Are you thinking of purchasing a home but are not sure how you are going to come up with the down payment, closing costs, and the additional fees associated with purchasing a home? With high demand and low inventory, it is important that you are financially prepared prior to your home search. Preparation is key to help you secure the house you want in such a competitive market. Financially, the process to purchasing a home can be overwhelming if you are not prepared. Here are 5 steps to help get you started on your journey towards being a homeowner.
- Strengthen your credit. Once you have determined you are ready to purchase a home, strengthening and maintaining your credit is important.
- Pay your bills on-time. The number one component that makes up your credit score is payment history. This makes up 35% of your credit score.
- One way to ensure you do not miss a payment is to set up auto payments.
- Obtain a free copy of your credit report. Review your credit report to ensure the information reported is accurate. If you find inaccurate information, contact the reporting credit bureau to dispute wrong information.
- Do not close any credit cards. Closing credit cards increases your debt-to-credit utilization, which can negatively affect your credit score.
- Pay your bills on-time. The number one component that makes up your credit score is payment history. This makes up 35% of your credit score.
- Create your goals to save for your home.
- Down payment: Down payment funds are paid upfront when obtaining a mortgage to purchase a home. The amount of down payment you pay will vary based on the type of mortgage loan you use and the specific lender. Depending on the mortgage loan, your down payment maybe as low as 3%. To determine how much to save for a down payment research each loan requirement and ask questions.
- Closing costs: Closing costs finalizes your mortgage loan. These fees usually range from 2% to 5% of the home loan amount. Familiarize yourself with what is included in a closing document.
- Moving costs: Determine if you will need to hire a moving company. Plan by researching moving companies and budget accordingly.
- Determine how much home you can afford. Calculate your debt-to-income ratio. Use an affordability calculator to help get you started. Rule of thumb: No more than 41% of your income should go towards debt. If your debt-to-income ratio is higher than 41%, assess your budget and find ways to decrease your debt.
- Research mortgage options and compare rates. There are many types of mortgage options. Speak with a lender about your options.
- Stick to your budget! Set a goal and hold yourself accountable. Use tools such as budgeting apps to help keep you on track.
You do not have to start your homeownership journey alone. UF/IFAS Extension is a HUD approved agency. We offer an 8-hour homebuyer education workshop, and have one-on-one financial counseling available. Contact Cyndi Longley at 561-233-1742 for more information.
0
