With almost two-thirds of households owning their home, it is no wonder that more people are looking to make the leap into homeownership. Those who have never owned their home may be surprised at the financial considerations and other obligations to be prepared for prior to going for a home mortgage. Renters may want to position themselves in such a way as to get the best rates possible or wait for market conditions to change before buying. What should renters realize before buying a first home?
Preliminary Financial Expenses
Individuals who are looking to take out a conventional mortgage loan should be aware that most lenders prefer borrowers who can make a 20 percent down payment. Such individuals may be offered better terms. In addition, those who create initial equity in their home with a larger down payment often are not required to pay mortgage insurance. This can make it easier to pay down the balance on a mortgage loan.
In addition to having a down payment, potential buyers need to cover other expenses. Closing costs may need to cover expenses from home inspection fees, lawyer fees and moving expenses. Those looking to buy a home should be able to set aside enough to reasonably cover such expenses.
Other expenses may come into play when not purchasing a new construction home. Those looking to buy older homes or fixer-uppers at a reasonable price may need to put in money in order to make upgrades and repairs. Such expenses can be spread out over time as needed. Buyers need to carefully look over their budget and determine the priority of necessary renovations and how much home they can actually afford.
Consider Getting Pre-Approved
Many potential buyers do not know how much of a home loan they may qualify for and may fall in love with a Primm Springs home outside of their budget. Getting pre-approved for a home mortgage loan can help a borrower understand where they may need to improve themselves as an applicant and know the loan amount they may qualify for once approved.
There are many reasons to get pre-approved. The process itself is educational and borrowers can learn more about areas to improve, such as low credit scores, or a high debt-to-income ratio. Paying down debt and increasing one's credit score can make it more likely to be approved for a home mortgage loan. Also, sellers and their agents often prefer working with buyers who have been pre-approved as such individuals may be more likely to be approved for a mortgage loan, making the home selling process easier and more efficient for the seller. Those who are thinking of going through the pre-approval process may want to request a free credit report and check for any inaccuracies, as well as, review their general credit history. This is a major factor for lenders when it comes time to review applicants.
Review Your Options
Those who may not be approved for a conventional loan may want to look into other types of loans. It is possible to buy a home with a small down payment and even zero down. Certain stipulations apply to any loan, but it may help to look into VA loans or USDA loans. These options may make homeownership more accessible to certain groups of individuals.