We’ve taken down the holiday decorations, put our leftovers in the refrigerator, and said good-bye to all of our company. Then, we take a deep breath, welcome in the New Year, and just before relaxing, we start to ponder our New Year’s Resolutions. What improvements will be made this year? Will I buy my first house? Upsize to fit the family? If a big purchase is in your future, there are a few things that can benefit you in
the long run.
First, check your credit score. A credit score of 700 or better can get you a lower interest rate and save you thousands over time. Also, a good credit score can open
doors to better loans.
Secondly, talk with a loan officer and find out what kind of loan you qualify for. If you qualify for a Fannie Mae Loan, there are set guidelines they use for determining purchase loans. We call this the 28% / 36% Guideline. The housing payment cannot exceed 28% of the borrower’s gross monthly income. Also, the payment plus other financial obligations, (car payment, credit card debt), cannot exceed 36% of the borrower’s gross monthly income. Therefore, before purchasing a house it is always a good idea to pay off the cars and other debts.
Lastly, it’s time to start or build your savings account! There are more out of pocket expenses than the down payment. You will be writing an Earnest Money check first, (1% – 3% of the cost of the home you are purchasing), when your contract is accepted. Then, you will be paying out of pocket for the home inspection. The Home Inspection takes place within the first 10 days of contract acceptance. Now, it’s time to think about things you may want to update or change in your new home. How much money will it take to make the house your home? Finally, there will be closing costs. Your Realtor can give you a mortgage calculator sheet so you can have a good idea of what to expect at closing.
Sometimes the details can feel overwhelming. However, streamlining your finances can get you the home of your dreams. It will all be worth it in the end!