Buying a home can be quite nerve-wracking, but it can also be one of the smartest decisions you can make. It’s an investment, that can earn lots of value or lose lots of value. Getting into the market at strategic times can prove to be quite important to the overall return and investment on your home.
Your credit: Work on it!
If you think buying a home may be in your future, even if it’s within the next few years, start working on your credit now. If there’s even a chance that you’ll need to borrow money to purchase a home, it’s time to plan for your credit.
Take the time to meet with a lender, and see what they’d recommend. If you have low credit, they can take the time to analyze your plan for better credit, and tell you what to focus on, and what to change. They’ll know the fastest and most solid ways to improve your credit for the long run. They know the ins and outs of the homebuying process, and they’ll be able to tell you what you can benefit from the most.
Even if your credit score is stellar and just what lenders want to see, there are still many things to consider in relation to your income. They look at how much money you make and how you spend that money. If you spend the majority of your income every month, or if you finish each month with a chunk leftover. You should know what you have coming in, and what you have going out each month.
It’s also important to understand how lenders view your income. If you are self-employed or an independent contractor, lenders may require up to two years of earnings history to show an average of what you make.
Making sure that you will qualify for a loan matters too. An old rule indicates that no more than 28 percent of your gross monthly income can go toward housing costs, which is called the front-end ratio.
Figure out what you can afford, use what you have to put down, what you can afford month-to-month, and then the third variable is the cost of the house. Once you have the answer to the first two, finding a ideal price to stay around becomes easy.
Be sure to have important documentation when you’re applying for a mortgage, like income and tax documentation. Collect recent pay stubs, a couple years of W-2’s, tax returns and bank statements. Buying a home can take a long time, but if you have documentation organized it can take the headache out of compiling everything last minute.
Consider down payment programs. Some programs function more like grants, and can help with costs at interest and payment free terms. This can vary from state to state, but it’s important to do your research. Talk with your lender, and see what sort of programs they’re familiar with and what they can offer you.