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Four Must-Dos Before Buying a Home
Buying a home is a major event, especially for first-time homebuyers. There are so many questions that potential homebuyers are often overwhelmed. How much can I afford? Will I be approved for a mortgage? How much money will I need? Get the answers to those questions and be prepared before you start looking for your dream home by following four steps.
1. Get your finances in order. Before you leap into homeownership, you need to make sure that your finances are in good order. If you have outstanding debts, pay them off or pay them down. This includes credit card balances and other debts that will show up on your credit report and add to your monthly expenses. Check your credit score. If it is below 720, focus on raising it by paying
your debt down and paying all of your bills on time.
2. Have a down payment. If you want to buy a home, your lender is going to require that you have a down payment. Usually, that amount is equal to 20% of the purchase price. While it is possible to buy a home with a smaller down payment, you'll be required to purchase private mortgage insurance to protect the lender—and it will add to your monthly mortgage payment.
3. Determine how much you can afford. What is the maximum purchase price you can afford? What will your monthly payments be? These are major considerations that you need to know before you start touring potential homes. To answer these questions, create a budget. First, list your monthly income from all sources. Then list all of your monthly expenses. Subtract your
expenses from your income to determine the maximum amount of your monthly mortgage payment. Don't forget to factor in other expenses, such as items in escrow (insurance, real estate taxes, etc.). Also, consider the amount you'll need to set aside for maintenance and repairs of your home. Stay within a reasonable amount, keeping the monthly mortgage payment low enough that it doesn't cause financial strain.
4. Meet with a lender and get prequalified. If you really want to know if you'll be approved for a mortgage, how much you can afford to pay for a home, and what your monthly payments will be, meet with a lender and get prequalified. They are experienced in helping you determine the type of mortgage that will best suit your immediate and long-term needs and can help you navigate through the homebuying process with confidence.
The National Urban League offers pre-purchase one-on-one homebuyer counseling. Set up an appointment to meet with a housing counselor today.
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articles are featured in the housing section at iamempowered.com
Anna Cuevas
NUL's Consumer Advocate