First Time Home Buyers Advice
Buying a home is very exciting. However, it can also be a stressful time and seem overwhelming to the first time buyer. Before making the decision to buy a home, you should make sure it is the right time. Are you financially ready for the responsibility of homeownership?
Take some time to consider your net worth, your current monthly expenses and your amount of total debt. When you go to see a lender about obtaining a mortgage, you will need to know your net worth anyway. Subtract your total liabilities from your total assets to figure out your net worth. Once you figure out your net worth, total debt and monthly expenses, you can estimate how much you can afford to spend for your mortgage payment each month.
A general rule of thumb is that your monthly household expenses (costs such as your mortgage payment, taxes and heating expenses) should be no more than 32% of your gross monthly income. Your must also consider your debt. It should not be anymore than 40% of your gross income. Debt will include household costs, other loans, credit card payments and any other debt you may have. Also, when determining how much you can afford to pay for a house, you will need to consider your monthly income, debt and also the interest rates you will pay and the amount of money you can put down on a house. A mortgage consultant and other lending associates can help you to determine the highest monthly payment you can comfortably afford.
After doing your calculations, you might find that it may be difficult for you to obtain a mortgage. The cost of housing expenses or your debt may exceed the amounts looked favorably upon by lenders. If this is the case, there are things you can do to start working towards improving your chances of being approved for a loan. You can work to pay off some of your other debts, save more money towards a down payment or consider searching for a house that is of a little lower cost.
Before applying for a mortgage, you should order a copy of your credit report. Check over the report to make sure it is accurate. If you do not have much of a credit history established yet, you will want to begin building one. You can apply for a credit card with good interest rates for example. Make some small charges on your card and pay the balance each month as the bill comes in. If your credit is less than perfect you can begin to re-establish good credit. Be sure to make all your debt payments on time. If you are still unable to obtain a mortgage, you can find out if you have anyone who would be willing to co-sign on the loan. Again, if you meet with a lender or mortgage specialist, they can obtain a copy of your credit report so that they can advice you of your options.
Once you determine how much money you can afford to pay each month, you may want to get pre-approved for a mortgage. By doing so, the lender will consider your financial situation and tell you the highest mortgage that you will be able to afford. This will give you an idea of the price you can pay for a new home. You will then know what price range of houses you can look at when searching for your home.