Prepare to Finance Your New Home
Updated: Jan 19, 2021
Real estate is a part of your financial plan. You are committed, you're mentally ready. It's time to get your finances ready!
Establish Good Credit.
With COVID, the lending requirements have tightened up. Always aim high for the best interest rate, well above 700. Currently VA lending is more flexible requiring a minimum 620 credit score. But remember, the HIGHER your credit score, the LOWER your interest rate, monthly payments, and amount paid over the life of the loan.
Save, Save, Save!
Remember that you only need as little as 3% down for a conventional loan, and less for VA, but you'll need extra funds in the bank.
Due Diligence & Earnest Money up front: typically 1% of the purchase price of the house Inspections: think 1K-2K depending upon your price point and home features.
Closing costs: include taxes, insurance, HOA dues, attorneys fees, to name a few, and the down payment funds (3-20% of the purchase price)
Note: You may be able to use 401K funds to help you purchase a home...that's a lender question.
Reduce Your Debt.
Your debt-to-income ratio matters when qualifying for a home loan. Lenders typically look at a debt load of no more than 36% of your income. Pay down your debt, including installment debt: car loans/student loans, and revolving balances on credit cards down to under 10% of your after-tax monthly income. Don't let a student loan balance make you wait though. Chat with a trusted lender to make a plan! Need a trusted lender? Call me.
Get a better job, if you're on the year to two year plan to buy. **
Ask for a raise! Are you hard working, reliable, and can prove it. Get brave already and discuss a bump in salary!
**If you've been at your job less than 2 years, you may pay a higher interest rate. On commission, be prepared to show 2 years of commission to be able to use that as a basis for income.
Motivated? Ready to make a plan? Whether you are 2 months or two years out, call me, I can help!