There are a lot of factors that go into buying a home that you may not realize when you are a first-time homebuyer. You don’t want to feel shocked by all the extras that seem to pop up when you are making this large purchase. It is best to prepare far in advance for this life changing event. Central Texas Auction and Realty is here to share some tips for first-time home buyers to help make the process as seamless as possible.
Aim to Increase Your Credit Score
It is no secret that your credit will be the gateway to getting the financing needed for a mortgage. If you have had some trouble with your credit in the past, work on getting that score up. You will not only need a good credit score for the best interest rates, but any private mortgage insurance you may need or homeowner’s insurance as well will take into consideration your credit score when giving you the best rates.
Benefits of Saving Money Early
When you are purchasing a home, you will want to have a down payment. This will help you in the financing process. It is ideal if you only have to finance 80% of your home’s value. Start saving as soon as possible so you are ready for this portion of the buying process. It will help your mortgage be much more affordable.
Income to Debt Ratio; Pay off Your Debts
Your debt to income ratio will be taken into consideration when you are in the financing portion of the process. If you have large debts, you will benefit from paying them off as much as possible. You want to be able to qualify for the best rates possible and have several financing options available to you. This can’t be done when your debt to income ratio is too high.
Don’t Take on New Debts
If you have any new debts this can stand in the way of you purchasing the home you want as well as qualifying for the mortgage that you need. If you can avoid taking on any new debt, this is certainly the time to do so. Being debt free is the goal, but sometimes this is hard to attain. If you have had your eye on that new car, wait to purchase it until after you have purchased your home.
What Percentage of Your Monthly Income Should Your Mortgage Payment Be?
You will find in the buying process that lenders will be willing to lend you way more money than you may be comfortable with taking on. It might be tempting to take out the maximum amount that lenders are offering, but you will be happy that you chose to finance a mortgage that is comfortable and within your budget. Keep your mortgage to about 30% of your monthly income or lower.