Are you considering buying a house? Homeownership can be incredibly gratifying and financially rewarding. However, it’s possible to take the plunge prematurely or overextend your finances, which could have devastating consequences. Here’s what to think about before buying a home to help you make a wise decision.
- Define why you want to buy: Why are you interested in owning a home? It’s the embodiment of the American dream, but homeownership isn’t right for everyone. Make sure your motives are prudent and not based on “keeping up with the Joneses,” or you could end up regretting your purchase.
- Check your credit report: Lenders examine your credit score to determine your interest rate. Before you approach anyone about a mortgage, make sure your credit report is up-to-date and error-free. Also, work toward improving your credit score. It should be 640 or higher before you apply for a home loan.
- Consolidate monthly payments: If you have existing debt, look into consolidating your loans into a single monthly payment. You’ll pay off your debt faster and appear more attractive to lenders.
- Know what you can afford: To quality for a mortgage, your debt-to-income ratio cannot exceed 43 percent. But just because a bank feels you can afford a mortgage doesn’t mean you actually can. Consider all your expenses, not just your debts, including medical costs, childcare, and insurance.
- Commit to saving for a down payment: Before buying a house, you must be in a financial position to save for a down payment on top of paying your existing debts and expenses. FHA loans require a minimum down payment of 3.5 percent. However, you’ll save in the long run if you put down 20 percent because your home loan will be smaller, and you won’t have to pay private mortgage insurance (PMI).
- Compare mortgage interest rates: As you get serious about buying a home, it’s wise to seek preapproval. If all your financial ducks are in the row, you should have your pick of lenders. Choose one with the lowest interest rate to save thousands over the lifetime of your loan.
- Take out any loans you need now: By the time you ramp up the home-buying process, you’ll need to avoid any major financial changes that could affect your credit score. That means if you want to buy a car, switch jobs, open a new credit card, or take out a loan, do so now. Then, give your credit score a few months to level out before seeking preapproval for a mortgage.
Even if you realize you’re not quite ready to buy a home, start getting your finances in order today. VIP Title Loans offers an affordable way to get cash fast when you need a little extra help. Our low-interest title loans and flexible repayment terms are just what you need. Visit one of our six North Texas locations or give us a call at 214-819-9491 or 682-325-4202. You can also contact us online for more information.