What to Know as a First-Time Home Buyer
Buying your first home can be very exciting. Of course, your main concern will likely be finding a home that suits your needs and that is also in a desirable location. However, as a first-time home buyer, there are a lot of things to keep in mind. Buying a home is a major financial decision, and even just a couple of missteps can spell out major financial trouble. If you are taking out a mortgage, there are a lot of factors to keep in mind. Here are a few things that first-time home buyers should be aware of when it comes to financing.
How Much You Can Afford
One of the most important things that you should know as a first-time home buyer is how much you can actually afford. While lenders will give you an upper limit in terms of how much mortgage they will allow you to take on, it's important to consider all of the expenses associated with owning a home. You must factor in how your mortgage, taxes, home maintenance, insurance, and other fees will fit into your budget. Most experts agree that your total debts should not make up more than 36 percent of your take-home income. Before buying a home, make sure you can fit it into your budget.
Your Credit Score Matters
Another thing to consider when buying a home for the first time is that your credit score will play a large role in financing your new home. The better your score, the lower your interest rate. Over time, lower interest rates can mean thousands of dollars in savings. If you are planning on seeking out a home loan, you will need a score of at least 760 to qualify for the best rates. However, if your score is lower, you can still obtain financing. A minimum score of only 580 is needed for FHA loans.
Down Payments Can Help
When it comes to buying your first home, a large down payment can be difficult to save, especially in areas with a high cost of living. However, even putting just some percent down can be helpful. The more you put down, the less your monthly payments will be. A down payment of 20 percent is required by many conventional lenders and will allow you to avoid having to pay for private mortgage insurance. However, many lenders will accept lower down payments.
If you are buying a home for the first time, there are a few things to keep in mind. First, it's important to budget carefully and determine exactly how much you can afford before you buy. Next, your credit score matters. The higher your score, the better your interest rates. Having a larger down payment can also be very helpful.
Contact a financing professional for help if you are a first-time home buyer.