“Vital Steps to Take to Get Ready to Buy a Home”
In recent times, the dream of buying a home has lost some of its luster. Difficulties in obtaining financing have taken many buyers out of the market place. The rules for obtaining a mortgage loan today are stringent. About 30% of people that purchased a home in 2006 would not be able to do so today because the qualifications for buying a home have become so strict. About 50% of my real estate business, is helping buyers find the home of their dreams, (at least that is my goal). And although it may be more difficult to buy a home, it is definitely something that is within the grasp of those that set it as a goal and pursue it. The Dream is definitely alive in Austin/Round Rock and I would like to help you go after it.
I would like to use my weekly contribution to our TODR blog to share important information for buyers that we have found will help you in preparing for your next (or perhaps your first) home purchase. Home ownership is still one of the most rewarding and hopefully profitable experiences that a person can make. The first few articles will talk about preparing your finances and your credit score for home purchase. Much of this information comes from the National Association of Realtors.
8 Steps to Getting Your Finances in Order
- Develop a family budget. Instead of budgeting what you’d like to spend, use receipts to create a budget for what you actually spent over the last six months. One advantage of this approach is that it factors in unexpected expenses, such as car repairs, illnesses, etc., as well as predictable costs such as rent.
- Reduce your debt. Generally speaking, lenders look for a total debt load of no more than 36 percent of income. Since this figure includes your mortgage, which typically ranges between 25 percent and 28 percent of income, you need to get the rest of installment debt—car loans, student loans, revolving balances on credit cards—down to between 8 percent and 10 percent of your total income.
- Get a handle on expenses. You probably know how much you spend on rent and utilities, but little expenses add up. Try writing down everything you spend for one month. You’ll probably see some great ways to save.
- Increase your income. It may be necessary to take on a second, part-time job to get your income at a high-enough level to qualify for the home you want.
- Save for a down payment. Although it’s possible to get a mortgage with only 3.5% to 5% percent down you can sometimes get a better rate and a lower overall cost if you put down more. Shoot for saving a 20 percent down payment.
- Create a house fund. Don’t just plan on saving whatever’s left toward a down payment. Instead decide on a certain amount a month you want to save, then put it away as you pay your monthly bills.
- Keep your job. While you don’t need to be in the same job forever to qualify, having a job for less than two years may mean you have to pay a higher interest rate.
- Establish a good credit history. Get a credit card and make payments by the due date. Do the same for all your other bills. Pay off the entire balance promptly.
It may take you a while to get these things in order but it will pay off in the long run. Here is to making your dreams a reality!
Dan/Nov. 13, 2011
