Preparing to Buy a Home

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All across Arizona, there are thousands of people looking to a buy home – either now or in the future.  Over the last few years lower interest rates have come along, making it more affordable than ever to buy a home.  When you stop and think about it – buying a home makes a lot more sense than renting a home or an apartment. In order to buy a house, you’ll need to know how much you can afford, you’ll have to have good credit, unless you’re buying in cash, and you’ll have to have enough money for the down payment and closing costs.

Affordability:  The best way to know how much home you can afford is to get preapproved for a mortgage by a lender.  You can apply directly to a bank or you can work with a mortgage broker to find the best mortgage rates.  Either way, you’re monthly mortgage payment shouldn’t be more than 25% of your total monthly income.  Although there are lenders out there who’ll say that you can afford to pay more, don’t let them talk you into it – stick to your budget instead. Keep in mind that there will be other expenses than just the mortgage payment.  You also have to pay for utilities, homeowners insurance, property taxes, and maintenance.  Owning and caring for a home requires a lot of responsibility and if you’ve never owned a home before, it can take a bit of time to get used to.

 Credit:  Before you fill out any applications, look over your credit report and check for any errors. An error will decrease your credit score, which will put you in a higher interest bracket and ultimately cost you a lot more money over the life of the loan.  You can obtain a copy of your credit report once a year from each of the 3 major credit reporting agencies: Experian, TransUnion and Equifax.  If you need to fix something, stagger your requests so you can check your credit reports every 4 months.

Down Payment: Your down payment will normally need to be around 20% of the price. You’ll probably still be able to get a mortgage if you have less than 20%, but you’ll have to have pretty good credit and you’ll need to buy some private mortgage insurance, which will cost you more in terms of your monthly payment.

Closing Costs: In most cases, the closing costs will run you around 5% of the property price.  Your lender should provide you with a Good Faith Estimate of all the fees associated with your loan.  This is only an estimate, and there might be other closing costs not associated with your loan, but it’ll give you a good idea of how much cash you’ll need to have for the closing.

Buying a home requires a bit of commitment.  Strive to get the best possible deal, which means prepare yourself financially, and you’ll enjoy your new home for many years to come.  If you have any questions you can find us at www.RalphandTricia.com

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