How to Afford a House
Having your own house is one of the many accomplishments you can be proud of. It’s very important to look into all the details before buying a house. Is your income enough to pay for the monthly payments? Would you be able to afford a 20% down payment? Here are some tips you can follow to afford a house.
Improve your credit rating. Buying a house would require you to apply for a loan. Make sure that your credit rating is good so that you’re loan will be easily approved. A FICO score of 300 or above is a good score. The higher you have, the better your chances of having your loan approved. (Learn how to improve your FICO score)
buying a house
Prepare your down payment. Know how much down payment you can afford. Most of the time, you’ll be asked to give 10-20% down of the appraised value of the property. This amount is different from the selling price. When you pay a lower down payment, you may be asked to pay for a private mortgage insurance. (Tips on how to get rid of Private mortgage insurance debt)
Assess if you qualify for a loan. Lenders commonly used a 28 and 36 ratio to determine if you’re qualified for a loan. This ratio tells that in order for you to get a loan, 28% of your income should be sufficient enough for your housing payments, which includes mortgage, real estate taxes and insurance expenses. When you combine your housing payments and your payments for other debts, the amount shouldn’t be greater than 36% of your gross income.
Know how much money you need for your housing expenses. Determine the real estate taxes and insurance payments on your area. Check the price for the closing cost. Use a mortgage calculator to determine if these expenses exceed 28% of your gross income. If it does, you might have a difficulty in getting your loan approved.
Scout for home buying programs. If you qualify for a loan, the next thing to do is to look for a home-buying program that will make your new home even more affordable. There are numerous first-time buyer’s programs, which usually let you give out a lower down payment. You can also try using part of your 401K or Roth IRA to buy your home.
You can get a combination mortgage if you can’t afford to give a 10-20% down payment. This means that you’ll have one mortgage for the 80% price value of your home and then get a 2nd mortgage for the remaining amount.
Go house shopping. When your loan is approved, it’s time to go house shopping. Determine the kind of home you like and the neighborhood you want to live in. You may also want to consider the resale value of the place. To make this task easier, you can look for a real estate agent. An agent will be able to help you look for your perfect house. You just have to be very specific on the kind of house you like. He’ll do the haunting for you and you’ll just have to go and visit the houses that your agent recommends. Going to open houses is also a good idea. For more information on buying houses, read the 3 things you should do before looking for a new home.
Finding a house that you like is easy, it’s affording the house that can be a bit hard. When you want to buy your own house, make sure to prepare for it. This may mean months and maybe years of planning and saving up but when you’re able to get the house that you really like, you’ll know that all those years of saving up has been worth it.