October is National Financial Planning Month, and this is one of the most common areas new home buyers are unfamiliar with! If you aspire to buy a home in the near future, it’s important that you make a solid plan and take the proper to steps to achieve your goal.
So, what do you need to do to get your finances in order before buying a home?
Get Smart About Your Credit – The type of credit score you need depends on what type of mortgage loan you’re seeking. Although there are options for people will lower credit, most lenders are hesitant to deal with anyone carrying less than 650-700 on their report.
Know Your Debt To Income (DTI) Ratio – This represents the percentage of your income that goes toward debt repayment each month. The lower this number is, the better for meeting the requirements to buy a house. Banks use this to determine your ability to afford a home due to stipulations from the Consumer Financial Protection Bureau. If your DTI exceeds 43%, you may have a harder time getting a mortgage.
Anticipate Closing Costs – It’s obvious that you need to save money for down payments and insurance, but don’t forget the closing costs (fees and charges you pay at closing). Your lender should provide you with a detailed estimate of what these would be. On average, closing costs run from 2% to 5% of the home’s purchase price. Things included in this cost are fees for credit reports, applications, recording, title insurance, underwriting, escrow, surveys, and more.
If you’re considering purchasing a home, the first step is to make a call to me!
We’ll meet to discuss your goals and then work with you to create a plan to get you into your dream home!