questions.
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