Planning to buy a home can be an exciting — and intimidating — venture. Many people love shopping for houses simply to browse and think about what they might like to own someday, but there are several financial considerations you should make before you even think about taking on house hunting seriously.
Follow this preparation guide to make sure that when your dream house comes on the market, you’ll be able to afford it and get the best mortgage rates, too.
Do everything you can to bolster your credit score. This may be perhaps one of the most important factors affecting rates for home mortgages from person to person. Credit reports factor in years of activity in several different aspects and categories of your spending habits, so the earlier you focus on making your numbers great, the better. Even a one-point difference that takes a score from “Fair” to “Good” can have an incredible impact on your potential home loans interest rates.
Save up for a down payment. Every mortgage company has its own set of rules and criteria, but in general the minimum amount required for a down payment is 3.5% of the sale price. However, it can be worth your while to pay quite a bit more than that. Remember that your interest rates for home loans are determined by how much you borrow. The more you can pay up front, the less your overall costs will be.
Watch the market. You don’t have to be a Wall Street shark to understand when rates for home mortgages are on their way up or down. Spend some time analyzing trends so that you can be ready to buy or apply for a loan while rates are favorable — and avoid home refinancing later on.
Purchasing and financing a home is not something you can easily jump into on a spur of the moment decision. Take the time to build your credit and amass your savings so that when the right house comes along, you’ll be prepared to make a smart investment.