Preparing to buy tips
1. Start saving early
When calculating how much money you need to buy a house, consider one-
time expenses as well as new, recurring bills. Here are the main upfront costs
to consider when saving for a home:
Down payment: Your down payment requirement will depend on the
type of mortgage you choose and the lender. Some conventional loans
aimed at first-time home buyers with excellent credit require as little as
3% down. But even a small down payment can be challenging to save.
For example, a 3% down payment on a $300,000 home is $9,000. Use
a down payment calculator to decide on a goal, and then set up
automatic transfers from checking to savings to get started.
Closing costs: These are the fees and expenses you pay to finalize
your mortgage, and they typically range from 2% to 6% of the loan
amount. Your closing costs on a $300,000 loan could be between
$6,000 and $18,000. That’s additional money you’d have to pay, on top
of your down payment. In a buyer's market, you can often ask the seller
to pay a portion of your closing costs, and you can save on some
expenses, such as home inspections, by shopping around.
Move-in expenses: Remember to budget for moving costs, which
typically run up to $2,500 for most local moves. (Long-distance moves
can be much pricier.) You'll need some cash after the home purchase.
Set some money aside for immediate home repairs, upgrades and
furnishings.
2. Decide how much home you can afford
Figure out how much you can safely spend on a house before starting to
shop. NerdWallet's home affordability calculator can help with setting a price
range based on your income, debt, down payment, credit score and where
you plan to live.
3. Check and polish your credit
Your credit score will determine whether you qualify for a mortgage and affect
the interest rate lenders will offer. Having a higher score will generally get you
a lower interest rate, so take these steps to polish your credit score to buy a
house:
Get free copies of your credit reports from each of the three credit
bureaus — Experian, Equifax and TransUnion — and dispute any errors
that could hurt your score.
Pay all your bills on time, and keep credit card balances as low as
possible.
Keep current credit cards open. Closing a card will increase the portion
of available credit you use, which can lower your score.
Avoid opening new credit accounts while you’re applying for mortgages.
Opening new accounts could put a hard inquiry on your credit report
and lower the overall average age of your credit accounts, which could
hurt your score.
Track your credit score. NerdWallet offers a free credit score that
updates weekly.
Now that you have read these steps, start doing them. If you need help give
me a call or send me a text. I am here to help you get your home.
Mary Cockburn
505-639-2090
MaryCockburn.Realtor@gmail.com
