Buying a house can be exciting and exhausting, both at the same time. If you are not careful ‘Little House on the Prairie’ can quickly become ‘Nightmare on Elm Street.” Determine if you meet the qualifications to buy a house. Your income, employment status, Debt-To-Income Ratio, and credit score are the primary factors that will determine your prequalification to buy a house.
A mortgage is a huge long-term commitment. Make sure you know that you are ready to reside in one place for an extended period. Count the capital and resources you must use toward and down payment and closing costs. Evaluate whether the timing is right. Understand your financial readiness and lifestyle preferences. Calculate what you can afford on a house. Some suggest that 35% of your income can be used toward housing. I prefer a more conservative ratio of 20% or 25% of an individual’s income to be allocated toward housing. Home ownership is expensive and there are many unexpected costs and expenses that can be incurred in relation to your home ownership. Repairs and maintenance are normal and routine expenses. Knowing whether to purchase warranties or risk the out of pocket expenses is imperative. Overhead for utilities may increase, too.
Deciding the mortgage type that is right for you is also important. Conventional loans are the most popular and most conforming as they give ample consideration to the limits in place by the Federal Housing Finance Agency (“FHFA”). Federal Housing Administration (“FHA”) loans are backed by the government and deemed less risky for lenders because the government insures them if the borrower stops making payments. Veterans Affairs (“VA”) loans are insured by the U.S. Department of Veterans Affairs and are available to qualifying service members, veterans, and qualifying surviving spouses. United States Department of Agriculture (“USDA”) is another government-backed loan that assists people with homebuying in rural areas.
Before you start your home search, get pre-approved and find a real estate agent that is right for you as this is the individual that will advocate for you and facilitate your real estate transaction. Understand the realtor’s experience, their knowledge of the real estate market, and their full-time availability. The realtor should also be very comfortable with housing within your price point. Obtain client experiences, reviews, and testimonials.
To schedule a consultation with Nicole Michelle, feel free to connect with her on the Home Page.
Nicole Michelle
Finance and Money Wiz
July 12, 2024
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