6 Things You Must Do Before Buying a Home

6 Things You Must Do Before Buying a Home – Spring means a hot home buying market is just beginning to heat up! We buy distressed homes or homes that homeowners need to sell quickly. For consumers, buying a home is a huge investment—probably the most significant purchase of your life. It’s not something you should do without preparation.

Before you start on the road to home-ownership, make sure you are ready.

1. Improve your credit score.
A high credit score snags you the best deals. “Below 660 or 680, you’re either going to have to pay sizable fees or a higher down payment,” says Barry Zigas, director of Housing Policy for the Consumer Federation of America.

A score of 700 to 720 can get you a good deal, and 750 and above can garner the best rates on the market.

Pull your credit reports and make sure you’re not penalized for old, paid or settled debts.

Stop applying for new credit a year before you apply for a mortgage. Keep the moratorium in place until after you close on your home.

2. Figure out what you can afford.
There are various ways to determine how much house you can afford. If you’re using an FHA loan, your monthly payment can’t exceed 31 percent of your monthly income. The FHA will let you go higher under some circumstances.

For conventional loans, home expenses should not exceed 28 percent of your gross monthly income, says Susan Tiffany, retired director of Personal Finance Publications for adults for the Credit Union National Association, or CUNA.

Use Bankrate’s calculator to figure out how much house you can afford. Add to that other housing expenses, such as taxes, insurance and utilities. Then, bank the difference between that total and what you’re paying now.

3. Save for a down payment and closing costs.
Depending upon the loan program, you may need between 3 percent and 20 percent of the house price for a down payment. For some lenders, 0% down payment is acceptable. Your credit history and loan terms help determine how much you’ll need to have.

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