Grad Finances Part 2 - Buying Your First Home
You're working in your dream career. Are you ready for the next big step of home ownership? Try our calculator here and read this article for our 5-point first-time home ownership check list.
Do you have that urge? That feeling that you want to settle into a permanent home, sip coffee from your own porch, mow your own lawn, and add some new family traditions to old ones? It may be time to consider buying your first home!
But how do you know you're really ready for a mortgage? According to a 2013 MSN Real Estate article*, there are some questions you can ask yourself to help you determine if you're ready to take on a mortgage and a new home.
Your 5-point check list to home ownership
- Budget—If you've set yourself a budget and have been following it successfully, you could be ready to buy your first home. Knowing the money you have, and how it's being spent, will help you determine if you can take on a mortgage and manage the additional costs that come with home ownership. If you don't have a budget, start one and stick to it for at least six months.
- Down Payment—Usually a first-home buyer will need a 20% down payment. There are options to get around that (zero down, or low-down loans) but those options can come with a price—such as having to pay extra for private mortgage insurance, or paying a higher mortgage rate. The Smart Money Mortgage is a youth-related that may be the perfect fit for your needs. Contact our Mortgage Team to learn more.
- Income—Lenders want to know you can make your regular mortgage payments, so a reliable source of income is vital. The longer track record you have with a single employer, the better—two years is ideal, but one year is a great start.
- Credit Report—According to the MSN Real Estate article, "You don't have to have perfect credit to become a homeowner, but a decent history can help you get a lower interest rate on your mortgage and a lower monthly payment." The government allows you to check your credit report once per year for free. You can get more information at AnnualCreditReport.com. Once you have your report, your Bellwether representative can give you advice on how to improve your score if needed. Strengthening your credit score during the year before you apply for your mortgage will help you secure that first mortgage.
- Debt—Make sure you have your debt—all the money you owe, including sums on credit cards—under control and budgeted for. Your lender will look at this total debt-to-income ratio—how much you owe compared to how much you earn each month. Your total housing costs should take up no more than 42% of your monthly gross income, but can be increased to 45% with FNMA (Federal National Mortgage Association) approval.
Are you ready for your first mortgage?
Even if you don't have all of the above items checked off, you should still come in to speak with a Bellwether representative. We can help you prepare a plan to make your mortgage application as strong as possible, and even give you an idea of the home price range within which you can shop.
Contact Bellwether if you're ready to follow your urge to first-home home ownership! Call us at 1-866-996-9828 for information.
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