With mortgage rates being around record lows for the better part of the last year, many people may have considered purchasing a home. This is a major investment, and there are many things that need to be considered before making the decision to buy.
Can you afford the costs of homeownership?
Owning a home comes with many more costs than renting an apartment. You’ll have to purchase homeowners insurance, your mortgage will likely be higher than your rent payments and you’ll be responsible for maintenance on your own dime. Before committing to search for a home, you should ensure that you are able to afford these extra costs, as you don’t want to end up being foreclosed on because you made a bad decision.
How much debt do you have?
Another factor you should consider when buying a home is the amount of debts you currently have. If you have a lot of credit card debt, you may want to consider paying this down before purchasing a home. Not only can this give you more financial freedom, it could potentially help build your credit score before applying for a mortgage.
What is your credit score?
A person’s credit score will play a major factor in how much they’ll pay for their home. When applying for a mortgage, lenders will use your score to determine what terms and conditions to offer. If it isn’t up to par, you won’t be able to take advantage of today’s affordable mortgage rates. Those who do find themselves with a low score may want to consider rebuilding it before they purchase a home, so they are able to get the best rate available.
How much home can you afford?
Before beginning the home buying process, you’ll also want to determine how much home you can afford. This will allow you to know what type of house you can purchase based on your current debts, expenses and income. One of the best ways to do this is to get pre-approved for a mortgage before starting your search. Pre-approval will give you an idea of what you are able to pay for a home. It can also make your offer look more serious to buyers, as they know you are good for the money. However, just because you were approved to spend a certain amount, doesn’t mean you have to use it all.