If you’re planning on buying a home in 2016, a major part of the planning process should include how you intend to finance your new home.
Mortgage rates are still really low, so there is no need to panic about rising interest rates just yet. But getting your finances in order before you go shopping for your new home will help you know what you can afford, and the more you do now, the less anxiety and stress you may experience later.
Your credit profile is important to lenders. Do you pay your bills on time? Do you pay more than minimum payments? What is your debt-to-income ratio? Most lenders like that ratio to be 36% or less.
Saving A Down Payment
Although a 20% down payment on a mortgage is ideal, it’s not required. Many lenders expect buyers to put down at least 3%, aside from the Federal Housing Administration (FHA), which requires a 3.5% down payment. However, if you’re interested in building sizable equity right away, put as much money down as you can afford. BankRate.com is a good place to begin shopping for rates and lenders.
If you’re looking for assistance with a down payment, the North Carolina Finance Agency may be a good place to start. Their website, is full of useful information about a variety of programs to help finance a home.
In rural communities, the U.S. Department of Agriculture (USDA), has programs available that may allow a homebuyer to finance 100% of home’s purchase price. Click here for more information.
Before you rush into house-hunting mode, get a mortgage preapproval. This process is used to help determine how much money you’re qualified to borrow for a home purchase. Once you’re preapproved, you’ll have a more realistic expectation of the homes that fall within your budget. Typically, you may qualify for a loan that is roughly 3 times your gross annual income.
The home-buying process involves more than just chasing a favorable interest rate. You have to find the best mortgage lender for your financial situation. No two sets of lender fees are the same, so it’s important to get loan estimates from multiple lenders before making a decision.
Know Your Loan
A fixed-rate mortgage isn’t right for every homebuyer. Neither is an adjustable-rate mortgage. If you plan to stay put in a home to raise a family, you might consider a 30-year loan. Conversely, if you’re moving in 10 years or less, an adjustable-rate mortgage, or ARM, could better suit you. Interest rates on ARMs are fixed for the first several years of the loan and often start out lower than rates on 30-year fixed loans.
Plan For More Than You Think
Your monthly mortgage payment won’t be the only expense you have as a homeowner. There are homeowner’s insurance and maintenance costs, property taxes, and possibly homeowners’ association fees, which is why it’s necessary to stick to a budget.
In addition, you will have to plan for closing costs. The loan estimate you receive after applying for a mortgage gives you an idea of the “cash to close,” or the money you need to complete the transaction. There are some closing costs for which you can shop and save money, and others that are fixed.
For more information, contact the professionals at the Hillsdale Real Estate Group, and see how we’re all in to help your in your home purchase process. Call 336-998-1967 to learn more.