Buying a house is a huge decision. It takes a lot of planning and preparation. If you hope to own a home someday, you may begin wondering whether you’re ready to start the process. Fortunately, there are some basic questions and steps you can take to gauge whether it’s the right time or if you should prepare a bit more before such a big purchase.
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Transcript:
Welcome to Money Tip Tuesday from the Making Money Personal podcast.
When buying a house, you’ll find you’re faced with many choices. Going in new to the game can be intimidating, especially if you’re facing pressure from places like family, friends, or even the economy.
As you get started, you’ll need to determine a few important things to find out if you’re ready to make such a big purchase.
First, if you’re feeling ready to embark on this journey remember that you don’t have to do it alone.
The best way to start is by setting up an appointment or free consultation with a mortgage loan officer. They can review your finances with you, set you up with a plan of action that may include preparing your credit and accounts prior to applying, get you in touch with a realtor, and provide an idea of the price range you should be looking at when shopping.
Mortgage professionals will help you answer essential questions to determine how ready you are to find the right home.
First, they’ll help you figure out how much down payment you’ll need. Determining the down payment is an essential step in the home-buying process. The more you put down, the less you’ll need to borrow. But for many people, this is a challenging step because it takes time and planning to save enough of a down payment that will even make a dent in the overall house price.
Lenders generally require 20% down, which as of this recording is averaging around ninety-five thousand dollars in New Hampshire—difficult for most to obtain. With the benefit of PMI (Private Mortgage Insurance), many lenders can offer a mortgage without that large down payment. Because of this, different lenders also offer a variety of first-time homebuyer programs that accept low down payments, some as little as 5% or even 3% down. That can make a huge difference for someone with little time to save up for a down payment. Being intentional about saving that down payment is critical, and it will make the difference in how much money you’ll have to borrow for your home.
Second, they may provide insight on whether you qualify for any down-payment assistance programs.
If you’re struggling to collect enough for a downpayment, you may find help through down payment assistance programs. These are special programs, usually for first-time home buyers, but not explicitly, that can provide funds like grants, particular loans with very low rates or no need for repayment, forgivable loans, and tax credits. These offers are very localized and differ from state to state, but it’s worth researching the opportunities that might be available to you. Remember that you may have to meet specific requirements to get the assistance, and some lenders might not work with all programs, so do your research beforehand to determine your likelihood of receiving downpayment assistance.
Third, they’ll help you get an idea of your interest rate and APR.
The interest rate significantly affects whether you’re ready for a mortgage. Getting as low an interest rate as possible is a top priority for many people. As a prospective homebuyer, you’ll find that you’re not only shopping for houses but that you’re also shopping for the best rate. Rates play a considerable role in how much you’ll pay in interest over the lifetime of your loan, and they vary by lender. But, to get as good a rate as possible, you need to have good credit. Make it a point to know your credit score. This is one of the most significant factors for lenders regarding what interest rate you’ll get, so nurturing a good credit score is ideal. Monitor it regularly and ensure you’re making all payments on time, reduce your debt-to-income ratio by paying down as much borrowed money on credit cards or personal loans as possible, have a good credit mix and a reasonable length of credit history. The better your credit score, the more likely you’ll get a reasonable rate and pay less overall for your mortgage.
Finally, they'll help you get an accurate estimate of your monthly payment. Once you have a good idea of your down payment and what rates you qualify for, it’s helpful to calculate what you can expect to pay monthly and whether that’s affordable.
Use a mortgage calculator to determine how different down payments and rates affect your monthly payment. Remember that insurance and taxes should also be factored in for the most realistic payment possible. Use the calculators to determine whether that monthly payment is something you can comfortably afford and if not, your mortgage professional can provide options or insight into how to make it more affordable.
Determining you’re ready to buy a home should involve careful planning and research. Like many other significant decisions in life, rushing into a home purchase can be dangerous if you’re not ready. However, considering all the factors mentioned earlier, you will be encouraged to ask the right questions to ensure you’re as prepared as possible.
If you’re ready to buy a home, it’s time to contact a mortgage professional who can help you plan it all out. They’ll walk you through the process of getting pre-approved to finalize the deal at closing. Our team at Triangle is here to help you get the best mortgage option for the home of your dreams.
If there are any other tips or topics you'd like us to cover, let us know at tcupodcast@trianglecu.org, and don't forget to like and follow our Making Money Personal FB page and look for our sponsor, Triangle Credit Union, on Instagram and LinkedIn to share your thoughts.
Thanks for listening to today's Money Tip Tuesday. Check out our other tips and episodes on the Making Money Personal podcast.
Have a great day!
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