4 Tips for Financing Your First Home
By Colin Ryan
As the events of the last few years in the real estate industry show, people forget about the tremendous financial responsibility of purchasing a home at their peril. Here are a few tips for dealing with the dollar signs.
Strengthen your credit score.
Since the real estate bubble burst a few years ago, lenders have tightened their requirements when it comes to borrowers’ credit scores. The basics, however, remain unchanged: The higher your credit score is, the lower your down payment and monthly payments will be. To bolster your numbers, settle any outstanding debts and refrain from applying for new credit for several months prior to buying.
Secure your savings.
Savings are obviously important for a down payment, but they have other benefits as well. A homebuyer with three to five months’ worth of mortgage payments set aside is a much better loan candidate, and lenders will often give you a little more latitude on other factors if you can show that you have an ample cushion. A healthy savings account can also act as insurance against unforeseen problems or repairs.
Sub-primes may be history, but you’ll probably still be shown homes you can’t actually afford. By getting pre-approved as a buyer, you can save yourself the grief of finding your dream house, only to find you don’t make the cut financially. You can also put yourself in a better position to make a serious offer when you do find the right house. By doing a thorough analysis of your actual spending power, you’ll be less likely to get in over your head.
Do your homework before bidding.
Before you make an offer on a home, do some research on the sales trends of similar homes in the neighborhood with sites like Zillow. Consider especially sales of similar homes in the last three months. For instance, if homes have recently sold for 5 percent less than the asking price, your opening bid should probably be about 8 to 10 percent lower than what the seller is asking.
Follow these tips and work with an experienced real estate professional, and you’ll go far in ensuring that you get the best deal and the best mortgage on your first home.
Published on July 2, 2013