Buying a home is one of the most important decisions you’ll make in your life. You need to be careful about what kind of home mortgage you get because it will affect how much money you have available every month and whether or not you can afford your home. If this sounds complicated, don’t worry. This guide will walk you through the process step by step.
Table of Contents
1) Understand Your Credit Score
You want to know where your credit score stands before applying for a home mortgage. This way, if there are any errors on your report that could cause problems when looking for a home loan, they can be fixed right away. The higher, the better, but even if yours isn’t perfect (and few people’s are), it’s still possible to get home financing.
Most home loans require a credit score in the range of 620-740, which is above average. It’s worth taking the time to understand your credit history so you can make sure there are no mistakes or errors that could hinder your home search.
2) Research Your Options
Always shop around for the best home mortgage loan available per your current situation and needs. Some home buyers find that they qualify for better home loans than what they originally thought when they checked into it further with lenders; others find that their financial situations prevent them from getting home financing at all (for example, if you’ve got tons of debt already including high balances on credit cards, you may not be able to get home financing). Shop around for home loans and speak to various lenders.
3) Determine How Much You Can Afford
Figuring out how much you can afford on a home is important before you start looking. A home is one of the biggest investments you’ll ever make, so it’s vital that you do your research and figure out how much you can comfortably afford per month. You don’t want to waste time looking at homes that are completely outside of your price range since those likely won’t work as home financing options for you as well as homes within your budget will.
Make sure the home mortgage payment plus any other possible housing expenses (like utilities) is something you’re comfortable with per your monthly income before continuing with house-hunting! Remember: don’t over-extend yourself.
4) Save For a Down Payment
Most home mortgages require you to come up with a 20% down payment before the home is yours. This means that if the home costs $200,000, you’ll need to have $40,000 for your down payment before they approve home financing for you. There are home loans available that don’t require this amount of money as a down payment; but unless you’re getting an FHA loan (which is insured by the Federal Housing Administration), it’s usually not worth looking into because it typically makes home buying less expensive in the long run for homebuyers who do pay cash upfront on their homes.
It’s usually best to save up enough money, so at least 20% of the home’s price is covered by your down payment. However, if you only have 5% to offer upfront, there are home financing options where you can still get a loan with that small amount.
5) Understand Your Home Loan Options
There are different types of home loans available for homebuyers today. Each has its pros and cons, so it’s important to understand all of them before deciding on a home mortgage. For example, some home buyers decide they want to pay their homes in full (or mostly in full) and then refinance into a new loan after a few years or when rates drop; others like structured payments over time and choose home mortgages that allow for this benefit to be maintained over the course of their home loan.
6) Know Your Credit History
Your home loan application will likely ask you to state your credit history. You’ll want to make sure that all the information listed is accurate and up-to-date since home mortgages are usually dependent on what you say here; if anything major changes, make sure it gets updated accordingly (or else the home buying process could be delayed).
