Rents are skyrocketing across the U.S. so it is cheaper to buy a home. According to data compiled by National Association of REALTORS®, about 1/3 of home buyers are purchasing for the first time. Forecasts show that more than 6 million people will buy home this time around.
If you are jumping on the same boat of home-ownership then ask yourself these 5 questions to determine where you currently stand and what you can afford to achieve.
Have you planned for the purchase?
Buying home might be the biggest purchase you are going to make in your lifetime. Be smart and make plans about it. Personal finance is the most important factor to consider. Your future decisions will have an impact on the home ownership process. So, keep your future goals in mind. Planning will help you make smarter moves and remain ahead of the curve.
How much can you pay monthly?
People tend to look at the maximum price of the home. That is not a right question to ask yourself. The right question is how much you can afford to pay comfortably on monthly basis. The maximum monthly payment is more important than maximum home purchase price. Make a monthly budget inclusive of all the future recurring costs. Determine whether buying a home of particular size and price is affordable on month to month basis or not?
Have you decided about the down payment?
When buying a home you also need to set aside some money for contingencies. Financial experts suggest that you should have at least 6 months of cash reserve for this purpose. This money should not be used for estimating the amount of down payment you can afford. The down payment percentage can vary from 0 to 20 percent or more.
The Department of Veteran Affairs and Aepartment of Agriculture, both offer homes without any down payment. There are also some programs in the market that can be a suitable option for lowering down payments like FHA (Federal Housing Administration) and Fannie Mae housing programs, both allow very low down payments. These laons hav eligibility eligibility.
Majority of the people that are going for a mortgage with low down payment have to settle with Fannie Mae, Freddie Mac or standard FHA loan. Use their data to determine which one suits your needs.
Have you taken closing fees into account?
The department of housing and urban development (HUD) has issued some guidelines for home buyers. They recommend you should set aside 4 percent of home’s cost to account for various fees and expenses. This include lender fee, title fee and government taxes.
Closing costs vary by state and you can contact your lender and talk about your options.
Have you error checked your credit report?
Your credit report is linked with your personal credit score. Your lenders look at the report to determine the risk. It is because credit report reflects the likelihood of loan defaulting and foreclosure.
It is a rough estimate that a lot of credit reports contain errors. These can significantly affect your score. You should review your credit report for errors time to time and file a dispute to amend mistakes in it.