Buying a home is a big commitment and the mere thought might overwhelm you. But with the right guidance,
- Your home buying process can be much simpler,
- You will save money,
- You will avoid making common home buying mistakes.
There are two ways to pay for your home. The first option is cash. If you have been saving up money or have come in to some inheritance or other form of windfall, you can buy your home in cash.
Home mortgage is the second option. Your banker will consider several factors before processing your mortgage amount. You should therefore do the following to get your financial health in order before you go for a mortgage application:
- Consider whether you can afford the price tag on the home
You should only buy a home that you can afford. The cost of your home should not strain you financially. If by making mortgage payments you are going to have no money left for savings, it means one of two things:
- It is not the right time for you to buy a home, or
- You are buying a house that is too costly for you and you should consider buying one that costs less.
Buying a home that costs less does not mean that you are compromising on value. It just means that you are making wise financial choices.
There are many homes in places like Stowe, Vermont that are attractive as well as well-finished and yet they have an attractive price tag. Contact a Stowe VT real estate agent to show you some affordable homes within that area.
When you are able to raise more money in the future, you can sell your home and move into one a more expensive one.
- Work on your credit score.
A bad credit score will cause rejection of your mortgage request or result in a high interest rate on your application. Higher interest means that you will spend a lot of money making interest payments, money which you could put away as savings or investment.
Get your credit report and if your credit score is poor, work on it prior to approaching your bank for a mortgage.
- Reduce the bulk of your debts.
Lenders will regard you as too high risk if you seem overextended in debt.
Pay off some of your debts, especially the unsecured debts. This will reflect positively on your bank statement as it will free up some of your income.
- Raise a down payment.
You have to raise at least raise 20 % (sometimes less) of the list price of the house, for the bank to consider giving you a mortgage.
If you are able to raise 20% or more, you will have access to lower interest and you will also avoid mortgage insurance charges.
- Work out additional costs
In addition to the list price of the home, you will incur other costs and you should budget for those as well. They include:
- Maintenance costs
- Home insurance
- Property taxes
- Home appraisal and inspection fees
- Attorney’s costs
Your mortgage application process will be smooth if you take the above into consideration. You can contact your real estate agent, property lawyer or your banker for further clarification.