Buying your first home is perhaps the biggest financial decision you will ever make in your life. At the end of the day, everyone’s situation is unique, but when it comes down to evaluating if you are ready to purchase your first home, it is important to ask yourself a few important questions before moving ahead and exploring home ownership.
In our most recent article, we tackled the question of, is now the right time to purchase a home? This week we look at the next important question when it comes to purchasing your first home and that is, can I qualify or afford the purchase of my first home?
When it comes to figure out how much you can afford, for the purchase of your first home, sales price is only a part of the equation. If you understand and know your credit score, how much cash you have for down payment and factor in costs for things like property taxes, insurance, and regular maintenance, you’ll have a true understanding of what you can afford.
First off all, when it comes to credit scores, different financing programs will look for different numbers, but in general you want to make sure that your credit score is a 620 or higher and have a pretty clean payment history in the last 12 months. However, in today’s market place, to receive the best interest rates it may be beneficial to even have a higher credit score than this. It is always in your best interest to sit down with a licensed and knowledgeable mortgage professional and have them pull your credit report ahead of time and evaluate if your credit score is where it needs to be. Then you can decide if there is anything you can do in the short term to raise your credit score even further to obtain the best possible interest rate.
Next, in today’s marketplace there are still many low down payment options including 0% for a Veterans Administration or USDA Home Loan. Or 3.5% for a Federal Housing Administration Loan. Or 5% for a conventional loan. Depending on your credit and financial situation, one financing option may make sense more than the other, but you want to make sure you have the down payment that is needed for financing ahead of pursuing your first home purchase. Again a trusted mortgage professional can help evaluate and qualify you for the right home loan program so that you know what to expect.
Finally, it is also important to factor in the whole equation and that will also include things like property taxes, homeowners insurance and homeowners’ association dues. These will also be part of your monthly expenses and factoring them into your monthly payments will definitely affect how much you can and want to pay monthly for your first home.
As always and mentioned above, when you decide that it is time to purchase your first home, your first step should be to make sure your credit and finances are in order. This will allow you to know how much you can qualify for, what you need to do if anything to fix your credit and how much down payment you will need.
For more information on current home loan programs and options for existing and potential home owners, please contact Bill Kamboukos of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com
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