Turns out you can move out of your parents basement, eventually. Buying a home in today’s market can be scary when you do not know what to do. Increasingly more and more millennials are choosing to rent instead of buy property given rising cost of home ownership and overall lack of preparedness. But today we are going to talk about ways in which you can be prepared and ready to buy your first home. It is important to note that the vigilant and serious potential home owner will complete these steps about a year about before buying or even looking for a home.
- Talk to a lender. What this will do is ensure that you have all of your bases covered so that you can truly see how much money that you have to spend on a home.
- DO NOT make any larger purchases 3-6 months before buying a home. The bank can see this and in turn can pull your loan.
- Save $$$. When buying a home you will need to put at least 3% down for a downpayment and another 3% down for closing costs, and extra money for an earnest money deposit.
- Have a credit score between 740-760
- Have a balanced debt to equity ratio.With that being said, you should try and pay off as much debt as you can.
- Have at least 3 sources of debt. This is helpful to the lender because they want to be able to see that you can pay off your debt in a timely fashion which will in turn get you a better interest rate. These sources can be:
- A student loan
- A car loan
- A credit card. It is important that you only spend about 25-30% of your given balance
The biggest thing to remember during all of this is that you need to be comfortable throughout the whole process. Find a lender you like, start saving an amount that makes you feel comfortable when starting that house search because at the end of the day it is a huge investment so make sure that you are happy with it. With all of that, happy planning!!