Getting home financing is like a dream come true for anybody in the market for a new house. This is the first step toward getting those keys in your hand. Before you begin setting up a tree swing and imagining your kids and dogs playing in the yard, you should work to lock in home financing that is affordable.
1. Go over all of your financials before looking for home financing
Some of the most devastating financial crises have happened because people defaulted on homes they could no longer afford. Look for home financing that you can afford every month even if you miss a few checks or even lose your job. Try to keep your mortgage to under 28% of the income you take home before taxes. This check and balance helps you to live beneath your means.
A good credit score is about 700 and up, so also consider repairing your credit before taking out a loan. You can get approved for certain mortgage financing with lower credit, but high credit gets you the better deal.
2. Set an amount that you can purchase and compare it to the home market
After you do your pre-application calculations, you should have an ideal home price and a max number you won't go over. Take those numbers and start searching listings in your desired city, county, and part of town. This should show you how much square footage and how many bedrooms you can expect based on your level of income.
3. Choose professional home financing companies that can give you a loan
Home lenders can offer you financing that allows you to place an offer on one of those homes. As a tip, try to get pre-financing so you are already approved. It makes the process quicker and jumps you to the front of the line when you're serious about purchasing a property.
4. Know all of the important clauses and terms of the loan before signing and make sure to honor it
There are so many legal terms with home financing that you should forward a copy to a real estate attorney before putting your signature on it. Find out if it is a conventional mortgage, adjustable-rate mortgage (ARM), fixed-rate mortgage, or government-insured mortgage. Read through it to figure out clauses related to early termination, special protections to the bank, occupancy clauses, and other potential issues.
You are on the right track once you get to know home financing in detail.