Over-dramatic headlines bashing the housing market--both its options and affordability--can make it hard to get excited about buying a house. In fact, it can feel flat out disheartening. The decision to buy a home is a big one and you should feel excited and confident about it, not anxious and uneasy. Here’s the good news;
It's a great time to buy a home.
Take the right approach by following these steps.
Know your numbers
Check the bank
How much have you saved for a down payment? Generally, you should expect to provide a 20% down payment on the purchase price and around 1% should be set aside for closing costs. For example if a house is $500K, 20% is $100K.
Yep, $100,000. Start saving.
Check your credit score
That’s where lenders will look first. A higher score is more likely to get you a higher loan and a lower interest rate. Lenders will also look at your debt-to-income ratio (monthly debts divided by monthly income) and they don’t want to see anything greater than 43%. When you’re preparing a buy a house, clean your credit, work on erasing debt/collections and hold off on other large purchases (like a new car) to keep your ratio low.
Credit monitoring and advisement is helpful at this stage in your life, teach yourself as much as you can, become your own credit expert. Seriously, take it seriously.
Never start your house search based on an assumption. All kinds of factors are taken into account when a lender determines what you qualify for, so get pre-approval from a lender so that you know exactly how much you can spend. You’ll need a pre-approval letter for your offer to be accepted by any seller anyway, so it doesn’t hurt to get this done early in your housing search.
Check your budget
Consider the amount of money you got approved for a loan. Just because it’s available, doesn’t mean you can spend that much. Consider ALL expenses like student loans, car payments, health care, groceries, cell phone and utility bills. Account for fun things like entertainment, shopping, and travel. The amount of money you spend on your house should feel right to you.
Check out the market
Finally, it’s time to start clicking through online listings and get to the part of your house hunt with actual houses. Get an idea of what homes cost in the areas you’re interested in and determine what you can expect to buy given your budget. Some buyers find it helpful to write down a few lists early in their search. What features are absolutely essential in the home you buy? What characteristics are you hoping to find, but aren’t deal breakers? What are the deal breakers?
Find your AGENT
A truly good agent can help you shop around to get the best price and having a professional guiding you through a process they understand well can make your life a lot easier. The Flynn Team can streamline your first home purchase, providing step by step advice before the house hunt even begins.
Call us today! (516) 294-7292