So you’ve decided to take the next steps toward buying a new home? Congratulations! Home ownership is one of the best ways to build wealth with a long-term investment. It can also provide you with added stability and perks like tax deductions for some homeowners. It is also a big step and definitely not a decision you want to take lightly.
Mortgage lenders provide loans to homebuyers based on their credit score, a number between 300 and 850 that tells lenders how reliable you are at paying back debt so they can determine the risk in lending you money. If you have a low credit score (under 580) you won’t be able to qualify for a home loan. If your score is at or above 580, but still on the lower side (below 700) then you are probably paying a higher interest rate. Even a 0.5% rate increase can add up to thousands of dollars in extra interest over the life of your loan, and make your monthly payments higher.
Start repairing poor credit now before you apply for a loan. You can do that by:
It is a good idea to save money for a down payment; the more you have to put down, the better interest rate you can get. You can also lower your monthly payments by putting 20% down because you won’t have to pay the mortgage interest premium (MIP). However, there are a lot of other costs associated with buying a new home, so in addition to saving for a down payment, also save for things like:
Before you start shopping for your new home, talk to a lender to get preapproved. This process is relatively simple, but it provides you with an idea of how much you will be able to borrow so you can find a house in your budget. It also shows sellers you are serious about buying when you make an offer.
If you are planning a future home purchase, talk to Integrity First Lending today to get preapproved.