If you are considering getting out of the renter market and into the housing market as a homeowner here a few tips that can help. All but two of the following 6 tips will help you no matter whether you decide to buy a home or not so I’ll get the first two out of the way as they have to do with buying a home and then get to the good stuff about your consumer credit health.
Consider Low Down Payment Loans – This tip brings forth buying a home using an FHA loan, VA loan, or a USDA mortgage. Each of these loan programs carry some sort of social stigma such as they are only for lower income home buyers or poorer credit home buyers. I suggest you forget the stigma because who cares about your mortgage if you own your home. Believe me there are a lot less people standing around the water cooler at work talking about their mortgage or home’s value these days as many many more people have financial skeletons in their closets and avoid the social bragging rights that seem to exist several years back. Loan down payment loans can keep money in your pocket that you can either save for later, or use to purchase furniture etc. once you close on your new home.
Consider A No Closing Cost Mortgage – No closing cost mortgages are not really mortgages without costs. Rather, they are mortgages where the third party fees that are associated with getting a mortgage are paid by the lender because the lender charges you a higher interest rate. This loan option is a great way to keep money in your pocket, but you need to weigh the long term benefit of keeping a higher payment mortgage over time versus the short term savings. If you go too long without reifnancing you could be paying more with the no closing cost loan option.
Credit Score – Yep, you have heard it before – or maybe you haven’t…but the higher your score the better your loan terms will be meaning possibly lower fees and lower interest rates. Not only do mortgages have credit score requirements, so do car loans and all other kinds of consumer credit. The better your scores the better credit terms you can get. Because credit is so closely tied to your credit score it is imperative to keep your scores as high as possible. You never know when you need to have your scores pulled – like getting a job or applying for a new aparment lease.
Preserve and Protect Your Credit – This is a wide open tip that has many boundaries from fixing your credit report to preventing identity theft to keeping your credit balances low compared to your credit account limits. You should get yourself up to speed on how to preserve and keep your credit protected.
Shop Around – No one ever always has the lowest rates or the best deal. It seems like there is always someone out there who is willing to offer better terms. In terms of mortgage interest rates, you need to check rates everyday as one day a lender will the lowest priced and the next day they won’t. It is not exactly clear to those of us who aren’t behind the closed doors as to how prices are set, but let’s just say that some subjectivity goes into it which means there is some human consideration that makes room to someone else somewhere having a better rate. The question is how willing are you to go seek it if you like what you have and the pricing works for you?
Know your borrowing limit – Last but not least this tip should be considered by all of us. How much can I afford, how much do I want to spend etc.? Do you know your budget? Perhaps this should be the first thing to consider. Most people qualify for a different figure than what they ultimately want spend for a home or a car. So knowing your personal intuitive limits versus your “book” limits is very important when it comes to making major financial buying decisions.
There you have it, my version of Tips to buying a home in 2011. If you have any questions please feel free to contact me.