| 10 Ways to Prepare For Homeownership | |
1. Decide what you can afford. Generally, you can afford a home equal in value to between two and three times your gross income. A big factor in what you can and cannot afford is your debt to income ratio or your DTI, which is your percentage of debt for both living reoccuring debt such as car payments and credit card debt.
2. Develop your home wish list. Then, prioritize the features on your list.
3. Select where you want to live. Compile a list of three or four neighborhoods you'd like to live in, taking into account items such as schools, recreational facilities, area expansion plans, and safety.
4. Start saving. Do you have enough money saved to qualify for a mortgage and cover your down payment? Ideally, you should have 20 percent of the purchase price saved as a down payment. That doesn't mean you should put off homeownership if you have less, in fact, most first time home buyers are not able to put that much down. Commonly most put down between 3% - 5%. Also, don't forget to factor in closing costs. Closing costs - including taxes, attorney's fee, and transfer fees - average between 2 and 7 percent of the home price. Talk to a Real Estate Expert of what best suites your situation.
5. Get your credit in order. Obtain a copy of your credit report to make sure it is accurate and to correct any errors immediately. A credit report provides a history of your credit, bad debts, and any late payments.
6. Determine your mortgage qualifications. How large of mortgage do you qualify for? Also, explore different loan options - such as 30-year or 15-year fixed mortgages or ARMs - and decide what's best for you.
7. Get preapproved. Organize all the documentation a lender will need to preapprove you for a loan. You might need W-2 forms, copies of at least one pay stub, account numbers, and copies of two to four months of bank or credit union statements.
8. Weigh other sources of help with a down payment. Do you qualify for any special mortgage or down payment assistance programs? Check with your state and local government on down payment assistance programs for first-time buyers. Or, if you have an IRA account, you can use the money you've saved to buy your fist home without paying a penalty for early withdrawal. Are there any family members that are interested in helping you?
9. Calculate the costs of homeownership. This should include property taxes, insurance, maintenance and utilities, and association fees, if applicable. But, do not forget that there are many tax advantages to home ownership. For instance, all of the money you pay in interest for your loan is tax deductible, including what you pay for PMI, if you make less than $110,000 per year.
10. Contact the Cindy Dickerman Team for a free home purchase preparation consultation, which will help you make sure you have covered your bases and are on the best path to home ownership.
Originally written by Julie Woodward-Trenker on realtown.com
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