1. Figure Out How Much You Can Spend
This means going through your budget, income, and expenses, and sitting down with your loan officer to figure out the monthly payment that you can afford as well as the loan amount you can be approved for.
Do not stretch yourself too thin, you will need to make sure that you will be able to afford all of your monthly housing expenses like the mortgage, insurance, taxes, association (if any), etc…
2. Budget Your New Expenses
At this point, you’ve budgeted a certain amount of your income toward your future housing expenses. Now, the trick is to make sure that you can survive on what you have left.
Remember, utility bills like electrical and gas are a lot higher for homes than apartments. And don’t forget other expenses like water and sanitation.
Finally, you need to leave a little money aside every month for the inevitable repairs that come with home ownership.
A good way of seeing it you can afford all of these expenses is to put that money away as if you had those expenses and live on the disposable income that you would have if you purchased the home for a few months.
3. Down Payment
Although FHA loans only require a 3.5% down payment, the more you can put down, the lower your interest rate and monthly payment would be.
Putting 20% down on your home would get you the best possible interest rate and allow you to avoid paying PMI (Private Mortgage Insurance).
If you can’t get a 20% down payment together and are stuck with a PMI, don’t forget to write it off your taxes. PMI is tax-deductible.
4. Check Your Credit Scores
A credit score determines a consumer’s creditworthiness when applying for a loan and is a key factor in determining the loan amount and interest rate.
The lending market’s credit score requirements constantly fluctuate, but it is generally accepted that a consumer needs at least a 640 FICO score to qualify for a mortgage loan.
Consumers looking to get the best available interest rates on their mortgage generally need a FICO score of 720 or higher.
Check your credit reports and credit scores at least 6 months before applying for a mortgage to give yourself enough time to straighten out any issues with your credit (if any exist).
If your credit score is standing in the way of you purchasing a house, sign up for CreditFirm.net’s professional credit repair service today.