The prospect of buying your first home can be an incredibly exhilarating experience. While the idea of frolicking in your backyard during warm summer nights is a concept to behold, the process of purchasing a home is composed of various factors, most of which can be overwhelming.
Regardless if you’re a young adult looking to find a home or simply wish to make your first big purchase, rushing into the financial process of home buying comes with many pitfalls. There are so many things you need to consider before finalizing your decision, so make sure you ponder on the following questions:
Question #1: What can you afford?
The digital world has placed power into your hands, so make use of them by looking up various properties for sale. By doing so, you gain perspective on the types of homes currently available on the market, the price range, and of course, requirements you will need to accomplish.
Seeing how much homes cost also helps you determine your budget, giving you ample opportunity to ponder your decisions and workaround details accordingly. Your desired neighborhood may be above your price range, for example, so you can either delay buying until you save enough money, or you can search in a different location.
Question #2: Are there more ways to boost your credit?
The home loan application process is a tumultuous prospect. You will need to gather the right documents to apply but above all, your credit score needs to be sparkling clean. It plays a vital role in mortgage qualification. In many cases, a score of 740 or above is the most ideal, especially if you wish to get the best interest rates. Anything lower than that will land you higher rates, so it’s best to ensure that your credit report is clean.
If you’re working with student loans or credit card payments, however, don’t worry unless you’ve been missing monthly dues. Change bad financial habits as early as you can, as this will give you enough time to correct issues. In time, you’ll have a good credit score to qualify for a mortgage loan.
Question #3: Have you saved enough money for a downpayment?
Budget and credit scores are important, but you will need to have cash on hand for the down payment. It should be at least 20% of the home price, as doing so will get you the best mortgage terms. A hefty amount of 20% will save you the trouble of paying for private mortgage insurance, which has been designed to protect the lender should you fail to repay.
Unfortunately, 20% can be too much for anyone, including someone with a relatively stable and mid-paying job. For a $600,000 home, that can be a whopping $120,000—for the best results, however, start saving now!
On The Road to Your Dream Home
The daunting task of buying a home isn’t a myth—it’s very much real. People continue to willingly go through the process simply because it’s fulfilling—and that is what awaits you at the end of the tunnel. You may not have enough now to cover down payment and good credit scores, but a year can change your luck. With a little work and enough time to prepare, you’ll be living in your dream home in no time!
Never think you’re alone in your financial journey, however. Help is always given to those who ask for it, so if you’re on the lookout for local credit union banking services in Buffalo, New York, Good Neighbors Credit Union would be happy to assist. We offer you our unparalleled services and expertise, all of which are dedicated to building a financial institution designed to make banking services stress-free and accessible.
To further diversify our services, we’ve launched The Ultimate Staycation Contest, dedicated to the summer fun we’ve lost due to the coronavirus pandemic. Win an amazing staycation package or get the chance to lower your debt repayments! We also offer you the chance to improve your credit score—the choice is yours, so join now!