Buying a Home and your financial foundation
Posted by Metropolitan Group on Thursday, April 1st, 2010 at 11:03am.With all the options available, now is a great time to think about buying a home. For many first-time homebuyers it can be a nerve-wracking experience not knowing what steps to take.
The first thing to do before you make the decision to purchase a home is make sure your financials are in order.
1. Check your credit report. You can request a free credit report from any one of the three credit bureaus: Equifax, Experian, TransUnion.
Your credit score, or “FICO score,” is essential in qualifying you for an interest rate on your home loan.
Here’s an example of how much a FICO score can affect your monthly mortgage payment:
FICO®
scoreAPR Monthly payment (30
yr. fixed mortgage)760-850 4.685% $1,553 700-759 4.906% $1,593 680-699 5.083% $1,626 660-679 5.296% $1,665 640-659 5.726% $1,746 620-639 6.271% $1,8
Source: www.myfico.com. Example is based on Colorado rates.
2. Once you know your credit score, think about creating a budget and stick to it. Know where your money is going and make sure you’re working toward paying off any small debt you currently have: like paying off your credit cards in full each month. Also, avoid getting further into debt by making any large purchases you would need financing for, like buying a car.
Keep in mind that a home costs more than just the mortgage itself. There’s also maintenance, homeowner’s insurance and taxes. Furnishings, window coverings and paint may also be priority purchases right after moving in.
3. You may be approved for a larger loan than you need. This exercise is a great gauge to help you determine what monthly mortgage payment you’ll be comfortable living with. Try setting aside the additional amount it would cost to pay your mortgage every month. Let’s say it’s $600 more than what you currently pay on rent. Saving that money for 6 months is $3,600 you can put toward your down payment. And now you’re in the habit of what it feels like to spend that amount each month. If it feels to tight, maybe it’s time to reconsider the maximum amount you can afford.
Owning a home is one of the most rewarding and most expensive purchases you will ever make and you’ll need someone you can trust to help guide you through this process. Please contact us if you have any questions about what you need to consider before purchasing a home. We're here to help.
CalenBrennan & Paul Williams
contact@metropolitandenver.com
1.888.LIV.5280
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