You may think that home buying is an easy and simple process, but it requires a copious amount of homework and understanding. This is why a checklist is needed to help make the home buying experience as least troublesome as possible.
Some of the information to look at includes the lowest mortgage rates. The Bankrate’s six-item checklist provides information on types of savings you need, plus advice about the most important matters regarding purchasing a home at resale value.
The next item on the list is your credit. The higher your credit score, the lower your monthly payments. If you want to avoid paying sizable fees or large down payments, make sure your score is maintained above 660 or 680. This is practically the cutoff for getting a mortgage. While there a number of qualified borrows with a 580-range score, the market is looking for those above the 640 range. If you want the best market rates, a 750 or above score will suffice.
There are some rules of thumb that gives an idea of how affordable a home is for you. If you use FHA financing, one-fifth of buyers get FHA-insured loans. The home payment cannot exceed 31 percent of your monthly income.
Keep a tab on your debt-to-income ratio. The safest formula is to keep your home expenses from exceeding 28 percent of gross monthly income. Your Bankrate’s new house calculator can provide an assessment of how affordable your house is. Calculate your mortgage payment, along with additional expenses such as taxes and utilities, long before signing those mortgage papers. By calculating the difference between your expected mortgage payments and what you are currently paying, you can estimate the best time to step back if the payments begin to make a dent.
Closing costs are another cash expense you must consider. Regardless of your loan source, you will need money to pay these costs. They can run from $2000 to $4000 depending on your mortgage. The Bankrate’s closing costs map provides information on the average closing costs in your state.
You have another tool in your hands and it is your savings account. Your savings should be built up overtime to cover both the down payment and closing costs. A lender preferably does not want their buyer living a paycheck-to-paycheck lifestyle. Having 3-5 months of mortgage set aside makes you a more attractive loan candidate. The money can also assist in covering maintenance and repair costs when owning a home.
One more tip to know is to set aside money each month. You will want to spend 2.5 to 3 percent of your home value on upkeep, repairs, and maintenance per year. For a $250,000 home, aim to save $520 to $625 per month.