As you consider buying your first home, you’ll get lots of advice, but you shouldn’t do anything without a complete understanding of your financial situation and how much home you can afford. So, where do you begin?There are two parts to financing – the downpayment (generally 20% of the purchase price) and the balance (the remaining 80%). Secure the best interest rate by reviewing your credit reports and correcting errors, which are surprisingly common. Do this at least two months in advance of your home search, as that’s how long it can take to clean up your reports.
You’ll know exactly what you can afford by securing pre-approval from a lender, who will review your income, debt and credit, and suggest the loan best suited to your qualifications and needs. If you can put down more than the usual 20%, you may qualify for a higher loan amount.
With less than 20% down, you might pay a higher interest rate or PMI (Private Mortgage Insurance), because the lender assumes a greater risk. Consult a financial adviser about ways to raise the cash, like withdrawals from an IRA or gifts from your parents. Each has tax implications, so proceed with caution.
With your financial house in order, you’re ready to discuss your desires with a real estate professional and begin your home search in earnest. Congratulations!
Categories: Bennington VT, Buying, First Time Buyers