Buying a home is a big financial purchase. In fact, it’s often the largest investment many people make in their lives. So there’s no pressure, right? In fact, it’s a difficult decision with real consequences that can cause a lot of anxiety for many prospective buyers and deter them from purchasing a home . If you’re worried about your down payment or what will happen if you can’t make your mortgage payments , you’re one of the millions of people who face the same fear every year. Buying a home can be daunting, but it’s also smart and rewarding. Here are some tips to help you overcome your first-time homebuying fears so you can jump into the market in earnest.
Manage your debt
Having too much debt can put a strain on your resources when trying to buy a home. With the average American household having several hundred dollars in student loans, car loans, and credit card debt each month, it can be overwhelming to take on another larger payment . Learning how to budget so you have money left over after all of your current debt requirements is essential to being prepared for homeownership. Debt consolidation is one step that can help you get started on this path. Remember, it is still possible to have debt and successfully manage a home loan. Most lenders like to see a debt-to-income ratio of 36% or less, so if you are there or close to it, you can eliminate that anxiety.
Improve your credit score
Having a decent credit score is important for getting approved for mortgage financing, as well as for getting good interest rates and terms. While most loans require a FICO credit score of 620 or higher, there are some types (for example, VA loans) that will accept lower numbers. If your score is too low right now, you can ease that anxiety by raising it over the next few months. The fastest and most effective way to build your credit is to pay all of your bills on time . It’s also important to keep your credit card balances low and not apply for new credit as much as possible until the mortgage loan process is complete.
Come with an advance payment
With the way home prices are rising these days , it may seem impossible for first-time buyers to save up enough for a down payment. While this is a valid concern, potential buyers should know that there are many mortgage options that do not require a 20% down payment. FHA loans, for example, only require 3.5% and VA loans often require nothing at all. You can ease this anxiety by talking to a mortgage lender about the different options available for your financial situation.
Calculate how much you can pay
Another anxiety that many first-timers worry about is whether they’ll be able to afford their mortgage . There are online calculators that can help you figure out how much you can reasonably add to your budget, but sometimes they don’t include all of the additional costs , like property taxes and home insurance. Likewise, talking to a mortgage lender will help you understand exactly what mortgage payments will look like in your area and price range . Most lenders want housing costs to be no more than 30% of gross monthly income. You can eliminate this concern, too, if the homebuyer ‘s proposal allows you to stick to this type of budget.
If you meet all the requirements to buy a home, there may still be concerns even after you buy it. Home maintenance and mortgage payments are serious responsibilities, but owning your own home can also give you freedom and peace of mind when you’re ready to take the plunge.
