Tips for First Time Homebuyers
Determine how much house you can afford and get pre-approved.When you’re ready to look for your dream home, it’s important to know how much home you can afford. This will narrow down your home search and will give you a realistic view of the types of homes you can buy inside of your price range. You will also avoid the temptation to purchase a home where you’ll struggle to make the payments.
Save up for a down payment.With such a big purchase, having a down payment to invest in your home is important. A good rule of thumb for a down payment is to save 20% of your mortgage. For instance, if you have a $100,000 mortgage, your target down payment is $20,000.
If 20% of your mortgage doesn’t seem feasible, there are other options for first-time homebuyers that will allow you to save and invest a smaller amount into your mortgage. If you’re wondering how much you need to save to achieve your desired payment, check out a down payment calculator for reference.
Payoff as much debt as possibleOne of the factors that will determine your creditworthiness is your debt-to-income ratio. A debt-to-income ratio measures the total amount of debt you’re paying off each month compared to the amount of income you’re bringing in within the same period. If the amount of debt you’re paying off is considerably more than your income, this will negatively impact your credit score. In turn, this will hurt your chances of being pre-approved for and financing a mortgage.
Try at all costs to avoid inquiries on your credit reportWhen you’re looking to finance your first home, one item that first-time homebuyers seem to overlook is avoiding new lines of credit. For instance, opening a new cell phone line, television service, or even setting up a utility account will all affect your credit score and your inquiries.
Before you buy a house, your focus should be on maintaining and improving your credit score while saving as much as possible for a down payment and closing costs instead of building new avenues of credit.
Buying your first home is no easy feat. When you finance your home with United Community Credit Union, we’re with you every step of the way. Pre-approval has never been easier, and you’ll be well on your way to opening the door to your new home. Start today!