You think you're ready to own your home? Here are financial steps you can take before you start searching for home.
BUILD YOUR CREDIT.
Your credit score is one of the factors the lender will look at when you are applying for a loan. Each loan has a minimum credit score requirement. The higher your credit score, the better your interest rate will be, the more purchasing power you have.
Boost your credit score by:
- Pay bills on time
- Make frequent payments
- Dispute credit report errors
- Get a secured card
- Request a credit limit increase
SAVE FOR DOWN PAYMENT
Some buyers are able to borrow money from their 401K while others from their friends or relatives to help them with their down payment. Unless you're working with VA loan, you are going to need down payment when purchasing a home. The higher your down payment, the lower your monthly mortgage will be.
Ways to save:
- Automate a fixed amount into a special savings account very month
- Cut some unnecessary expenses
- Improve your income with side jobs
- Save your bonus
SAVE FOR CLOSING COSTS
In a buyer's market, closing costs can be negotiated with the seller. However, in a hot market where the seller has the upper hand, you need to come up with your own closing cost in order to compete.
What can you do?
You can borrow money from your 401K
You can borrow money from your friends or relatives
You can save some money. (See #2)
GET PRE-APPROVED BY A LENDER
The best person to help you find out how much money you can borrow and determine how much home you can afford is the lender. If you want to know how much you are going to need for down payment and closing cost, the lender is your person. They know the required FICO score and debt-to-income ratio as well as the right program for you. It's no cost to you so why not?
Finding the right lender:
- Work with a Realtor. They usually have trusted lenders they work with.
- Your bank has their own home loan specialist
- Search the internet for the best reviewed lenders
Note: Angela Carpio is a Realtor serving Menifee, Murrieta, Lake, Elsinore, Temecula, Wichester, Canyon Lake and the surrounding cities.
Angela Carpio, Realtor
Coldwell Banker ABR