Buying a home doesn’t have to be a scary process if you are asking yourself the right questions. When considering buying a home, start by gaining clarity about what you want in a home. Understanding your finances and budget is crucial when making such a big decision. Many factors go into finding the perfect home for you. Here are 3 questions to ask yourself when buying a home:
1) How much can I afford? Knowing how much you can afford is extremely important when looking for a home. Three key areas that determine this is knowing how much money you have saved, what your income is, and how much debt you have.
If you do not have money saved up, that is where you need to start. Take a look at your monthly spending and find areas to cut costs to put into a savings account. If you are already in saving mode and still aren’t saving enough each month to put towards a down payment, there are other avenues that you can look into. Some options are government-backed loans or having money gifted to you from a close eligible relative. Remember to consider all of the hidden costs such as utilities, property taxes, insurance and basic maintenance. Making sure you budget for all associated costs and expenses will determine what you can afford when buying a new home.
2) What are my chances of getting a loan? One of the biggest determiners of qualifying for a loan is your credit score. Lenders will look at your credit score as well as your debt to income ratio to determine if you would be a good borrower. The lower your debt to income ratio (DTI) is and the higher your credit score is, the higher your chances are to qualify for a loan. If your DTI and credit score need improvement, don’t panic. There are plenty of ways to better these numbers such as making sure to pay bills on time, decrease your credit usage, and pay off other debt. All situations are different when it comes to buying a home. Reach out to a West Banker to help determine what the best mortgage options are for you.
3) What is my intention with this home? Before making a big financial decision, it is important to look at the big picture. Is this a starter home or your forever home? Do you want a fixer-upper or a move-in ready home? What are your future goals? What are the utility costs in the area? Is this location somewhere I want to be long-term? Make sure you are asking yourself all of the possible questions when purchasing a home. Having a trusted West Banker navigate you through the home buying process will simplify the entire experience.
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