Important Questions you need to ask yourself
Buying a home is one of life’s most major decisions. Many first time home buyers are ill prepared and are forced to exit their first home in search of greener pastures much before they are financially ready. In purchasing a home there are many considerations.
- Will your career path change radically in the near future?
- Are you single and want to get married?
- Are you married and plan on having children?
- What neighborhood do you want to live in?
- Do you want a home near your work?
All these question’s answers will lay the ground work for both the size of home you will look for and in which area you will look. Too often people buy a house too small in a poor neighborhood, just to own a home, when renting for an extra year will let you buy a bigger home in a better area.
Work On Your Credit
You will need to get your financial house in order first. If your credit score is under 640, many lenders in today’s tight lending atmosphere may not even consider you for a mortgage. Start working on raising your credit score by making regular payments on credit lines or loans and review your credit history for any mistakes.
Pay Down Debt
Using an online mortgage calculator can help you ascertain the size of mortgage you can afford in relation to your income. Remember to keep your total costs of the mortgage less than 45% Loan-to-Value ratio as that is the maximum that lenders will offer for a mortgage. If you have other debt, tied up in credit cards, home equity lines of credit or loans, these will subtract from the total value of a mortgage you will be eligible for. It may be smart to pay off these debt instruments before applying for a mortgage.
Do You Qualify for FHA Loans?
If you qualify for a Federal Housing Administration (FHA) insured loan it enables you to qualify for a mortgage with most lenders with only a 3.5% down payment. For eligible veterans and active duty military, you definitely want to look at the 0% down VA Loan. The VA is the best program available.
Save for a Down Payment
Remember also that depending on the type of home you are buying, whether you have a lender mortgage or an FHA-backed mortgage your down payment needed will range from 3-20%. This down payment is needed in order to purchase the home.
Get a Preapproved Mortgage
Get a mortgage preapproval before you start looking to ensure you are not wasting your time on homes you could not afford. Other fees when buying a home include closing costs that can range from 1-8%, so shopping around between lenders can make a big difference.
Set Your Minimum Standards
Now that you have all your preparations in order, it is time to start house hunting. Too often first time home buyers are looking for a great looking home without examining the more important structural parts of a home. The major items that should be considered include the quality or state of: roof, windows, furnace, central air system, plumbing, electrical, non-leaking basement, kitchen and bathrooms. Remember that cosmetic changes like light fixtures, flooring, paint, landscaping, fences, decks, and trim can all be done by yourself or relatively inexpensively by contractors. Replacing major items like a roof or windows require a significant investment.
Hire an Agent, Look for a Home
This is the best part of all, where you get to actually look at your potential new home. Consider a home that meets your needs now and 5-10 years from now. Do not get stuck in a home that you will need to sell in less than 5 years, as you may not even recover your closing costs in the resale of the home.
As a first time home buyer Arizona, remember the most important decisions are: what can you afford? Where do you want to live? Which lender offers the best cost of the mortgage? What are the minimum must-haves you need to even consider a home? From these basic questions, you will get a home you will enjoy.